What I Learned From the Personal Finance Reddit

It’s no secret that personal finance can be a difficult subject to approach. From the unrelenting pressure to save every spare penny to the sometimes overwhelming array of information available, it can be a challenge to stay on track. Luckily, the personal finance community has your back. Reddit’s /r/personalfinance is a virtual hub for those seeking financial advice and guidance of all stripes. The r/personalfinance community is filled with useful tips, tricks, and insights from successful savers and spenders alike.

From answering basic questions about budgeting and spending to tackling more complex questions about debt management and investing, the personal finance community has something for everyone. Here’s what I learned from browsing the r/personalfinance subreddit over the past year.

What is personal finance?

Personal finance is the term used for advice and strategies related to achieving financial success. Topics range from insurance, retirement planning, saving money, and more. The personal finance community on Reddit provides a range of resources for those seeking help with their finances.

How to achieve financial goals

One of the most popular posts on /r/personalfinance this year was from u/NerdyGuyNamedMike, who offered his advice on how to achieve financial goals. He suggests that you start by asking yourself what you want to do with your money:

-Do you want to buy a house?

-Do you want to retire early?

-Do you want to travel the world?

He then recommends figuring out your monthly expenses and goals and lays out a plan for how best to allocate your money. In the end, he recommends creating a spreadsheet of all your monthly costs, listing any debt repayments or savings contributions, and calculating what will happen if you stop spending so much. If it’s still possible, continue with the spreadsheet until you have achieved your goal. If not, go back to step one and adjust accordingly.

Investing

One of the most important aspects of personal finance is investing. After all, investing is how you grow your money and make it work for you. You can invest in stocks, bonds, or mutual funds; each has its own benefits and drawbacks.

Investing is an often daunting process, but it doesn’t have to be. Reddit’s /r/personalfinance community has a lot of advice on how to get started:

The best way to start with investing is by diversifying your portfolio across different asset classes. This means that you should allocate a percentage of your money to stocks, bonds, and mutual funds to account for all possible outcomes in the market.

Many people turn to an index fund because it offers low-cost exposure to many different companies while still coming with a high level of diversification. Index funds are designed to track the performance of the stock market as a whole and are generally less expensive than actively managed funds, which charge higher fees for their services.

If you’re not sure where to start with investing or if index checks interest you at all (they don’t!), there’s plenty more helpful information on r/personalfinance that could help get you started!

Debt reduction

The most common topic of discussion on r/personalfinance is debt. The posts in this section discuss everything from the best ways to pay off a credit card to what options are available when faced with overwhelming debt.

One of the most popular posts in the debt reduction category was, “I am drowning in student loan debt, what should I do?” User The-Michael-Lowe shared a detailed look at his plan for paying off student loans through a low-interest rate refinance and targeting the highest interest rate loans first. This post has received over 1,000 upvotes and 99 comments indicating that many people were interested in what he had to say.

How to cope with bad financial news

It’s heartbreaking when you learn that you’re not going to be able to keep up with your monthly expenses. It can seem impossible, but there are several steps you can take to make a plan for how to cope with bad financial news.

First and foremost, it’s important to stay calm. Regardless of what the bad news is, panic won’t help anything. Take a deep breath and remind yourself that it will be OK–you’ll find a way out of this mess.

Next, figure out where the money is going each month. Write down every expense and how much you spend on it each month so that you have an accurate picture of your budget’s current state.

If there are areas where you’re spending too much or too little, then take a hard look at those categories and see if there are ways to scale them back or eliminate them altogether. You may need to cancel some subscriptions or reduce your grocery budget by making meals at home instead of eating out every night.

The power of compound interest

Compound interest is a powerful tool for the savvy saver. I’ve always known that if you invest your money and earn interest on the interest, it will grow much faster than in a traditional savings account with only simple interest. But what I didn’t know was how quickly it would grow.

A traditional savings account pays out 2% interest per year. Simple math tells us that every dollar put into this account will double in just over 7 years. That’s not too shabby, but when we factor in compound interest, we see exponential growth.

An example of a compound interest calculator is found here: https://www.dinkytown.net/java/Calculators/CompoundInterestCalculator.html

If you deposit $5,000 dollars into this account and leave it untouched for 40 years, you’ll end up with $164,735 (or $636,185 if you include compounding)! That’s an insane amount of money to have sitting around waiting to be spent or invested!

Wrapping up

I’ve shared six of the most valuable personal finance insights from the r/personalfinance subreddit. There’s a lot to learn from this community and it’s a great place to start!

– Save as much as you can as soon as you can.

– Keep in mind that your financial situation is always temporary.

– Remember to live below your means and avoid overspending.

– Take advantage of compound interest by saving early and often, and when you do invest, consider index funds or ETFs.