Grigory Lukin Let's Retire Young lean-FIRE blog personal finance memes idea power

Personal Finance Memes: the Good, the Bad, and the Ugly

Not all personal finance memes are created equal.

Social media is full of personal finance memes. Sometimes, they’re in a classic meme format: a funny image, a snarky caption, etc. Other times, they’re a poison pill of bad math and misleading reasoning, designed to be provocative and to get shared over and over, resulting in classic memetic contagion.

Of all my posts, this one will probably cause the most anger and random accusations, simply because personal finance memes deal with touchy topics. Then again, ships aren’t made to stay in harbors, are they? I don’t want this to end up being just another watered-down blog advising you to buy secondhand tupperware.

Fundamentally, there are two types of memes: those that try to spread misinformation, and those that don’t. The latter are jokes, funny captions, informal group misery sessions (e.g., all the cliché memes complaining about Mondays), etc. The former category, the memes that try to spread misinformation, can be a lot more insidious – especially when it comes to personal finance memes.

I’m just an enthusiastic amateur and not a scholar, but it seems to me that memes that spread false information either do that deliberately (i.e., the creator knew the math/logic was wrong, but went with it anyway) or accidentally, made by a well-meaning but misinformed creator. Sometimes the motivation doesn’t even matter, because the idea itself grows legs and walks away. Years later, nobody might even remember the original meme, but the same message will keep circulating. And so…

Grigory Lukin Let's Retire Young lean-FIRE blog personal finance memes Guy Fawkes idea mask
Behind this mask, there is a LOL-cat – and LOL-cats are bulletproof. (Image by OpenClipart-Vectors from Pixabay)

The good. Those are the personal finance memes that call out legitimate and indisputable injustice. Yes, the cost of college really has gone up astronomically, and it’s very hard to get a white-collar job without a college degree. (Hard, but not impossible – see my earlier post about getting an entry-level tech job without a degree.) Economic disparities between minority and majority groups are a real thing, and that perpetuates the ancient divides in our society. Those are valid points, they are true, they’re backed up by data, and we should fight the complacency as we try to elect better leaders. (Or run for office ourselves.)

The bad. This is where it gets a bit controversial. There are many, many memes about housing prices, and how the Boomer generation had it better than Millennials or Zoomers. That is partially true, yes. The problem is that most people don’t zoom out. Boomers grew up in unique circumstances, in the only country on earth that came out on top after World War II. (England was in shambles, Russia lost 27 million people (no, really), etc. There were no winners outside of North America.) Boomers had their own issues, yes – the war in Vietnam, the constant threat of nuclear annihilation – but they also lived through unprecedented economic prosperity, which enabled them to buy cheap houses, go to college for next to nothing, and so on.

When we compare our current housing situation to Boomers – yes, that’s pretty abysmal. But if you zoom out and look further back, it was just as bad as it is now. There weren’t a lot of property owners during the Great Depression. Going further back, to the early 1900s and to the 19th century, it was also pretty damn difficult to buy a house while working full-time. The point is this: the prosperity of our grandparents wasn’t something that every other generation can expect. It was a historical fluke, and one that likely won’t happen again.

Not all hope is lost, though… It’s true that it’s impossible to buy a nice house (or even a condo) in San Francisco, New York City, Chicago, or any other major city unless you’re one of the top earners in this economy. This is supply/demand: too many people want to live in big shiny cities, and the bidding war is too aggressive for you to even enter. If, on the other hand, your dream is to be a homeowner, regardless of where or how, then there are far more options. I don’t know what it is about the Midwest, but there are some dirt-cheap properties out there. (I guess folks really do hate those winters.)

As of this writing, Zillow has 10 houses under $60K in Indianapolis, 42 houses under $10K (not a typo) in Detroit, and 10 houses under $100K in Omaha. Are they fixer-uppers? Most likely, yes. Bad neighbourhoods? Probably. Will you get even more options if you look for $150K houses? Absolutely. As long as you’re okay with paying extra for mortgage insurance, you can get a mortgage with 3% down, which is just $4.5K for $150K. This is, of course, the point in the personal finance memes comment section where people hold their nose and say, “Well, I don’t want to live there!” And while I understand that downtown Indianapolis isn’t the best party scene in the country, that objection negates their point.

Grigory Lukin Let's Retire Young lean-FIRE blog personal finance memes cheap house for sale in Indianapolis
This 1,180 sq ft Indianapolis home could be yours for just $45,900! (Source: Zillow)

You can always buy the thing you want, as long as you compromise on the quality and the location. Be a boat owner by buying a 14′ raft for $1K! Become a land owner by getting a chunk of the Mojave desert for next to nothing! (A friend of mine did just that when he moved from Seattle to Arizona. Heh.) Live out your homeowner dreams, but not in your favourite city! Once you stop comparing the present to the past, and ask what you really want (status? location? or an actual dwelling?), things open up for you. Yes, Boomers had it easier, but unless you’re friends with a time traveler, reposting angry real estate memes won’t fix anything.

As an aside, when I first moved from Seattle to Toronto, and lived in a remarkably stressful rooming house (meth addicts wailing at the top of their lungs all night long, and a giant dog that would bark 24/7 before a neighbour finally snapped and kidnapped it), I did a lot of what-if searches on real estate sites… One time, I found a nice plot of land right by the river in northern Ontario: just $11K USD, and you could set up your very own compound with access to fresh water, and with a town just a few miles away. Another time, I found an abandoned church in a small Saskatchewan village that was slowly going extinct. Just $12K USD, and you could live on the hallow ground, in a remarkably large building. $40K USD would’ve bought you an entire abandoned hotel in eastern British Columbia. Remarkable, really. I’m glad I never pulled the trigger on any of those fantasy purchases, but that would’ve made for a very interesting life.

And finally, the ugly. There are some mighty ugly personal finance memes out there. Those are the ones that have egregious math/logic errors: they induce rage and indignation, get spread far and wide, and steal people’s mental energy while (probably) reducing their lifespan, and creating some mighty divisive discourse that’s based on a mistake. (As if we needed more of that.)

One of those personal finance memes was everywhere last summer, but it has become so diluted that I could find only an echo of it:

Grigory Lukin Let's Retire Young lean-FIRE blog personal finance memes misleading Twitter math
Your math is bad, and you should feel bad. Source: Twitter

On the surface, it seems infuriating, doesn’t it? Here is the problem, though: the mega-wealthy (or even the merely rich) don’t get to that point by just gradually stacking their cash into one big pile. No, they either invest or start their own businesses. That turns their money into money-money-money, and then the compound interest does its magic. Let’s run the numbers, shall we? To simplify the meme’s logic, let’s say we save $3.65 million a year. ($10K a day x 365 days. Let’s skip the leap years.) Let’s also assume that we’re not completely naïve, and that we invest our money into an index fund instead of just throwing it into the Grand Canyon, as the meme suggests. Finally, let’s look up Bezos’s net worth: as of this writing, it’s $184 billion.

And so: we earn $3.65 million every year, we grow it at 7% per year. How long until we beat Bezos? I’ve crunched the numbers in Google Sheets: you may have to open the image in its own tab to view the whole thing, but here are the results.

Grigory Lukin Let's Retire Young lean-FIRE blog personal finance memes compound interest math
Behold, the math inspired by the meme! (Source: yours truly.)

By year 11, your 7% annual return would make you more money than your $10K daily allowance: you’d make $4,032,710 just from your investments. Year 44 is when you’ll cross the billion-dollar boundary: your net worth would be $1,039,334,985. Finally, at the end of your 120th year, you’d have more money than Bezos himself: you’d end the year with just over $187 billion.

That’s too long for any person’s lifespan, yes, but definitely less time than the meme suggests. You’d grow old and die as a mere billionaire, but your children (and especially grandkids) would live long enough to see their fortune thwart even that of Bezos himself.

And that’s with only 7% in annual returns. Let’s say your investments are more successful, and you bring in 10% per year. You’d make your first billion after 35 years, and you’d beat Bezos in just 90 years. (Eat your veggies, people!)

Finally, let’s say you started a successful business, and you make 25% per year. You’ll become a billionaire in 19 years, and defeat Bezos in 73 years.

Those numbers may seem fake to you, but the math checks out – and so does the conclusion: you become mega-wealthy not by stockpiling your cash, but by making your money work for you. Start a business (and fail, and start again, etc), become a passably good investor, go into real estate… If your money isn’t growing and appreciating, then yes, it’ll take you millennia to get to the same point your business-owner neighbour would reach in only 73 years.

These are the ugliest types of personal finance memes: they don’t educate, they only anger. They don’t make people pause and wonder, “huh, is there any way for me to grow my money?” Instead, they only foster rage, which is typically quite counterproductive. That sort of memetic contagion can – and does – hijack people’s minds, replace curiosity with disdain, and quite possibly change several lives for the worse. If several million people share a meme that blatantly ignores basic finance, and if even 0.01% of those folks permanently give up the chance to learn about compound interest, or investing, or business – that’s hundreds of people whose financial future has now been changed. (And in reality, that’s likely to be a lot more than just hundreds.)

It’s okay to rage against the machine: there is, in fact, a lot to rage about. But it’s vitally important to separate the true injustices from the poison pills wrapped in a snappy screenshot. Next time you across some personal finance memes, don’t hit that “Share” button. Stop, and think, and consider if there’s another explanation, and maybe fire up a spreadsheet to double-check the math.

To quote Flobots, “There’s a war going on for your mind.” Every piece of information you encounter in daily life competes for your attention. Catchy songs on the radio, or commercials, or funny videos, or memes, or random ads. It’s up to you how you filter your information intake, and what you do with it – just know that the end result will affect your perception of the world, will shape your reality. You have a choice in what you consume, and especially in how you react. Next time you come across rage-inducing personal finance memes, just stop and think, and consider them critically. You will be better off for it. We all will be.

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