The Didact on money.

Didact has hit 2M views. Among other things, he has done game reviews for reaxxion (now sadly gone), turned to Christ, and had to redefine himself when the job blew up and with it is residency under the Imperial Presidency of Trump. The man is a Trump fan, with good reason. But I’m extracting stuff he wrote well before the current depression for my reference.

To my knowledge, the man is single. As Captain Capitalism says, if you are single, have a small apartment, a crappy car, and decent clothes. Save hard, and keep frosty. Don’t have the suburban lifestyle. It costs.

Even people who enjoy their work and are happy with their careers, and get along very well with their bosses (like me), need to consider how their minds would change if they could simply walk away from it all if they wanted to.

Such people would be free, both physically and mentally. No force short of God Himself could stop them from living their lives on their terms, with nothing more than the goal of their own happiness and the enjoyment of the fruits of their own labours.

Sadly, these changes don’t come without sacrifices. But they are well worth making.

The changes I’m talking about are really simple. They come in three basic steps:

  1. Cut your expenses down and pay off any debts as quickly as possible
  2. Once you’re debt-free, maintain your expenses as low as possible for as long as possible
  3. Save up at least six months’ worth of expenses- preferably a year’s worth

That’s it. That’s all there is to it.

Hey, I said it was simple. I didn’t say it was easy.

Of all of the lessons that my father taught me as a boy, the one that stuck with me the most was probably his lessons about debt. Like me, he was and has always been a stubbornly independent man. He always hated the idea of going into debt for any but the most desperate of reasons, and he did everything he could to avoid taking that route. He succeeded, and in the process he passed on to me a lifelong aversion to indebtedness and borrowing that persists to this day.

I will readily admit that there are a few genuine and legitimate reasons to take on debt, such as buying a house for which you’ve already saved up a significant deposit and intend to live in for a very long time. But debt taken on for transient or disposable spending is a noose around your neck, and no free man should ever want to walk willingly into the hangman’s rope.

Here come my comments. I would say that you need to… right now….

  • Pay down that fracking credit card
  • Trade down the house so you don’t have a mortgage. You no longer should look for a school distrct. Move as far out of town as you can afford as a commute, and your wife keeps garden and teaches the kids. Much safer, much cheaper
  • Have one month’s expenses in cash somewhere I can get to fast — Without going to the bank.
  • Have about three months at least in cash like — as in able to withdraw right now — cash market accounts with established, guaranteed banks

We are in the process of doing this. This means Kea is down to ONE project this year, when she’d like to renovate the entire house. This means that the glasshouse is in and it means that we married and killed two mortgages by moving out of town. It means that I’m driving a car with 200 K on it and will do so until I can buy a replacement with cash.

Your mileage will vary. In Kiwi terms, that is about $2000 in cash around the house and $6000 in cash management as a goal, with zero debt.

(And no, I’m not talking about my retirement savings. I do that automatically at close to maximum rates and so should you. But that money could be taken by the government. You need to be independant. If the job ends, that money is frozen until you hit retirement age — well in NZ it is — and I expect the value of the investments in the fund to decrease by 50% this year if I’m lucky).

If you are in the USA, do as the Didact says: it is what Kiwisaver in NZ forces you into.

The absolute best investing strategy, the one that guarantees low-risk returns over a long time horizon, is dollar-cost averaging.

This simply means that you invest a fixed amount of your pay cheque every single month into a retirement vehicle, like a 401(k) or an Individual Retirement Account, or your particular country’s tax-advantaged equivalent of the same.

This provides an automatic stabiliser in your investments. Because you are investing a specific fixed amount every month, when the market is going gangbusters and setting new highs every other day, then your dollars purchase fewer and fewer shares because prices keep going up.

But, by that same token, when the inevitable corrections come and prices collapse again, your dollars buy more and more shares, because now prices have cratered and your every dollar gets way more mileage.

The result is an automatic stabilisation process that sees you through the highest highs and the lowest lows, and quietly, relentlessly, inevitably builds up your capital – while still giving you a big tax benefit, because you don’t pay taxes until you retire on the money that you have invested.

Personal shares? It’s hobby, but unless you can predict events, there is risk. Complicated schemes that mitigate risk don’t work. IPOs don’t work unless you were vested.

The Didact has good rules around this, and I’d agree. Note that the last time I invested was the global financial crisis, and even when I dumped the shares during the COVID I still made a bit in addition to the dividends.

Basically, if you have money that you can afford to lose, and you have more than 5 years – absolute minimum – to wait before pulling that money back out and spending it, ONLY THEN should you even think about investing that cash in the stock market.

If you don’t meet those criteria – park your money in interest-bearing bonds, or inflation-protected securities if you’re worried about that. If you have questions about how to do these things, write ’em up in the comments below or shoot me an email.

In a crisis, keep that job, get rid of debt, and save emergency funds. Only then can you consider long term savings. Tedious or otherwise. It is better to use money as a tool, and not be mastered by it. Those who do such speculate, and win big, or lose bigger.

In the hope that they will join a dying elite.