Reply #23: Reading This Thread Just Proves That the Financial Advice That People Were Getting Was Flat Wrong

[Yavin4]

First, you should tailor your spending, saving, and investing around your personal levels of risks, and then you should categorize your risks into short term, mid term, and long term risks.


For example, if you have a ton of credit card debt or a huge student loan, then you have short term credit default risks. You should not be putting money into a 401(K) if you're at high risk for a short term default.

Retirement is a long term risk for most of us, and in order to enjoy retirement, we have to overcome short and mid term negative events like a loss of a job, a divorce, a medical emergency, etc.

Finanical advisors have preached to the masses to elevate long term risks over short and mid term risks. The current economic downturn shows the results of this. People are not financially prepared to handle a severe down turn in the economy, and as a result, they're taking money out of their 401(k) accounts at a big penalty.