10 Best Lessons from Reddit's Personal Finance Subreddit
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Depending on how much time you’ve spent on the internet—and which corners you like to frequent—you may or may not have heard of the social media message board site Reddit. Comprised of thousands and thousands of communities called subreddits, the website is a great place to congregate and learn from strangers online.
If you’re looking for a community to hold you accountable and advise you on your personal finance journey, Reddit can be a fountain of information and encouragement. Reddit users use the subreddit for all kinds of tasks and conversations, including in-depth budget breakdowns and complex conversations about everything from taxes to real estate investing.
New Reddit users could easily become overwhelmed by the sheer number of posts on the personal finance subreddit (not to mention its unique lingo and acronyms like FIRE, short for “financial independence, retire early”). If you’re interested in what the personal finance community has to say but don’t have the time or energy to wade through pages of information and financial advice, here are the best Reddit lessons you can glean from r/personalfinance.
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What is r/personalfinance?
Reddit personal finance is one of many popular subreddits on the website. According to the sub’s description, r/personalfinance is a place where users can “Learn about budgeting, saving, getting out of debt, credit, investing, and retirement planning.”
Reddit functions, in part, by showing you topics based on how many upvotes or downvotes they’ve received. Put simply, users “vote” on whether they think a topic is interesting, helpful, or relevant, and that determines how certain message threads and comments are shown to you.
While there are a variety of personal finance subreddits on Reddit, r/personalfinance is one of the most popular and active. As of this writing, it has more than 17 million members, and is ranked 22nd overall in terms of size on the social media platform.
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Top 10 lessons from r/personalfinance
With so many threads, topics, users, and perspectives, it can be overwhelming for beginners to wade into r/personalfinance. Even so, the following ten pieces of advice continually come up from Redditors again and again as they field questions from new and old users alike.
1. Create a budget and stick to it
One thing Redittors on r/personalfinance all tend to agree on is the importance of creating a budget. The r/personalfinance FAQ has this to say about budgeting: “Budgeting should be the cornerstone of your financial house.”
When creating a budget, r/personalfinance suggests that you start by listing your monthly income and then tracking your mandatory spending. Mandatory spending includes things like your housing costs, utilities, groceries, and transportation. Note that discretionary expenditures like Netflix or eating out once a week are not included on this list.
There are a few rules of thumb that Redditors on r/personalfinance will frequently encourage users to leverage as they assess their financial situation and budget. These include suggestions like:
- Keeping your housing costs below 30% of your take-home pay
- Keeping groceries at or less than $300 per person each month
- Paying no more than 15% of your take-home pay towards a car loan
r/personalfinance also includes a handy reference of various budgeting apps you can use to track your spending—and some users also share their own elaborate Google Sheets on the message board. Whether you use YNAB, the envelope method, or a pen and paper, what’s most important is that you have a budget.
2. Pay off high-interest debt
Paying off high-interest debt is a key way to free up more money and increase your cash flow. After all, if you’re drowning in credit card debt and monthly payments are eating up your budget, it becomes more and more difficult to save money.
When it comes to paying down high-interest credit cards or personal loans, the age-old question is whether it makes more sense to use the snowball method of debt paydown or the avalanche method. Redditors typically land on either side of the debate, as evidenced by the following two quotes.
As u/MakeItHomeMade shares in one Reddit thread, “Financially and Mathematically, yes it make sense” to pay down higher interest debt before smaller balances.
However, as pointed out by u/TragicBus, “If removing a loan payment or 2 can increase cash flow to allow for less chaos, and less chance of making new bad debt or access to a better place in life, I would argue it’s as mathematically relevant.”
Ultimately, the personal or emotional gains you may get in terms of generating momentum could ultimately be more beneficial than the saved money in interest payments by tackling a smaller debt first — even if that smaller debt has a lower interest rate than your other high-interest debts. As long as you are focusing on getting rid of the high-interest debt that’s weighing you down, you’re on the right track.
3. Build an emergency fund
Building an emergency fund of at least $1,000 is an important starting point when it comes to avoiding future debt.
While you may feel comfortable tackling high-interest debt with the understanding that you can use your credit card should an emergency arise, Reddit is full of stories illustrating just why that kind of thinking can backfire and quickly erase any progress you’ve made. Cars break down, people lose jobs, and accidents happen. All of these cost money to fix, which is why you need an emergency fund.
r/personalfinance’s Wiki has this to add about emergency funds and credit card debt: “A smaller emergency fund of $1,000 (or 1 month of expenses) is temporarily acceptable while paying off credit card debt or other debts with interest rates above 10%.” Otherwise, you may want anywhere from a few months to a whole year of expenses saved up in a checking, savings, or money market account.
Reddit u/ScrewedThePooch has this wisdom to share about what sort of emergency fund may be necessary based on your personal situation, although he does concede that it is “up to your discretion”:
- If you are a single-income household with a stable paycheck who would be eligible for unemployment, six months is a good amount to have saved on hand.
- If you are a single-income household with a stable paycheck who would not be eligible for unemployment, nine to twelve months is a good amount for your emergency fund
- If you are a single-income household with an unstable paycheck due to commissions or contracting who wouldn’t be eligible for unemployment, 12 or more months is appropriate for your emergency fund.
- If you’re a dual-income household with a stable paycheck and both of you are eligible for unemployment, six months of living expenses is appropriate for an emergency fund
4. Invest for the long-term
Every once and a while, you’ll see new Redditors ask questions about whether or not it makes sense to pull money out of their retirement savings in order to pay down debt more aggressively. While these posts are generally well-meaning, the resounding consensus is that this is a terrible idea.
Investments are intended for the long-term, so it’s best to adopt a “set it and forget it” approach when it comes to investing for long-term goals like retirement. This is true whether you’re investing in the stock market as an individual or a 401k plan through your employer.
As one Reddit user, u/zhenya00, put it when another user asked if it made sense to pull $9,300 out of a $13,800 retirement account in order to pay down credit card debt: “$9300 of credit card debt is not worth robbing yourself of $200k at retirement. Buckle down on expenses, build and follow a realistic budget, and pay off your credit cards. Your retirement funds are not an emergency piggy bank for your over-spending.”
Especially as your investment accounts grow, it may be tempting to use them as another source of income for a large purchase. However, treating them that way robs your future self of a lot more money than it might seem. Thanks to compound interest, your money is worth much more in the long-term than it is in the short-term. As such, it’s best to have a separate investment account for passive income if you truly want investing to be a source of money.
5. Maximize retirement savings
Retirement planning is a topic that comes up frequently on r/personalfinance. There are some rules of thumb that the subreddit generally suggests, but the most common refrain is to save as much as you can to maximie your retirement savings.
One rule of thumb that is commonly shared is the the “10x” guideline for saving for retirement. Summarized from r/personalfinance’s Wiki, this retirement goal bases certain benchmarks on your income and age: “You should ideally have saved at least 1x your income by age 30, 3x by age 40, 6x by age 50, 8x by age 60, and 10x by age 67 (full retirement age in the US).”
Once you’ve paid off major debt, putting as much money towards retirement as you can afford is a surefire way to have enough money to retire on once you reach retirement age. Some redditors supercharge their savings goals in communities about the topic of FIRE, which stands for financial independence, retire early. You can learn more about these and other subreddits later in this article.
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6. Avoid lifestyle inflation
Lifestyle inflation, also known as lifestyle creep on r/personalfinance, refers to the concept of getting a raise and immediately spending more money rather than re-evaluating your financial needs and goals.
u/Oax_Mike discusses why it’s important to tackle lifestyle creep early in a post with over 6,000 upvotes. They share that “once you creep forward it's pretty tough to creep back.” Or, put another way, “Once you're used to wine and brie, it's hard to enjoy Kool-Aid and Velveeta.”
u/Oax_Mike goes on to explain that while it’s important to reward yourself when you get a raise or bonus at work, it’s important to do so consciously. To them, it’s just as important to understand what’s important to you rather than to start upgrading every facet of your life. Some people might like to spend more money on organic groceries while others like the newest tech or ethically-sourced clothing. There’s nothing inherently bad in spending more money on any of those three categories; however, upgrading all three aspects of your budget could definitely constitute lifestyle creep.
7. Increase your income
Sometimes, once you’ve created a budget, you may realize you don’t have enough money to live within your means—comfortably or otherwise. In these situations, it may be prudent to look into a side hustle.
For some people, getting a part-time job or picking up some freelance work is just a means to an end to tackle debt more quickly. For others, it may be crucial to work more hours on your side job until you are able to get a raise at work. r/personalfinance and other subreddits even have discussions wholly devoted to how to ask for a raise.
One tip if you’re looking to have more than one income stream and are willing to put in part-time hours: instead of delivering through DoorDash or Uber Eats, consider delivering pizzas for a chain in your area. You’ll generally get a guaranteed hourly rate, and keeping your tips is much more streamlined.
8. Understand your credit score
Your credit score plays a role in a variety of aspects of life, including things like rent or getting approved for loans. Your credit score can also impact what interest rates you qualify for, with better scores receiving lower rates. As such, r/personalfinance highly recommends taking an active role in improving your credit score.
r/personalfinance puts it plain and simple in their Wiki: “A good credit score lowers the cost of borrowing money for such purchases, leaving you with more money in your pocket after the loan is paid off.” That’s certainly a win-win situation whether you have debt or not.
9. Prioritize financial goals
If you set up a budget with no real goals, it will be hard to stick to them. One great thing about r/personalfinance is that you can be exposed to people from all walks of life. As a result, you can see just how many definitions there are for living a rich life.
For example, in a recent thread about 2023 Financial Goals, users shared a wide-ranging list of goals they had set for themselves for the coming year. Just some of a few of the different goals included things like:
- finding a new job
- maxing out the new $22.5k 401k contribution limit
- getting less food delivered and learning to make some new and exciting meals
- spending money on fun experiences without feeling guilty
As you can see, some of these goals were more mathematical and logistics based and others were more about behavioral change or aligning spending with individual priorities. The important thing is to define your goals and make a financial plan that helps you achieve those goals.
10. Educate yourself
If there’s one current running through all of r/personalfinance it’s the importance of educating yourself. Many people claim to be bad with money or not understand personal finance and use that as a crutch to make poor decisions. However, thanks to resources like Reddit and JoyWallet, it’s possible to take your finances into your own hands and come out the other side happier and more financially solvent.
Other personal finance subreddits
If you’re interested in exploring other subreddits devoted to personal finance topics in more specificity, here are a few that may be of interest to you.
r/Bogleheads
Named after Vanguard founder Jack Bogle, this is a subreddit for “passive investors who follow Jack Bogle's simple but powerful message to diversify and let compounding grow wealth.”
r/crypto
If you’re interested in cryptocurrency, this subreddit offers a place to discuss a wide range of crypto topics.
r/fatfire
Interested in the FIRE movement? Here’s a subreddit where you can learn how to “retire with a fat stash.”
r/frugal
Looking for stratgiees, tips, and tricks to live more frugally? If so, r/frugal is a great place to help you find ways to live within your means.
r/leanfire
The sibling of r/fatfire, r/leanfire is focused on financial freedom and independence for folks who “want to retire before 60 with less than $50k in planned yearly household expenses.”
r/povertyfinance
If you’re struggling with your finances, it can be disheartening to read so many stories in r/personalfinance of people making six figures a year or paying off all of their student loans. r/povertyfinance is a subreddit for anyone who is struggling financial to get tips and advice in a judgment-free zone.
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The bottom line
While you can learn a lot listening to personal finance podcasts or reading articles online, sometimes a community of strangers is a better place for you to learn. If so, then Reddit—and, by extension r/personalfinance—can be a welcome source of information, encouragement, strategy, and inspiration.
You can learn countless things about improving your financial standing browsing r/personalfinance, but some of the biggest lessons are based on simple tasks like setting a budget, paying off high interest debt, and saving for retirement by maximizing your contributions. Keep the above tips in mind and spend some time browsing the website from time to time and you may just absorb some important personal finance lessons.
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Writer
Brent Ervin-Eickhoff is a Chicago-based writer, stage director, and filmmaker with a background in digital marketing and content creation. In addition to Joy Wallet, Brent has written for Complex, Volkswagen, HowlRound, Picture this Post, and Third Coast Review, among others. He currently serves as the Associate Director of Marketing for Content Creation at Court Theatre at the University of Chicago. Brent graduated from Ball State University with Academic Honors in Writing.
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