In this episode, we discuss the PBS news hour feature, “All the financial advice you’ll ever need fits on a single index card.”  This is a popular blog then book by Harold Pollack, a UC Chicago social scientist.  Here are the 10 guidelines:

 

  1. Strive to save 10-20% of your income
  2. Pay your credit card balances off every month
  3. Max out your 401k and other tax advantaged accounts
  4. Never buy or sell individual stocks
  5. Buy inexpensive well diversified indexed mutual funds and ETFs
  6. Make your financial advisor commit to a fiduciary standard
  7. Buy a home when you are financially ready
  8. Insurance – make sure you are protected
  9. Do what you can to support the safety social net
  10. Remember the index card

These are all fine guidelines; however, they are just guidelines. Each person´s goals and situation is different and their ability to follow these guidelines (and even the relevance) will vary. Some of the rules are not that clear.  I suppose that is why there is a book, because the card was not self explanatory (and there was an opportunity to make more money).

Strive to save 10-20% of your income – good goal but it depends on your situation whether this is practical. If you have kids or heavy expenses, there may be periods when this does not happen. It´s a good goal.

Pay your credit card balances off every month – definitely. However, many people don´t and debt can get out of control. If you need to keep a balance, pay off the highest interest cards first. Transferring them to lower rate (or 0% cards) may help as well. You can reach out to the credit card companies to negotiate as well. They may put you on a pay off plan with low interest.

Max out your 401k and other tax advantaged accounts – as with saving, for many it makes sense to max out retirement accounts.  However, be sure you have a prudent reserve and tax differed savings might not be the best, depending on your goals.  For example, if your goal is to buy a rental property, you will probably need to save without the tax advantage.

Never buy or sell individual stocks – for most people this is good advise. ETFs will serve the majority of people very well.  There are cases where individual stocks may be desired but, in general, they are not needed.

Buy inexpensive well diversified indexed mutual funds and ETFs – for most people this makes a lot of sense. Be sure to be diversified with different asset classes.

Make your financial advisor commit to a fiduciary standard – this is very important. Use a FEE ONLY financial advisor. One who is not selling you products or getting commissions. The fiduciary standard means that they put their clients´ needs first, before their own. 

Buy a home when you are financially ready – agreed. This should not be hurried. Be sure that you can commit to an area. It may not be a great financial move if you leave after a short time. A long term mortgage is difficult to get out of once you are committed.

Insurance – make sure you are protected – it is important to be covered. We have seen many clients with the state minimum coverage and they are at risk of losing their assets if they cause a serious accident.

Do what you can to support the safety social net – he is referring to medicare, social security, and other government programs. We all support them with our taxes. I´m not sure what more he is recommending. Donating to organizations is worth doing but it is up to each person do decide how much and to what organizations.

Remember the index card – it is important to stick to the plan you made. Some people will have no problems sticking with a plan and others may find it helpful to have a financial advisor available to check in with regularly to be sure they are on track to meet their financial goals.

 

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