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The Index Card: Why Personal Finance Doesn't Have to Be Complicated Hardcover – January 5, 2016
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“The most important financial advice is stunningly simple and fits on an index card. The newbie investor will not find a better guide to personal finance.”
—BURTON G. MALKIEL, author of A RANDOM WALK DOWN WALL STREET
“Ten simple, amazingly effective rules unencumbered by the agendas of fee-sucking fund managers or reckless business-media pundits. Highly recommended.”
—NOMI PRINS, author of ALL THE PRESIDENTS’ BANKERS
“The Index Card offers engaging stories, persuasive explanations, and fascinating data. It’s realistic, honest, wise, and compassionate, as well as socially and politically astute.”
—JOE CONASON, editor in chief at THE NATIONAL MEMO
“All parents should buy The Index Card for their children. If they refuse to read it, consider disinheriting them.”
—ROBERT H. FRANK, professor of economics, CORNELL UNIVERSITY
“In a world of relentless financial noise, Helaine and Harold are here to help. This is the best and most important financial book of the year.”
—ZAC BISSONNETTE, author of DEBT-FREE U and THE GREAT BEANIE BABY BUBBLE
About the Author
HELAINE OLEN is the acclaimed author of Pound Foolish: Exposing the Dark Side of the Personal Finance Industry, which was featured on The Daily Show with Jon Stewart and PBS’ Frontline. She writes the Spread the Wealth personal finance column for Inc. Her work has appeared in numerous publications, including The New York Times, Salon, Slate, where she wrote the popular column The Bills, and the Los Angeles Times, where she wrote the popular Money Makeover column.
HAROLD POLLACK is the Helen Ross Professor of Social Service Administration at the University of Chicago, where he researches health and urban policy concerns and is a nonresident fellow at the Century Foundation. He writes regularly for the Washington Post, Politico, Atlantic Monthly, healthinsurance.org, and other publications.
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As the title indicates, Olen's and Pollack's answer fits on an Index Card. 1-Strive to save 10%-20% of your income. 2-Pay your credit cards off every month (and minimize other debt). 3-Maximize your 401(k) and other tax-advantaged savings accounts. 4-Never buy or sell individual stocks. 5-Buy inexpensive well-diversified indexed mutual funds and exchange-traded funds. 6-Hire a fee-based fiduciary (avoid commission-based financial salespeople). 7-Wait to buy only as much home as you can afford (remember homes are usually highly-leveraged investments with high maintenance costs). 8-Buy term life insurance, auto-insurance (especially liability), home insurance or renter's insurance, and disability insurance. 9-Support the social safety net (government programs, such as Social Security, Medicare, Medicaid, and student loans, because 96% of American depend on such programs for financial assistance, even though 40% deny obtaining help from the government.) 10-Keep doing the first 9.
Much of this advice falls under easier said than done, but these are achievable goals for someone in a stable financial situation. The authors repeatedly tell readers how to take care of their money during good times, so that they will have money during bad times. The first principle, saving ten to twenty percent of your income will be difficult for people who have gotten used to spending what they make, which the authors acknowledge, but one should at least save as much as possible. Likewise with the second principle, payoff your credit cards every month, easier said than done, but the Olen and Pollack suggest that if you can't pay them off, then stop using them altogether. Psychologically cash is harder to spend than credit. Principle 3 harkens back to principle 1, save 10-20% of your income, only try to save as many pre-tax dollars as possible to reduce your taxes and you're less likely to miss what you never got. Principle 4 is simple, playing the stock market is like playing poker, unless you are exceptionally skilled and lucky (and rich) you will lose more often than you win. Instead, principle 5 suggest that you bet with the house and just try to match the market, since most stock-pickers and fund managers do worse than the market over the long run. The last two principles stress protection for disasters that are too big for you to self-insure with your savings. Finally, like staying in physical shape, staying in financial shape requires frequent repetition.
Through trial and error as well as research, I have come to many of the same conclusions. Recently, I have been able to implement all ten principles. They work well for me, but I wish the Olen and Pollack had said more about costs that seem destined to set one back, such paying for college and home renovations. Nonetheless, I would recommend this book to recent high-school or college graduates just beginning their careers.
P.S. I have taught college courses and published papers on the sociology of money. I have also obtained licenses to sell life and health insurance and mutual funds. Thus, I have been on both sides of the table.
Should be read and followed for anyone just starting a career and needing help how to organize and plan their financial future.
There are too many financial advisors and stock/mutual fund companies that it is too confusing to know were to start (unless you want to learn to study corporate annual reports, industrial trends and read the Wall Street Journal every day and Barron's ever week - much more than most people can spend the time to do right).
This book gives simple guidelines for organizing personal finances and simple instructions to begin investing (until you want to be your own "Cramer").
Investment guidelines explained her are basically conservative (i.e. John Boogle and Vanguard instead of hedge funds and futures).