CHARACTERS » TEXASBEERGUIDE.COM ✓ Helaine Olen
THE MOST NOTABLE PERSONAL FINANCE WRITING OF 2013 . . . WAS A HANDWRITTEN 4 x 6 INDEX CARD. MINNEAPOLIS STAR TRIBUNE
TV analysts and money managers would have you believe your finances are enormously complicated, and if you don t follow their guidance, you ll end up in the poorhouse.
They re wrong.
When University of Chicago professor Harold Pollack interviewed Helaine Olen, an award-winning financial journalist and the author of the bestselling Pound Foolish, he made an offhand suggestion: everything you need to know about managing your money could fit on an index card. To prove his point, he grabbed a 4 x 6 card, scribbled down a list of rules, and posted a picture of the card online. The post went viral.
Now, Pollack teams up with Olen to explain why the ten simple rules of the index card outperform more complicated financial strategies. Inside is an easy-to-follow action plan that works in good times and bad, giving you the tools, knowledge, and confidence to seize control of your financial life. The Index Card: Why Personal Finance Doesnt Have to Be Complicated
Simple and sane advice on personal finances. The Index Card: Why Personal Finance Doesnt Have to Be Complicated I was two chapters away from giving this book a 4 star review and then I read the chapter about tip 9.
I've read lots of books about personal finance and through tip 8 I thought the authors were giving great advice.
However, I 100% disagree with their tip 9. To make my point I've knocked the book from 4 stars to 2.
Tip 9 is Do what you can to support the Social Security network.
The authors are big defenders of SSI. They specifically dispute the claim the Social Security is a Ponzi scheme, but don't say why. Ignore the cries of experts like former Comptroller of the the Currency David Walker, who has been proclaiming the failures of SSI for years, is not responsible. SSI is a Ponzi scheme - anytime you set up a system where one group pays for another with no plan for the final group to get paid, that's a Ponzi scheme.
SSI doesn't need support, it needs to be reformed.
For academics like Olen and Pollack, the answer to fixing Social Security is often to raise taxes on those who are well off and redistributing their income to others. That doesn't sit well with people like me who don't think government should pick winners and losers. If a poor person robs a rich person, they get arrested and go to prison. But if government takes the same amount of money from rich people to give to poor people, that's okay?
The mismanagement of the Social Security program for at least the last 30 years is one of the great travesties of American history and evidence that government often makes things worse. I've actually studied this more than most and have come up with a plan to help solve the under-funding of Social Security for anyone born in the 21st century. It could give people $1 million or more tax free by age 70. (see https://www.linkedin.com/pulse/young-...)
I still liked the book through tip #9. Good advice up to that point.
But it was like reading a novel you like with a lousy ending, hence my screed and the 2 star rating. The Index Card: Why Personal Finance Doesnt Have to Be Complicated Somewhat paradoxically for a book of 210 pages, the premise of The Index Card is that the necessary rules of personal finances can fit on (wait for it) an index card. As the authors sensibly explain in the beginning, however, basic rules often require a little elaboration to be implemented, and that is what the book tries to do. I’m sold!
It does a decent job of it, but with some holes. One issue is that it occasionally throws around vocabulary assuming you already know what it means, such as “small-cap index fund.” (I should have paid more attention in high school, you might say? I wouldn’t be reading a book that sells itself as Finance for Dummies if I’d taken the class, I retort!) And in oversimplifying some complicated topics, it fails to reach the depths necessary to understand them.
Nevertheless, its conversational style is generally very accessible, and more than a few of its explanations are a home run (e.g., the fiduciary standard). Even with the more obtuse topics (stock trading is at the top of the list), the basic principles are sound. They are therefore something I know I can figure out. For a finance illiterate such as myself, it’s a good starting place.
A note on the final rule (“support the social safety net”): this is a blatant political statement that only tangentially relates to the topic. Perhaps a little like shaming Bush at the Oscars, but I accept the digression for the simple reason that I agree with it. Ends rarely justify the means, but in this case the message is important enough to forgive some subversion.
As for the meaning of “small-cap index fund,” it would have been nice if the authors had told me, but I suppose that’s why Larry and Sergey invented Google. Wisdom such as this book offers, on the other hand, is a little harder to come by. Overall, it’s a fine endeavor whose greatest contribution is concentrated in the Ten Commandments of finance that do, indeed, fit on an index card. The Index Card: Why Personal Finance Doesnt Have to Be Complicated Helpful reminder of basic tips: Save on a regular basis; don't spend too much.
Subaccounts for your main bank account:
1. Savings
2. Vacation
3. Emergency fund/rainy day
4. House
5. Taxes
Don't prioritize emergency savings over credit card debt. Pay off your credit card first!
Secret to our grandparents' financial discipline:
- Lack of access to credit
- Layaway plans
- Loved ones (reality test)
- Loan sharks (most people sensibly avoided them)
Rank your debt; pay down the bill with the highest interest rate first.
Figure of the difference between IRAs, Roth IRAs, and SEP-IRAs
Traditional IRA - (they're like the original 401(k) plan ;) You can put up to $5500, and another $1K if over 50 yrs. Immediate tax deduction, money grows tax-free; withdrawals taxes as earner income.
SEP-IRA - If you operate your own business, you can contribute 25% of self-employment income, up to a high limit (in 2015, it was $53K)
Roth IRA - No immediate deduction; money is contributed after-tax; generally never taxed again.
NEVER take money from a retirement account unless you are out of options.
Warren Buffett: Invest in index funds (like a very low-cost S&P 500 index fund).
Beware of fees.
Demand that your financial advisor be a Fiduciary (looking out for you). Not all are.
Check with the Certified Financial Planner (CFP) Board
Fee-only advisor: National Association of Personal Financial Advisors (NAPFA)
If you can buy disability insurance, do it. According to the Council for Disability Awareness, 1 in 4 20-year-olds will be disabled before they reach retirement age.
Insurance: Rental, Homeowner, and Auto
Home - protect your net worth (not pick up cost of every repair bill)
Go for high-deductible options. You won't use this insurance unless very unlucky.
Car - protect against collision (covers blue book value - not actual cost of replacement) and liability. Liability is important: do NOT sign up for minimum coverage. Liability pays the bills if you are in an accident and someone is hurt. Adequate liability insurance is twice the amount (and maybe more) of your net worth. People with really high net worth get umbrella insurance, in case you exhaust your liability.
Rental - Get it. It allows you to choose between replacement cost and actual cash value. Choose the replacement cost. Also, get liability: if your dog bites someone, you can get sued.
Health Insurance
If you lack access to insurance through your employer, you can get an exchange plan.
Four varieties: Bronze, silver, gold, platinum.
Subsidies depend on your calendar-year income.
No plan guarantees you are fully protected.
Health-related debt is one of the leading causes of bankruptcy. The majority of people who had to declare bankruptcy had health insurance when they were ill.
-Comparison shop every year
- Do your homework to ensure your plan includes the doctors and hospitals important to you.
Double-check with your doctor and hospital that they participate in the plan :)
Longevity annuities are great if it is a fixed annuity. Make sure you get a low-cost annuity (eg, Vanguard or TIAA-CREF).
Keep an emergency fund.
***
The government is your last-resort insurance. Social Security it a government program. So is Medicare. Student loans come from the government, and unemployment insurance. Mortgage deductions on your income taxes are a result of federal government largess.
Almost all of us have, at some point in our lives, relied on the government for services so we can get by or make our situations better.
The truth is that our financial lives as we know them would be much harder and more precarious without the benefit of government social programs.
Without Social Security, almost half of elderly Americans would probably live in poverty. It's the largest pension and protection most of us will ever see.
Speak up. When someone decries Social Security as a Ponzi scheme, remind him or her that many elderly would lead much poorer lives w/o it. When you hear someone say that government should keep its mitts off Medicare, speak up and say it is a government program.
Acting together, we can protect one another against financial and health risks that would crush any one of us, were we forced to face them unassisted.
We must take care of ourselves and our immediate families through planning, saving and investing. When we do that, we are in a better place. However, we must take care of the rest of our citizens, too. That's the best way to ensure that all the new changes we've adopted have the best chance for success.
The only defense against the onslaught of information and the warp speed at which we're expected to process it is still good old-fashioned simplicity and common sense. The Index Card: Why Personal Finance Doesnt Have to Be Complicated The less you know about sound money management, the more valuable this book will prove to be. Literally. Very few people, regardless of income level, understand every aspect that contributes to maximizing (or jeopardizing) one's financial health. Perhaps more important, avoiding the numerous pitfalls which dot the road to a secure retirement takes time, attention, care, and commitment.
While there is a lot of good, general advice that is applicable to everyone, some is specific to the American codes governing savings and investment options in the US. There has also been rapid change in certain industries (housing/mortgage, insurance, and Social Security) so a few updates are needed. However all of the basic education absolutely applies.
I had both the physical hardback and the audiobook, working through both during a recent road trip. They are not the same experience at all, with the audiobook being quite inferior despite being read by both authors.
Content: 4.5
Book: 4
Audiobook: 2
The Index Card: Why Personal Finance Doesnt Have to Be Complicated
This one is a short & quick read that provides some good information. I'm currently on a finance journey and there are a number of things in here that I liked/learned about investing. Glad I read this one!!!! The Index Card: Why Personal Finance Doesnt Have to Be Complicated Simple advice that's easy to follow. Most of the tips are about personal responsibility and self-education. I was shocked by the statistics of people who do not follow common sense steps like taking their time to shop around for the lowest mortgage, or not paying off their principle on their credit cards. The trick is to save money, to find the best deals, to protect your best assets and to pay off the highest interest first.
The most sound advice was paying off your credit card as quickly as possible and take advantage of your employer matching retirement programs because it's basically free money. It was powerful when it captured the figures for compound interest. How a 25 year old could save 200,000 dollars by putting away only a little money each paycheck and how employers can help you save without conscious effort by putting part of your paycheck in a savings account.
The one chapter that seemed to phone it in a little bit was the financial advisor chapter. Basically, it said to find a fiduciary who puts your needs above their own. Makes sense and the book was right about finding someone who gives objective advice instead of only looking for their own commission, but it was also something not a lot of people can relate to. I am in no position to find an advisor and pay whatever they ask for objective advice. I can barely afford an etrade account. So yes it was right but it was probably the least helpful part of the book. The Index Card: Why Personal Finance Doesnt Have to Be Complicated Good intro to personal finance that I recommend to any beginners. The whole premise is that all you need to know about personal finance fits on an index card, which I can agree with. There are a couple of things I don't quite agree with though. One, is that it isn't good to roll your 401(k) over to an IRA when you leave your job. I can understand their concerns, but I think it's better to move it to a low-fee company and choose your funds. Secondly, they didn't like target date funds. I once again understand their concerns, but I think the Vanguard option is a very good one for people that simply do not want to put in any more effort. It's cheaper than a robo-advisor and is a well-diversified, hands off approach. The Index Card: Why Personal Finance Doesnt Have to Be Complicated This was a very readable book. I have been told many times by different people to try Dave Ramsay's Total money makeover because it's really good and works, but I was always skeptical because I knew that everything was pretty heavily religious and I am not. I finally decided to try it and I was not wrong. I couldn't even get out of the introduction. It was so preachy and then boring on top of that. This was exactly the opposite. It had NO religious aspect, it was short and to the point and the anecdotes were just enough to make it personable and relate-able. I also appreciated the fact that the book isn't full of admonishments. Take for example the first rule: save 10-20 percent of your gross income. To some, that might sound like a lot and not doable. But instead of just telling you to either figure it out or telling you you'll never succeed if you don't they very much tell you that it's ok to start anywhere, even as small as 1 percent as long as you try. The Index Card: Why Personal Finance Doesnt Have to Be Complicated 3+ The Index Card: Why Personal Finance Doesnt Have to Be Complicated
