After rediscovering the young adult versions of fitting personal finance advice on an index card, I decided to go back and read the book The Index Card: Why Personal Finance Doesn’t Have to Be Complicated by Helaine Olen and Harold Pollack. (I was able to find it via library eBook.)
I noticed that the book version of the “index card” was slightly different. The original card had 9 items, but two of them were merged away into each other (401k/IRAs) and (Pay Attention to Fees/Buy Index Funds). I bolded the new additions below. (You can see all chapters on the Amazon page.)
- Strive to Save 10 to 20 Percent of Your Income
- Pay Your Credit Card Balance in Full Every Month
- Max Out Your 401(k) and Other Tax-Advantaged Savings Accounts
- Never Buy or Sell Individual Stocks
- Buy Inexpensive, Well-Diversified Indexed Mutual Funds and ETFs
- Make Your Financial Advisor Commit To a Fiduciary Standard
- Buy a Home When You Are Financially Ready
- Insurance – Make Sure You’re Protected
- Do What You Can To Support the Social Safety Net
- Remember The Index Card
Here again is the original:
Here are my notes on the newly-addressed topics of home-buying and insurance.
Home-buying. This will always be a hard topic because it mixes in emotion, personal history, peer pressure, and all that fuzzy stuff. If you want to own a home, you need to make sure the purchase won’t blow up your overall financial picture. Nothing really surprising, but still good advice.
- Get your debt under control first.
- Save up as close to a 20% down payment as you can.
- Stick with a 15 or 30 year fixed-rate mortgage.
- Prioritize what you really want and need in a home. Stay within your budget.
- Location, location, location.
Insurance. There are low-probability events that can destroy decades of hard work, and that’s why humans invented insurance to spread the risk. Here are their cut-to-the-chase bullet points:
- Emergency fund – Maintain one!
- Life insurance – If you’re young(ish), just buy 30-year level term insurance.
- Property insurance – Raise your deductible as high as you can handle.
- Health insurance – Always sure you stay in-network.
- Liability insurance – Coverage for at least twice your net worth.
I’m glad that this book still retained its “quick-and-dirty” nature. No single rule will cover every scenario, but it’s good to have a clear and concise collection of the big points along with just enough explanation that you understand the basic reasoning behind it.