In 2013, the University of Chicago professor Harold Pollack interviewed the financial journalist Helaine Olen. And, during their conversation, he made an offhand suggestion: if you’re a personal finance neophyte, everything you need to know about managing your finances could fit on a single index card. “[The best personal finance advice] can fit on a 3-by-5 index card, and is available for free in the library,” Pollack said. “So, if you’re paying someone for advice, almost by definition, you’re probably getting the wrong advice because the correct advice is so straightforward.” He then got an index card, jotted down a list of guidelines, and posted a photo of the card online. The post went viral, and it eventually led to Pollack and Olen co-authoring the well-reviewed book, The Index Card: Why Personal Finance Doesn’t Have to Be Complicated. There, they elaborated on the principles written on the original card, which read as follows:
- Pay your credit card bill in full every month.
- Keep a budget and spending diary. Pay cash up front whenever you can.
- Don’t smoke. Mind your alcohol and dining spending, too.
- Start saving early. Make it automatic, ideally through a 401(k).
- If you have a job and no kids, aim to save 20% of pretax income.
- Invest in low-fee total stock index funds, ideally in a 401(k).
- Open a Roth IRA if you don’t have access to a 401(k).
- Don’t buy individual stocks or try to time the markets.
- Think federal first when borrowing for school. And don’t combine public and private loans if you consolidate.
- A focused and rigorous major matters more than where you go to college.
- Don’t push your friends to overspend. And beware of the same peer pressures applied to you.
Over at the website for the Association for Financial Counseling & Planning Education, Corinne McKenna describes each principle on the index card in a little more detail, and then offers these thoughts: “I would recommend this book to anyone who is just diving into personal finance for the first time. It is the most realistic and reliable beginners guide to personal finance that I’ve read yet. I think it should be required reading for high school graduates. I would also recommend the book to older individuals who are overwhelmed and intimidated by their finances.” You can purchase The Index Card: Why Personal Finance Doesn’t Have to Be Complicated here.
