All the financial advice you need fits on a 4x6 index card
According to University of Chicago social scientist Harold Pollack, all the financial advice you need could be written down, folded up, and tucked in your wallet.
Sometimes, less is more.
Amid the ocean of personal finance books published each year (not to mention all the digital ink spilt in blogs and articles dedicated to the topic), one of the best reads in recent months was a scant 96-words long.
Hand-written on a 4×6 index card, a photo of University of Chicago social scientist Harold Pollack’s cheat sheet on the basics of personal finance has been bouncing around the Twittersphere for the past six months, and its legs shows no sign of wearing out. His advice:
- Max your 401K or equivalent employee contribution.
- Buy inexpensive, well diversified mutual funds such as Vanguard Target 20XX funds.
- Never buy or sell an individual security. The person on the other side of the table knows more than you do about this stuff.
- Save 20% of your money.
- Pay your credit card balance in full every month.
- Maximize tax-advantages savings vehicles like Roth, SEP and 529 accounts.
- Pay attention to fees. Avoid actively managed funds.
- Make financial advisor commit to a fiduciary standard.
- Promote social insurance programs to help people when things go wrong.
The card came out of an RBC chat I had with Helaine Olen regarding what I view as the financial industry’s basic dilemma: The best investment advice fits on an index card. A commenter, Alex M, asked for the actual index card. Although I was originally speaking in metaphor, I grabbed a pen and one of my daughter’s note cards, scribbled this out in maybe three minutes, snapped a picture with my iPhone, and the rest was history. (Here’s the picture and post.)
People have been wowed by the brevity of the advice. “The most notable personal finance writing of 2013 … was a handwritten 4×6 index card,” wrote the Minneapolis Star Tribune. Rank-and-file tweeters followed suit. “Best advice for the New Yr!!&follow @haroldpollack /This 4×6 index card has all the financial advice you’ll ever need,” wrote Tina Winsett.
Diane Harris, executive editor of Money magazine, was inspired to make her own list, tweeting:
— Diane Harris (@dianeharris) December 13, 2013
Still, there has been some criticism of his short-hand. “My biggest criticism relates to No. 3 … which is bad advice in my opinion,” writes John Reeves of the Motley Fool, who notes the premise of the website is built on “the merits of picking individual stocks.”
“The first part of the statement — Never buy or sell an individual security — implies that individual investors can’t succeed by picking individual stocks,” he writes. “But that’s just not true, as Warren Buffett argued in his classic “The Superinvestors of Graham-and-Doddsville.”
“The second part of the advice — The person on the other side of the table knows more than you do about this stuff – is equally flawed in my opinion. If the person on the other side is a hedge fund manager, does he or she really know more than an intelligent, ordinary investor? Remember, the U.S. stock market, according to the Financial Times, has returned eight times as much as the average hedge fund since 2009.”
But every blockbuster read is bound to have critics – even when the work is less than 100 words long.
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