The Index Card: Book Review and Giveaway
Last year, author Carl Richards taught readers to simplify their finances with The One-Page Financial Plan. Now comes The Index Card by Helaine Olen and Harold Pollack – a financial plan boiled down to nine simple rules that fits in your pocket and can help you navigate the all too often complex world of personal finance and investing.
To say that Olen views the financial industry with mistrust and suspicion would be an understatement. Her 2012 best-selling book, Pound Foolish, exposed the dark side of personal finance and (perhaps unfairly) labelled Olen as a ranting skeptic who chose to pin all of our financial woes squarely on the shoulders of slick talking snake-oil selling hucksters without offering any meaningful solutions.
Enter, The Index Card, a book in which Olen and Pollack arm their readers with nine surefire steps to get your finances on the right track and help avoid all the financial pitfalls that try and trip you up along the way.
The authors share these rules, not in a finger-wagging holier-than-thou manner, but with the humility and authenticity of real-life Americans who have struggled at times to master the art of personal finance. Too many personal finance authors leave us with a black-and-white set of money rules to follow and no margin for error, or, for lack of a better term, ‘shit that inevitably happens’.
In The Index Card, the co-authors weave in tales and anecdotes from their own lives that engage you as a reader and persuade you to re-think your views on personal finance and investing.
Even the cynical Olen opened up about her investing philosophy and buying inexpensive index funds:
“A lot of people read Pound Foolish and ask her where in her backyard she buries her savings. The answer: at a discount brokerage, invested in a fairly sensible way. Why? She has no faith in her ability to guess the future.”
Pollack, a University of Chicago professor, recounts his unexpected tale of financial strain when his wife Veronica’s mother passed away suddenly, leaving her intellectually disabled brother Vincent without a caregiver. The Pollack’s took Vincent into their home and Veronica had to leave her job to address his needs. Income fell, bills mounted, and Harold looked for answers to right their financial ship. What he discovered over the years amounted to what he calls “embarrassingly simple” advice, which led to the now famous Index Card financial plan.
The Index Card
So what makes The Index Card so special? For one, the rules are stunningly easy to follow. There’s even a perforated version at the back of the book with the title, “All the financial advice you’ll ever need on one card.”
- 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 exchange-traded funds
- Make your financial advisor commit to the 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
The point of the book, according to the authors, is for readers to gain the confidence to make their own financial decisions, discover basic truths such as how low-fee index funds outperform just about any more complicated investment you can buy, be armed with a timeless set of guidelines that you can turn to no matter what financial issues you may face, and to not let your fears about the financial unknown prevent you from doing anything.
I should mention the book is written for an American audience and, although parallels can easily be drawn between some of the terminology (401k = RRSP, Roth IRA = TFSA, 529 = RESP), certain chapters do spend considerable time talking about strictly American issues, such as paid health care under the Affordable Care Act, and choosing 15-or-30-year fixed rate mortgages as opposed to getting an adjustable rate mortgage (ARM).
Canadian readers may gloss over these points, but it is also interesting to read just how different things are for our neighbours to the south.
Fiduciary standard
I thoroughly enjoyed the chapter about the fiduciary standard, which means a financial advisor who has a legal and regulatory duty to put your interests ahead of his or her own. He or she has a legal duty to act in your best interests and is not getting paid to steer you into buying overpriced investment products you don’t want or need.
This chapter was of particular interest to me because Canadian investor protection groups have been calling on regulators to move from the inferior suitability standard to the fiduciary standard. These groups recommend that investors insist that a copy of the fiduciary oath is signed by their advisors before entering into a relationship.
Final thoughts and a giveaway!
The Index Card is a great primer for those who want to take control of their finances and who are looking for a guide to get started. For more advanced personal finance readers, you’ll enjoy the authors’ personal stories and emphasis on investor protection.
I reached out to Helaine Olen to get a review copy of the book and she was kind enough to send an additional book for us to giveaway on the blog. If you’d like to enter for a chance to win a copy of The Index Card, please leave a comment below with one financial rule that you’d like to write on your own Index Card.
The contest will be open until January 14th at 5:00pm EST. Good luck!
Eliminate unnecessary expenses. Save/invest this money.
One rule for my Financial Card:
Diversify by never allocating more than 10-15% in any one investment.
My rule when looking at my investment statements: Don’t panic, it’s not really a loss until you sell it.
#1 index card rule : Save now, Buy Later (instead of Buy Now, Pay Later)
A sale is of no value if you do not truly need what is on sale…..Rather, save or invest & get true value. Change your thinking on what a great deal is.
Never invest in anything you don’t fully understand!
Don’t wait for the ‘right time’ to invest. Sitting on the sidelines can be more detrimental than making an informed decision early.
PLAN!
Prepare and track a financial plan with clear goals. Prepare and track a budget plan for day-to-day expenses
Start early: it’s time in the market not timing the market.
Take the Credit card away from the wife. It’s like 1 step forward and 2 steps back!
Have a plan: where we are now, where we want to be in x amount of time, and how to get there. Then, stick to it.
Keeping up with the Jones’s (or any other common surname 🙂 is not going to bring you any long-term happiness … what it will bring you is long-term debt
Never buy what you would “like” (as opposed to what you need) if you can’t afford it.
Seems simple but we’re all in debt more than we should be.
You don’t need “stuff” to be happy. Live within your means – Mr. Micawber had it right.
Engage children in the household financial process/plan from a young age.
Track your expenses.
Do it now! Start NOW! Don’t let the perfect be the enemy of the good.
My financial rule: Be realistic and not greedy. “Slow and steady wins the race.”
Live within your means, whatever they are.
My index card would have: “Enjoy your money while continuing live within your means”
Ask yourself “Do I really need to buy this? ” before you buy it.
Diversify your investments.
Budget… and stick with it!
Your kid probably doesn’t need that.
Always Diversify!
My financial card rule – always review your credit card and bill statements carefully and compare against your bills and projected spending!
Travel only when the trip and spending money can be prepaid/paid for in cash.
When making your monthly budget, make sure it is REALISTIC.
Live within your means – always!
Don’t chase a good deal just for the sake of getting a deal. Make sure it is something I need/want.
Plan ahead with an emergency fund!
Be okay that your finances don’t look like someone else. You aren’t missing out on anything without a new car or nights out every weekend or a huge out.
Save as much as you can, when you can.
Save today- invest tomorrow!
Need to have a monthly budget. Automate your savings, investments and emergency fund accounts.
I would add to #5: “Keep it simple”.
And change #9 to: “Learn how to help the poor without enabling their poverty.”
Track expenses by category, including cash purchases. Report by category in Quicken for analysis and action.
The best time to invest is when you’re very young. The second best time is now.
My rule? Make a balanced budget to reflect your goals and values.
Pay yourself first.
About materialism: For some reason kids seem to be happier with the used furniture box, than the fancy toy. The finer things in life don’t have to be expensive just entertaining of the imagination. So, keep it simple, and let the mind do the rest. Also, get a spouse or partner of similar values….
Automate your savings to pay yourself first.