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.

The Index Card

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.”

  1. Strive to save 10 to 20 percent of your income
  2. Pay your credit card balance in full every month
  3. Max out your 401(k) and other tax advantaged savings accounts
  4. Never buy or sell individual stocks
  5. Buy inexpensive, well-diversified indexed mutual funds and exchange-traded funds
  6. Make your financial advisor commit to the fiduciary standard
  7. Buy a home when you are financially ready
  8. Insurance – Make sure you’re protected
  9. Do what you can to support the social safety net
  10. 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!

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