Turns out, you don’t need a personal finance expert. You just need an index card and some common sense.
Helaine Olen, a financial journalist for Slate, Inc., and most of the big newspapers at one point or another, believes the hype around personal finance expertise has lead to a lot of bad advice over the years.She's sort of a personal finance anti-expert, a veteran of the space who has seen the rise, and occasional descent, of dozens of personal finance gurus over the years, and who urges readers of her book Pound Foolish to treat them all with skepticism.
Why? For two reasons. The first is that a lot of "expert" advice is anything but when it comes to proven, repeatable results. The other reason, as she and her co-author Harold Pollack explain in their book The Index Card, is that you can write all of the important financial rules you need to know on a single index card, because there are just nine of them.
Olen doesn't hate personal finance experts—she just thinks they're sometimes given a free pass. Part of this is because of the history of personal financial advice, as she explains at the start of Pound Foolish. The personal finance advice industry as we know it is distinctly American and was started at the end of the Great Depression by Sylvia Porter, a Long Island journalist with a weekly newspaper column. From there it's grown into a massive industry, but at the core, personal finance advice is a part of the self-help genre, and like all self-help genres it's prone to being invaded by self-appointed experts whose advice doesn't hold up to scrutiny, or who sometimes offer an unhelpful moralistic view of your problems – like the suggestion that if you're poor, you deserve it.
Pretty much all of the major personal finance stars are problematic, according to Olen. She faults Suze Orman for sometimes giving bad or inaccurate advice, for example in Orman's short-lived investment newsletter "Money Navigator," and for falling into the moralistic camp during the Great Recession when (according to Olen) Orman blamed listeners for their financial troubles. She says Dave Ramsey's version of the snowball method of paying off debt doesn't take interest rates into account, and consequently can actually put you further into debt. (Here's more information on the snowball method of debt repayment, but remember to pay attention to those interest rates!) As for David Bach, the man behind the idea that if you give up your Starbucks beverage every day you'll be able to build up a million-dollar retirement account, Olen notes that the amount of savings Bach promises are about 5 times higher than reality if you actually run the numbers.
But one of the things Olen finds most offensive about modern personal financial advice is that it pushes the idea that financial strategy is hard to understand, and therefore you need a translator to learn how to manage your money. This is actually a strategy to separate you from your money, Olen argues, and you're better off taking the DIY route.
Which leads us to those nine financial rules on an index card. The point behind them is that they're easy to understand and easy to follow. You can stick to your favorite personal finance expert for motivation and emotional support, but if you follow these rules then you won't need an expert to manage your money.
So what are they? If you read the book, you'll get detailed explanations for why each rule exists, but here's the essential list if you just want to create your own index card. (We didn’t just pirate these from her book – you can find the rules all over the web or even by looking at the table of contents for The Index Card on Amazon.)
Try to save 10-20% of your income.
Pay off your credit card every month.
Max out your 401(k) and any other tax-advantaged savings accounts.
Don't buy or sell individual stocks.
Stick to diversified indexed mutual funds and ETFs.
Only use a financial advisor who follows the fiduciary standard.
Buy insurance! (Use our insurance checkup to figure out what you need.)
Help support the social safety net.
It may not seem like enough to build an entire financial strategy around, but you can use it as a base on which to build your own custom version. After all, there's always the other side of the index card. For example, you might want to add:
Build up an emergency fund. Suze Orman is right about this one. Having an emergency fund will help you stick to the other rules, like avoiding credit card debt (because you can pay up front for smaller expenses) and buying enough insurance (because you can buy cheaper policies with higher deductibles).
Stay on top of your credit reports (all three of them) and your credit score, because what happens there will affect the interest rates you're offered for things like home loans.
Plan out your career and your family as much as possible, because letting both of those develop "naturally" can leave you financially exposed when the unexpected happens. Planning ahead also provides a good opportunity to look at your insurance coverage and buy some life insurance if you haven’t already.
Ultimately the fundamental goal of personal finance advice is a good one, and has been since Sylvia Porter first introduced it to the country. But perhaps it's better to think of your personal financial situation the same way you're supposed to think of physical fitness: that success happens incrementally, that you're not in control of all the variables, and that the steps you need to take aren't complicated quant-derived higher math spells, but instead practical ones that you can do on your own.