9 rules of personal finance

I listen to a podcast called Freakonomics.  Specifically, one podcast titled everything you always wanted to know about money talks about an index card written by Harold Pollack.  The index card was titled, nine easy rules about personal finance.  Here are the nine rules:

  1. Max your 401(k) or equivalent employee contribution.
  2. Buy inexpensive well-diversified mutual funds such as Vanguard Target 20xx funds.
  3. Never buy or sell an individual security.  The person on that other side of the table knows more than you do about that stuff.
  4. Save 20% of your money.
  5. Pay your credit card balance in full every month.
  6. Maximize tax advantaged savings vehicles like Roth, SEP, and 529 accounts.
  7. Pay attention to fees.  Avoid actively managed funds.
  8. Make financial advisor commit to a fiduciary standard.
  9. Promote social insurance programs to help people when things go wrong.

I agree with all of these, but will say the emphasis on each depends on your current situation, and personal goals.  For example, rule #4 – save 20% of your money may be difficult for some people.  Some of you may just be scraping by, which does not allow you to save much at all.  Even if this is the case, you still should put efforts into hitting as many of these rules as possible.  It is typically difficult in the beginning as you adjust to a new lifestyle, but will pay off when it is important.  These nine rules can help a wide range of people from various levels of financial literacy.

As I collect more information and share it out, I hope to achieve greater awareness of financial literacy.  I want to share useful information to those interested in improving their financial situation. By nudging others to improve their financial situation, I believe we can improve the overall economy and in turn all benefit from it.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: