Personal Finance Cheat Sheet on an Index Card

All you need to know about personal finance is right there, according to Harold Pollack. Now, Pollack is not an investment manager or financial planner; he’s a professor of social sciences at the University of Chicago. But his index card (that’s it, above) was so popular he wrote a book, The Index Card: Why Personal Finance Doesn’t Have to Be Complicated, with Helaine Olen.

In an interview on Minnesota Public Radio, Pollack identified the most important thing on the index card:

The most important of the index card guidelines is the one many Americans do not follow: “Pay your credit card balance in full every month.”

“Credit card debt is so deadly,” Pollack said.

Like the rest of the advice on the index card, that’s solid advice everyone should follow. [Minnesota Public Radio]

Edit: If you like short-form financial advice, the New York Times asked eight financial writers to squeeze their best tips onto index cards, too.

Lifetime Student Loans

When you filled out the FAFSA before your freshman year of college, you probably did not consider the chance that you would still be paying off those loans well into retirement.

Rosemary Anderson could be 81 by the time she pays off her student loans.

She is not alone.

For all seniors, the collective amount of student loan debt grew … to about $18.2 billion last year.

In 2010 (I guess that is the most recent year for which there are numbers), 4% of seniors were still paying off their student loans. That is a small percentage, for sure, but it is growing. And most of these senior debtors are probably living on fixed incomes — social security in many cases. That’s probably why 25% of seniors with student loans are in default.

(h/t Legal Skills Prof Blog)

Frontline: “The Retirement Gamble”

I watched Frontline’s “The Retirement Gamble” with my wife tonight. It starts with the shift from company-managed pensions to 401K funds managed by all of us — or our financial planners. It is not a feel-good documentary. Many Americans are losing huge chunks of their retirement savings to fees, possibly for little or no benefit (well, not to the savers, anyway; the fund managers are getting plenty of benefit).

This was not a problem in the roaring 90s, when a monkey could make money in the stock market, but it’s a big problem now, when many Americans have seen their retirement accounts fall off a cliff, or at best, go flat.

What’s the root of the problem? According to Frontline, it’s not so much the fees, but the fact that financial advice is mostly doled out by salespeople whose only ethical requirement is to sell you something “suitable.” In other words, the financial products they sell you just have to sort of resemble the kind of product you want. They can’t sell you an insurance policy if you’re looking for a mutual fund, in other words.

Few financial advisors are fiduciaries, a word that means they would be required to put your interests ahead of their own. (Not salespeople, in other words.) It doesn’t seem to matter that most Americans have no idea what that word means or how to identify a fiduciary (hint: ask).

Are there good, well-meaning financial advisors out there who are not fiduciaries? I’m sure there are. I think my financial advisor is one of them. But whether you go with a salesperson or a fiduciary, you need to ask yourself (and your financial advisor, fiduciary or not) some important questions:

  • How much of your retirement savings are going to fees?
  • How are your funds performing compared to lower-fee index funds (hint: probably not any better)?
  • Does your financial advisor have a fiduciary duty to you?

Above all, be involved in your retirement planning. If your investments aren’t growing, find out why — or find someone else to help you manage your investments more effectively.