Harold Pollack, social scientist, is a man of few words. Or, at least he is when it comes to finance. A few years ago, after meeting Helaine Olen, author of the bestselling Pound Foolish, he was inspired to boil down the dizzying superabundance of financial advice to 10 simple rules succinct enough to fit on a 4-by-6-inch index card. In 2013, he and Olen published The Index Card: Why Personal Finance Doesn’t Have to Be Complicated.
“I’ve thought about doing it for myself a thousand times,” says David Ott, founding partner at Acropolis Investment Management, who suggests the card first might be divided into two categories—financial planning and investing. In terms of planning, Ott suggests saving 10 to 20 percent of income (“Easy to write, but hard to do”), buying term life insurance (if you have dependents), having a low-rate mortgage (“Anything around 3.5 percent”) and maximizing tax-efficient accounts like IRAs, 401(k)s and a 529 college saving plan. He says his bullet points for investment would be a.) to diversify (by company, by geography, by stocks or bonds); b.) to find low-cost investments and c.) to maintain your discipline.
He also recommends a basic estate plan that, first and foremost, takes care of children in the event of your death. “These are uncomfortable decisions to make,” Ott says. “But they are much more necessary than figuring out ways to save on estate taxes.” Ott adds, however, that following this advice is hard. “I compare it to a healthy body,” he says. “We know the simple steps required, but when it comes to saying ‘no’ to the things we want, it’s not as simple as it sounds.”
Meanwhile, Peter Dolan, founding partner of Plaza Advisory Group, cautions against a one-size-fits-all, index-card approach. He says without an understanding of our own unique relationship to money, certain financial strategies aren’t relevant. He refers to the principles of ‘behavioral finance’—how emotions (specifically fear and greed) govern our decision-making—and says the more emotional we are, the more we behave in counter-intuitive ways. “When the market’s doing well, people want more and buy. When it’s low, they panic and sell. It isn’t logical,” he says.
Dolan is the author of The Integrated Investor, which he co-wrote with son Ryan, an investment analyst at Plaza Advisory Group. Dolan says the book explores common finance myths and dishes up tidy wisdoms on subjects like diversification and risk. “Look carefully at the measurements of risk,” Dolan says. “And definitely diversify your investments. You want all 14 clubs in your golf bag, but you want each one to do something different.” In other words, it’s not the number of investments you have but how unique each one is in terms of its character and purpose. He also recommends staying away from media hype that generates either fiscal fear or excitement. “See things in the context of history, and make the most of advanced research,” he counsels.
