Personal finance goes 'viral'

 

Home videos of animals or babies often seem to go viral on the internet. But have you heard about a list of personal finance tips going viral on the net?

 

Your response is probably: "No way".

Well, it did happen two years ago. Harold Pollack, a professor in social service administration at the University of Chicago, jotted down on a small index card a straightforward list of things that had personally helped him straighten out his own finances.

Pollack then posted a photo of his handwritten note online; it went viral. And Money Magazine in the US named the listing of his points distilled on a single card as one of the best new money ideas of 2013.

Now fast forward to 2016. His simple index card has evolved to become the basis of a recently-released 245-page book, The Index Card: Why Personal Finance doesn't have to be complicated. Forbes magazine, among other publications, has given the book, co-written with personal finance writer Helaine Olen, a favourable review.

It should be emphasised that Pollack is not, nor does he claim to be, a personal finance expert but someone who carried out extensive research because of his own candidly-discussed financial challenges. That perhaps adds to the appeal of what he is saying.

In broad terms at least, his key points - which have been revised to a degree for his book - make much commonsense:

  • Try to save a proportion of your income for an emergency fund and to at least partly finance your retirement. (Although Pollack suggests actual percentages, a person's ability to save much depends, of course, on personal circumstances.)
  • Invest in a diversified portfolio of low cost index funds rather than trying to beat the market. (A Vanguard diversified fund was mentioned as an example).
  • Maximise savings in a concessionally-taxed retirement (super) fund.
  • Hold adequate insurance.
  • Buy an affordable home if and when you can.
  • Pay off your credit card in full each month.

With the release of Pollack's index card book, New York Times personal finance writer Ron Lieber has had a look at the handful of current publications featuring simple, should-do personal finance lists.

Lieber says the authors - who include Jonathan Clements, writer of the book Money Guide 2016, which carries a list of 18 personal finance steps - agree on at least four things. These are: create an emergency fund, invest most of your portfolio in index funds, buy your own affordable home if you can, and hold adequate life insurance.

In his article, How should you manage your money? And keep it short, Lieber writes that the "biggest takeaway" from these various simple financial pointers is: "Managing your money should be pretty straightforward but that doesn't make the task all that easy."

He asked the authors of the personal finance lists why people keep on breaking these four seemingly straightforward rules given that not one is new. However, as their responses indicate, this is no simple answer.

As behavioural economists tell us, we often seem naturally drawn to acting against our own best interests - such as trying to pick winning individual stocks and trying to time the markets. That is why some of the most fundamental and sometimes seemingly obvious principles of sound personal finance management are worth repeating again and again.

Hopefully such published lists will prompt more of us to write down or revise our own list of financial goals given our personal circumstances. (One of Vanguard's Principles for Investing Success is to set clear and appropriate investment goals.)


By Robin Bowerman
Smart Investing 
Principal & Head of Retail, Vanguard Investments Australia
11 February 2016

 

Any advice contained in this website is of a general nature only and does not take into account your circumstances or needs. You must decide if this information is suitable to your personal situation or seek advice.

Rolanda has been my financial adviser for 20 years. I have always found her to be highly intelligent, knowledgeable and professional in her career. Rolanda is accessible at all times and patiently explains terms that I do not fully understand. I can highly recommend Rolanda and it is a pleasure to do so. I do this with the utmost confidence. Marcia Montgomery (Retiree – home duties and ex-clerk with Water Board)
I retired Oct 2012, and seeking Financial Advice for my retirement funds, I decided to have Rolanda look after my financial affairs, and so happy I did. Since my retirement I am extremely comfortable with Rolanda’s advice, experience and strategies and the returns on my investments. Rolanda is my "Breath of Fresh Air" at this stage of my life and she makes herself available 24/7 should you need to talk with her. Steve Hoad (Ground Engineer, Qantas)
In 1997 I left Energy Australia and decided to join Rolanda Adams Financial Services for the financial support and advice that I would need into the future. That decision has proved a very good one and I am still with Rolanda who has given me advice and friendship over those many years. The advice given has ensured that my investments have been protected and the major losses, of some, during the GFC was not felt by me unduly. Rolanda and her team are very easy to contact at any time and one is always received in a most professional manner. I would be most happy to recommend Rolanda Adams Financial Services to all who need financial services. Graham Fleeton (Manager, Property Insurance Group Energy Australia (Ausgrid))
Rolanda has been my Adviser for the past 18 years. Through her wide industry experience and professional expertise she has ensured the sound development and ongoing management of my investments. Her advice has invariably been sound, timely and entirely tuned to meet my personal needs in retirement. She has a friendly, engaging manner and is always readily available to address any of my concerns. I have no hesitation in recommending her. Neil O'Keeffe (Chief Inspector (retired), Australian Customs Service)

© 2019 Rolanda Adams Financial Services Pty Ltd. All rights reserved. Site by PlannerWeb.