Author Topic: What are your thoughts on “The Financial Advice Index Card”?  (Read 1318 times)

MadBikePoet

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What are your thoughts on “The Financial Advice Index Card”?
« on: February 28, 2021, 10:27:55 AM »
What would you put on an FI index card?

Quote
In 2013, Harold Pollack, PhD, a social scientist at the University of Chicago, posted a photo of an index card online. On the card? The only financial advice he said anyone ever needed to know. It went viral.

https://www.sofi.com/learn/content/financial-index-card-advice/

Which pieces of his advice do you 100% agree with? What quibbles do you have with other pieces? What is missing for the average Joe/Jane?

Full disclosure: I am a post-fire self employed financial coach who creates free video content on financial topics with hopefully broad appeal. The intention of my free video content is to inform, educate, transform, and provide a sense of who I am and the things I coach on.

I am working on this particular topic as a 2 part video series. The first part is my assessment of Pollack’s rules, and the second part is a completely different index card for the FI seeker. I already have plenty of material and have my outline down, but I am curious about what others think about this and how it might differ from my own opinions formed by my own experiences in achieving FI.

Thank you for your time.

Zikoris

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Re: What are your thoughts on “The Financial Advice Index Card”?
« Reply #1 on: February 28, 2021, 03:47:18 PM »
I would axe the financial advisor entirely, and 20% savings is pretty pathetic unless you're really low income.

I suppose if I were to add a couple lines, it would be along the lines of: Rampant overconsumption is killing our planet and making everyone broke. Learn about the true cost of the things you buy (human, animal, environmental, etc), and work to consume less every day. If you can retrain your brain not to want stuff in the first place, you're going to have a really easy time financially.

Wolfpack Mustachian

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Re: What are your thoughts on “The Financial Advice Index Card”?
« Reply #2 on: February 28, 2021, 04:53:45 PM »
Maxing out 401k to employer match is pretty often good advice.
Saving 20% can be extremely low depending on the life situation or a good target.
Pay your credit card balance in full every month is pretty much never bad advice - the closest to 100% I would say from it.
Financial advisors aren't necessary at least for much of the time you're working on your savings - maybe at the very end of things.
The last piece of advice is fine and all, but it feels thrown in to make whoever wrote it feel good about themselves (the information claims to be about good financial advice, this is an apples and oranges thing to me). Comparing this to Zikoris's addition of rampant overconsumption is killing the planet comment - that comment makes sense, because it's a reasoning for reducing spending whereas this one seems out of left field. Just my take on it; I'm sure others will feel differently.

Overall, the problem with things like this is that financial information and advice is so specific. Maxing 401k to employer match is often good advice, but in some situations, it may legitimately not be. Saving 20% could be a great stretch goal if you're living on $10/hr or something like that. If you are single making 75k with no outstanding debt other than a small mortgage, it would probably be too little. It's just really hard to make something like this very encompassing.

The biggest thing I would add would be, be deliberate in what you spend money on and make sure it aligns with your priorities. If you do have disposable income, being deliberate about what you're doing as opposed to just letting your lifestyle creep up, spending on things mindlessly, and so on is, to me, one of the best things you can do.

kite

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Re: What are your thoughts on “The Financial Advice Index Card”?
« Reply #3 on: February 28, 2021, 06:19:26 PM »
Be particular about your sexual partner(s). 
Take care of your physical health.

MadBikePoet

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Re: What are your thoughts on “The Financial Advice Index Card”?
« Reply #4 on: March 01, 2021, 06:34:59 AM »
I would axe the financial advisor entirely, and 20% savings is pretty pathetic unless you're really low income.

I suppose if I were to add a couple lines, it would be along the lines of: Rampant overconsumption is killing our planet and making everyone broke. Learn about the true cost of the things you buy (human, animal, environmental, etc), and work to consume less every day. If you can retrain your brain not to want stuff in the first place, you're going to have a really easy time financially.

Love it! "Consume less" is my #1 secret agenda for coaching. Primarily I help people do better financially, and along the way I help them see the personal impacts of their spending to their lives and futures. I do help them raise their money consciousness. Of course it is up to them and their own personal values whether or not they decide to actually consume less. As conscious non-consumers I know it can be frustrating to continue to witness the garbage barges, the floating island of plastic in the Pacific, and the trillions in credit card debt. I'm with you on all of that! One of my mottos when I pitch myself is "Stop buying stupid sh*t!" Later I explain that stupid = not aligned to your values. The challenge I continually see in coaching is that most people do not take the time and effort to really understand their personal values, so they just do what everybody else is doing, which right now is buying a lot of stupid sh*t. Anyway, that's one of the first things I work on with people.

MadBikePoet

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Re: What are your thoughts on “The Financial Advice Index Card”?
« Reply #5 on: March 01, 2021, 06:54:50 AM »
Maxing out 401k to employer match is pretty often good advice.
Saving 20% can be extremely low depending on the life situation or a good target.
Pay your credit card balance in full every month is pretty much never bad advice - the closest to 100% I would say from it.
Financial advisors aren't necessary at least for much of the time you're working on your savings - maybe at the very end of things.
The last piece of advice is fine and all, but it feels thrown in to make whoever wrote it feel good about themselves (the information claims to be about good financial advice, this is an apples and oranges thing to me). Comparing this to Zikoris's addition of rampant overconsumption is killing the planet comment - that comment makes sense, because it's a reasoning for reducing spending whereas this one seems out of left field. Just my take on it; I'm sure others will feel differently.

Overall, the problem with things like this is that financial information and advice is so specific. Maxing 401k to employer match is often good advice, but in some situations, it may legitimately not be. Saving 20% could be a great stretch goal if you're living on $10/hr or something like that. If you are single making 75k with no outstanding debt other than a small mortgage, it would probably be too little. It's just really hard to make something like this very encompassing.

The biggest thing I would add would be, be deliberate in what you spend money on and make sure it aligns with your priorities. If you do have disposable income, being deliberate about what you're doing as opposed to just letting your lifestyle creep up, spending on things mindlessly, and so on is, to me, one of the best things you can do.

Thanks @Wolfpack Mustachian

I 100% agree with "be deliberate in what you spend money on and make sure it aligns with your priorities." I call them personal values but same thing, and that is one of the foundational pieces of my coaching. In fact, there is no such thing as "disposable income," a term I feel the need to always shoot down. From the philosophy of a zero based budget you assign every dollar a job before it comes in. I did a whole video on creating wealth by being a better boss of your money.

Your thoughts on spending on things mindlessly raises a really good point. Overconsumption is NOT actually the problem. It is a symptom of unconscious consumption. In my heart of hearts I truly believe that coaching is a consciousness raising activity, and one of the things I work hard to do is to raise people's money awareness and spending consciousness. This, to me, is more important than all the spreadsheets and apps.

We are the ones who got ourselves into this mess, and we are the only ones who can get ourselves out, but as Einstein said “We can not solve our problems with the same level of thinking that created them”... so we're going to have to raise our collective consciousness on a global scale.

MadBikePoet

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Re: What are your thoughts on “The Financial Advice Index Card”?
« Reply #6 on: March 01, 2021, 06:59:11 AM »
Be particular about your sexual partner(s). 
Take care of your physical health.
Thanks @kite

This is definitely good all purpose advice. People who find out I FIREd often ask me about healthcare, and I tell them my first health care plan is eating well and exercising regularly, and my second health care plan is ACA. Be well!

Wolfpack Mustachian

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Re: What are your thoughts on “The Financial Advice Index Card”?
« Reply #7 on: March 01, 2021, 04:14:49 PM »
Maxing out 401k to employer match is pretty often good advice.
Saving 20% can be extremely low depending on the life situation or a good target.
Pay your credit card balance in full every month is pretty much never bad advice - the closest to 100% I would say from it.
Financial advisors aren't necessary at least for much of the time you're working on your savings - maybe at the very end of things.
The last piece of advice is fine and all, but it feels thrown in to make whoever wrote it feel good about themselves (the information claims to be about good financial advice, this is an apples and oranges thing to me). Comparing this to Zikoris's addition of rampant overconsumption is killing the planet comment - that comment makes sense, because it's a reasoning for reducing spending whereas this one seems out of left field. Just my take on it; I'm sure others will feel differently.

Overall, the problem with things like this is that financial information and advice is so specific. Maxing 401k to employer match is often good advice, but in some situations, it may legitimately not be. Saving 20% could be a great stretch goal if you're living on $10/hr or something like that. If you are single making 75k with no outstanding debt other than a small mortgage, it would probably be too little. It's just really hard to make something like this very encompassing.

The biggest thing I would add would be, be deliberate in what you spend money on and make sure it aligns with your priorities. If you do have disposable income, being deliberate about what you're doing as opposed to just letting your lifestyle creep up, spending on things mindlessly, and so on is, to me, one of the best things you can do.

Thanks @Wolfpack Mustachian

I 100% agree with "be deliberate in what you spend money on and make sure it aligns with your priorities." I call them personal values but same thing, and that is one of the foundational pieces of my coaching. In fact, there is no such thing as "disposable income," a term I feel the need to always shoot down. From the philosophy of a zero based budget you assign every dollar a job before it comes in. I did a whole video on creating wealth by being a better boss of your money.

Your thoughts on spending on things mindlessly raises a really good point. Overconsumption is NOT actually the problem. It is a symptom of unconscious consumption. In my heart of hearts I truly believe that coaching is a consciousness raising activity, and one of the things I work hard to do is to raise people's money awareness and spending consciousness. This, to me, is more important than all the spreadsheets and apps.

We are the ones who got ourselves into this mess, and we are the only ones who can get ourselves out, but as Einstein said “We can not solve our problems with the same level of thinking that created them”... so we're going to have to raise our collective consciousness on a global scale.

Great points. It also has the added benefit that it's almost impossible to argue against it. You're not criticizing any spending whatsoever, just telling them they need to be mindful of what they're spending and make sure that they it's aligned with what they want. It can then, of course be used as a spring board towards making sure people see that there are tradeoffs, though and that prioritizing this means you can't do that and so on.

I liked your comment on overconsumption being a symptom and also on how using the phrase disposable income is a poor choice. I don't do it often, but I think it's worth trying to cut it out of my vocabulary altogether.

Telecaster

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Re: What are your thoughts on “The Financial Advice Index Card”?
« Reply #8 on: March 01, 2021, 06:12:35 PM »
If I were to add one line it would be something like

"The key to unhappiness is to spending more than you make."

The converse, "the key to happiness is spending less than you make."  is a little catchier and probably true as well, but there are other things that contribute to happiness besides money.  But if you spend more than you make your life will turn to shit 100% of the time.  Maybe "the road to unhappiness starts with spending more than you make."

Another one perhaps:

"The single most important financial decision you will ever make is saying "I do" to the correct person."

Also consider:

"Borrowing is just spending future income."

"You get paid for expending you life's energy.   If you waste your money, you are wasting your life."

"If you don't control you money, your money will control you."

"The best thing to invest in is yourself."

cool7hand

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Re: What are your thoughts on “The Financial Advice Index Card”?
« Reply #9 on: March 02, 2021, 05:31:11 AM »
Like others, I could quibble over the savings rate and using financial advisors at all, but it's a great start for anyone looking for an out to the traps of traditional consumerism.

FLBiker

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Re: What are your thoughts on “The Financial Advice Index Card”?
« Reply #10 on: March 02, 2021, 06:57:20 AM »
I think this is really good, thanks for sharing.  I agree with most of the other suggestions (especially @Zikoris) and I think the SEP / Roth / 529 advice may be too specific (in other words, there are exceptions).  Still, if folks could internalize what's on this card, it would help tremendously.  And I'd definitely lose the financial advisor.  I was recently reading The Millionaire Nextdoor and he spent so much time talking about how important it was to choose the right financial advisor I kind of lost interest in the book.

MadBikePoet

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Re: What are your thoughts on “The Financial Advice Index Card”?
« Reply #11 on: March 03, 2021, 03:47:25 PM »
If I were to add one line it would be something like

"The key to unhappiness is to spending more than you make."

The converse, "the key to happiness is spending less than you make."  is a little catchier and probably true as well, but there are other things that contribute to happiness besides money.  But if you spend more than you make your life will turn to shit 100% of the time.  Maybe "the road to unhappiness starts with spending more than you make."

Another one perhaps:

"The single most important financial decision you will ever make is saying "I do" to the correct person."

Also consider:

"Borrowing is just spending future income."

"You get paid for expending you life's energy.   If you waste your money, you are wasting your life."

"If you don't control you money, your money will control you."

"The best thing to invest in is yourself."

How about "The road to unhappiness is paved with overspending"? That might make a nice MMM bumper sticker. :)

Thank you for the thoughtful reply. I definitely agree that having the right partner who is aligned enough with you is important to achieving and living this kind of lifestyle. I am blessed in that regard. I agree with your other points as well. It sounds like you may have also read "Your Money or Your Life." I always like to say, "I never went broke betting on myself!"

MadBikePoet

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Re: What are your thoughts on “The Financial Advice Index Card”?
« Reply #12 on: March 03, 2021, 04:06:59 PM »
I think this is really good, thanks for sharing.  I agree with most of the other suggestions (especially @Zikoris) and I think the SEP / Roth / 529 advice may be too specific (in other words, there are exceptions).  Still, if folks could internalize what's on this card, it would help tremendously.  And I'd definitely lose the financial advisor.  I was recently reading The Millionaire Nextdoor and he spent so much time talking about how important it was to choose the right financial advisor I kind of lost interest in the book.
Yeah, I have discovered the whole "should I have an FA or should I do it myself" debate tends to get a little more nuanced once I started serving average people in the non-MMM world. I have a feeling that a poll of this forum would probably yield results of 99% never need an FA, and that is as it should be. Those of us who have managed to FIRE or to get on the stable path to FIRE by DIYing can sometimes fail to appreciate how difficult it is for those mere mortals to detach survival from money and just let it ride when stock market nose dives. An FA can provide the value of buffering them from emotional decisions that might otherwise decimate their progress. Anyway, I allow myself to be open to how others can see value in FAs and what that value is for them personally. In the video I make the main point of being an informed, conscious consumer of FA services (know what you're getting and what it costs) if those are services you decide have value for you.

MadBikePoet

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Re: What are your thoughts on “The Financial Advice Index Card”?
« Reply #13 on: March 05, 2021, 01:30:17 PM »
Video is now up on my YouTube channel!
https://youtu.be/v4hnzHit1yc

Thank you everyone for all the thoughtful discussion!