This post is part of an ongoing series to support our annual upcoming three-day learning event. The Personal Finance Virtual Learning Event will be held June 5-7 and this year will focus on the soft skills financial professionals need to effectively meet the needs of their clients and students. Learn more and register for sessions here.
Financial professionals have a difficult job. It sometimes feels like there is so much information to get out there…and so much misinformation to combat. To add to the problem, few Americans possess a great deal of financial literacy, and math literacy also is a challenge for many. At times, it may feel like we are not making much headway in our efforts to help people live a more financially sound life.
With all this in mind, what would you say if someone told you that most, or all, of the principles of sound financial management could fit on a single index card? If you haven’t heard about this, it’s the principle behind a book by Harold Pollack, a professor of public policy who said off-handedly in an interview that all the financial advice most people really need could be written on an index card and was available for free. When people started asking for this (at that point, nonexistent) card, Pollack actually made one. Over time, he’s refined his “index card” principles a bit more.
Though this idea may sound gimmicky, I recently listened to a podcast featuring an interview with Pollack and was favorably impressed. So–could distilling financial management down to “bite size” work for you and those you serve?
The original “index card” principles were:
- Max out your employer retirement fund.
- Save 10-20% of what you earn.
- Pay your credit balance in full monthly.
- Don’t buy individual stocks. Buy cheap mutual funds instead.
- Make sure your financial advisor follows the fiduciary standard.
- Watch the fees on funds you invest in.
- Put lots of money into savings account with tax advantages, like Roth IRAs and 529s.
- Support the social safety net, which helps those who need it.
These brief and generally sound tips could be pretty useful to many. However, any savvy reader will notice that these ideas seem to mostly apply to higher-income Americans. After all, millions of people out there wouldn’t recognize a mutual fund if one bit them on the leg, and are not in a place to save 20% of their income.
Pollack received criticism along these lines, so he got some advice from financial experts and added another “card” focused on budgeting. It includes the following general principles:
- Wait till the time is right to buy a house.
- Don’t bother with credit card rewards programs.
- Increase your insurance deductibles.
- Pay cash whenever possible.
- Buy used cars.
- Research before you buy.
- Track and analyze your spending.
- Spend wisely when it comes to entertainment.
An additional “card” Pollack developed offered yet more tips, such as “Don’t take financial advice from celebrities,” “Use your income tax return wisely,” and “Make financial goals that you want to meet.”
So. Do these tips sound familiar? Perhaps a bit basic? That might be because those of us in the financial field have heard most of them many times.
However, there is a powerful appeal to the idea of “this is all you need to know” and “it will fit on this tiny piece of paper.” (Even if it’s actually several tiny pieces of paper.)
Simplifying complex concepts is almost always a good idea, as is taking time to focus on the major “take-home messages” you want to impart. Though the concepts you are trying to teach may not fit on one card, the financial “index card” concept may be useful to communicators, who can take it and modify it to fit their needs.
If you’re interested in learning more about Pollack’s idea, the book is called “The Index Card: Why Personal Finance Doesn’t Have to be Complicated.”