How an Index Card Can Save Your Finances

Personal Finance
index card

Most young professionals probably did not have a financial advisor a decade ago, but for those that did, you know that historically a quality financial planning meeting ended with the advisor handing over an encyclopedia-sized financial plan that had 100+ pages filled with graphs and charts, 17 what-if scenarios explained, and another chapter full of disclosures written in Greek.

Thankfully, the financial planning process, has changed for the better.

As people’s lives have gotten busier – enter kids, soccer practice and school plays – a premium has been placed on concise, actionable information. In fact, in a world of noise it is increasingly easy to get lost searching for signal, especially when it comes to our finances.

Enter the 4×6 Index Card

Remember the index cards you used to use to study for tests in school? They usually came in various colors, some were flimsier than others, and others even had lines. In 2013, award-winning journalist and author, Helaine Olen, introduced a new use for the proverbial index card: financial planning.

One of the many reasons people don’t proactively plan their finances is they are seemingly so darn complicated. In fact, many of us spend more time planning our next vacation than we do planning our children’s college goals, but that’s exactly what Helaine Olen is attempting to fix in her new book, “The Index Card: Why Personal Finance Doesn’t Have to Be Complicated.

Olen’s idea is a simple one.

Write down the most important steps you must take to achieve your life goals on an index card. This should include things like how much you need to save for retirement (hint: good rule of thumb is 10-20% of your income), how to handle credit cards, the importance of minimizing fees, etc. These rules are by design not supposed to be sexy. In fact, for the vast majority of American’s the financial precepts they should live by can be downright simple.

Items to Include on Your Index card

Okay, so how do you boil quality financial advice down to an index card?

Below is a list, in no particular order, of some of the most important financial pillars that are fundamental to financial freedom for the vast majority of young professionals (and all Americans for that matter) and if followed, will undoubtedly set you up for success, both now and well into the future.

  1.  Save 10-20% of your income
  2.  Pay off your credit card balance every month
  3.  Buy inexpensive term life insurance
  4.  Spend less than you earn
  5.  Take full advantage of the employer match on your 401(k)
  6.  Minimize investment fees as much as possible
  7.  Contribute to 529 plans for your kids each year
  8.  Make your financial advisor commit to a fiduciary standard
  9.  Buy more experiences, less things

Have questions about any of the terms or acronyms listed in this blog? Check out our F.A.Q. page for definitions and explanations.

Everyone’s index card should be different, because everyone’s unique goals and situations are different. But for the vast majority of people, the list above is a really good place to start. So go grab an index card, first write down your “why” and list out the relevant financial precepts that will help guide you. From there, put it in your wallet, hang it on your bathroom mirror or set it on your dresser. Look at it daily and live truly to the precepts you set forth.

The Role of an Advisor

So right now you are probably thinking, “If an index card can solve all of my financial ills, how do you have a job?” The answer is fairly simple, especially when we look at a parallel.

The vast majority of Americans know they need to eat healthy, workout frequently and live a healthy lifestyle. There’s no shortage of blogs, documentaries and health magazines telling us this. But for so many Americans following that simple advice is considerably harder than it looks.

Hiring a financial advisor is in many ways, no different than why many people hire a fitness trainer. They are looking for someone that can help hold them accountable to the actions that they need to take, establish what those actions and next steps are, help implement them, and oftentimes protect people from making a big mistake (i.e. buying too much home, taking on too much investment risk).

If (and in many cases when) your financial life gets too complicated for your index card or if you are looking for some adjustments on the margins to ensure that each aspect of your financial life is maximized, that’s when a financial advisor can truly help, but before that at the very least just pull out an index card and write down the 5-10 most important steps you need to take to maximize your financial freedom.

You’ll be thankful you did later.

About Matt Cosgriff, CFP(®)

Minneapolis Financial Planner | Intrapreneur | Young Professional | Millennial Guru | Tech Aficionado | Traveler | Food Lover | Minnesota Wild Fan | Movie Quoter | Follow on Twitter| LinkedIn

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