A professor at the University of Chicago said that: "The best financial advice for most people would fit on an index card". One of the readers commented on his post : "What *is* this simple free best personal finance advice that fits on a card? It's kind of a tease to say its so easy and then not go ahead and spell it out in twenty seconds.
Here what the professor responded, by hand writing it on an index card:
- “Max your 401(K) or equivalent employee contribution
- Buy inexpensive, well-diversified mutual funds such as Vanguard Target 20XX funds (Note: I tried that but expense ratio is higher for them. Target fund is 0.14% vs. 0.04 S&P500).
- Never buy or sell an individual security. The person on the other side of the table knows more than you do about the stuff.
- Safe 20% of your money.
- Pay your credit card balance in full every month (Note: I say do not use them at all. Its a gamble).
- Maximise tax-advantaged savings vehicles like Roth, SEP and 529 accounts.
- Pay attention to fees. Avoid actively managed funds.
- Make financial advisor commit to a fiduciary standard.
- Promote social insurance programs to help people when things go wrong (Note: Its capitalism we are living in, not communism)”.