Jason at Wheaties for Your Wallet brought up a 9-step plan for better personal finance from Scott Adams, creator of Dilbert:
- Make a will.
- Pay off your credit cards.
- Get term life insurance if you have a family to support.
- Fund your 401(k) to the maximum.
- Fund your IRA to the maximum.
- Buy a house if you want to live in a house and can afford it.
- Put six months expenses in a money market account.
- Take whatever money is left over and invest 70% in a stock index fund and 30% in a bond fund through any discount broker and never touch it until retirement.
- If any of this confuses you, or you have something special going on (retirement, college planning, a tax issue), hire a fee-based financial planner, not one who charges a percentage of your portfolio.
Bravo! If you’ve done all of these, you are all set. No need to read more finance blogs (except this one). Although I’d replace #9 with
If any of this confuses you, or you have something special going on (retirement, college planning, a tax issue), read a good book. hire a fee-based financial planner, not one who charges a percentage of your portfolio.
It’s more important if you understand the issues than relying on a financial planner. That’s why I maintain a Recommended Reading List.
Jason said it very well
Putting money into 401(k)s and funding IRAs is hard. There are always reasons to not do it, but they really boil down to an unwillingness to take action with money.I’ve spoken to friends about why this might be and the reasons vary, but they usually come down to this one thing: we don’t want to make a bad decision, so we don’t make any decisions at all…which is of course a bad decision.
My new goal with money isn’t to get things perfect, and instead get it mostly right, i.e. Get the nine things on the list done.
I’ve done 8 out of the 9 things on the list. Not necessarily perfectly. There is a old saying “The greatest enemy of a good plan is the dream of a perfect plan.” So stop worrying about whether you are doing it perfectly. Just doing it will get you ahead. You have plenty of time for improving your plan as you go along and I hope this blog will be helpful when you do that.
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If you are paying an advisor a percentage of your assets, you are paying 5-10x too much. Learn how to find an independent advisor, pay for advice, and only the advice.