A little under three years ago, Professor Harold Pollack interviewed a personal finance writer. Pollack, a professor at the University of Chicago, took some time to engage writer Helaine Olen in a discussion about why so many people trust financial advisors when they are often given the wrong advice. While Pollack may have made too general a statement in saying financial advisors should not be trusted, he brought up an interesting statement that has wormed its way into the financial world. He began the idea that all the financial advice an individual needs can be written down on a 3x5 index card.
You may be thinking that this is crazy. How can everything one should do with his or her finances be shrunk down into such a small space?
Pollack then, to further prove his point, wrote financial tips on an index card and posted a picture on the internet. While these tips were already common knowledge, and quite general, they did spark a conversation about simple, transparent financial advice. The index card that he wrote on had several pieces of broad advice on it. They included buying diverse mutual funds, saving 20% of your money, and maxing out your 401k. Many people took to these simple finance tips the moment the index card went viral on the internet. Other financial experts, however, realized that personal finance is much more complicated than a few broad statements. Pollack did not take into account that people may not know how to save 20% of their income, for example, and that social insurance programs were not common knowledge. While the index card was a good place to start, it became clear that expert advice was necessary when figuring out finances got down to a personal level.
Pollack later retracted his statement about financial advisors being completely useless when he published his book The Index Card, but maintained that all advisors should use simpler methods in explaining personal finances. Now, here’s something I can agree with. Unfortunately, many people today are forced to jump through hoops when speaking to a financial advisor, and that can make their ideas about what to do with money convoluted.
This is why I am part of the Money Smart Movement. I am dedicated to educating my clients about finance, as opposed to simply telling them what to do. I, as a financial adviser, strive to help my clients learn more about how to take control their finances so they can beat debt and become financially independent. Therefore, while I agree that the simplicity of an index card with all the financial advice you will ever need is tempting, I encourage speaking with a financial adviser who will teach you about how to be smart about handling your money.
