Paul B. Farrel, in a recent article published on MarketWatch.com, posits that everything you need to know about personal finance is contained in nine simple steps. In a Dilbert book. He goes so far as to praise the ideas as worthy of a Nobel Prize in economics.
Paul, you may be onto something. I won’t get into too much blabber, but I certainly agree that these simple bullet points are essential and bear repeating. For the lazy readers (and because I think this is so important), I’ll quote them here:
- Make a will
- Pay off your credit cards
- Get term life insurance if you have a family to support
- Fund your 401k 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 worth of 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, tax issues), hire a fee-based financial planner, not one who charges a percentage of your portfolio
There you go. That’s it. Do these things and you will retire worry-free. Furthermore, you’ll live the rest of your life not having to worry about losing your job or being able to pay the bills.
I realize these things aren’t easy, but work towards them. Most of the people reading this post can go 9 for 9 if only they prioritize a little. If you’re not making much money, you can always save a small percentage somewhere you can’t touch it so easily. Do you smoke? Quit — and put away the $4 a pack. You’ll kill 2 birds with one stone that way (and maybe even save yourself).