My mother-in-law died suddenly and my brother-in-law Vincent had to move into our home. One of the first things I learned was that the conversation among real experts was actually a lot simpler than the conversation that you would get if you watched financial TV or read brochures from financial-services firms. I started to joke around that the fundamental problem that the industry faced was that the best advice was available for free at the library.
Pollack started writing about these ideas on a blog called The Reality-Based Community. I was speaking metaphorically so, of course, I was stuck. But I had planted a flag and I felt I had to honor that. And I scribbled down in maybe two minutes nine rules and I took a picture with my iPhone and I posted it on the web. Coming up on Freakonomics Radio: Lifehacker, which I also had never heard of. All the research suggests that that these rewards programs just make you spend more money.
As I mentioned earlier, before settling into my writing career, I thought about becoming either a psychologist or a financial adviser. That book got put in a drawer once Freakonomics started happening. But I still think its animating sentiment is pretty solid.
Harold Pollack, a public-policy scholar at the University of Chicago, tapped into this sentiment when he dashed off an index card with nine easy rules about personal finance. Lifehacker , which I also had never heard of. I hope that people in Romania find it useful. It just started showing up all over the place. In fact, there was a guy who plagiarized it. I found a YouTube video, of some life coach who just wrote out his own card. It was word-for-word exactly what I wrote and he spoke it as if he had made it up. It was hilarious to listen to because he actually has a great voice, but he had completely stolen the idea.
There was just something about it for a lot of people. All of us are facing this very intimidating task: Where to invest my money? How do I deal with all these questions about budgeting and when to buy a house and all that stuff. Or depending on your religious faith — I sometimes refer to the book as the Midrash to our index card for your Jewish listeners. And, for our non-Jewish listeners: One of the great things is once you start to save this money it really reduces the stress in your life so amazingly fast.
I got a bunch of emails that were essentially in the following form: You have just told me to save 20 percent of my money. At this stage in your life, you cannot save 20 percent of your gross income. How can you save something?
How can you start getting yourself on a good budget? My original card was really good for middle class people like me. This may be the most important single rule on the card for a lot of people. Credit cards and other forms of high-interest loans are just a really serious trap for a lot of people. You are doing a great job — for them. Pollack warns us to beware of any deal that offers to help you smooth out your cash flow.
You try to use cash as much as you can and you pay off your credit card. By the way, one of the things that I recommend to people is basically ignore your credit card reward program. All the research suggests that that these reward programs just make you spend more money. A typical k is a retirement plan run by your employer.
But there are a lot of options, including for self-employed people. There are several reasons why your k or your equivalent is just the foundation of your saving. First of all, very often your employer will kick in a matching contribution, and that is free money. You can also set up your k contributions to be automatic, so you never have to touch the money.
For example, there are two things that people can do to save money for their kids college that have tremendous tax advantages. One is called an E. But the tax code is full of breaks — many of which, some people argue, tend to help well-off people become even better off. The home-mortgage interest deduction , for instance. So what are you supposed to do if you think the tax code is unfair? We actually spent our previous episode going over this idea in some detail. Enough to fund their beautiful offices, and homes, and boats — even though, again, your investment returns will likely be worse than if you just bought, as Harold Pollack notes, some low-cost, diversified index funds.
This is a completely easy one. Why do you want to get into that? You want to capitalize on the magic of compounding returns without succumbing to the tyranny of compounding costs. They make you believe they alone know the secrets to the investing universe. They do it in TV commercials like this one:. We understand the challenges of a complex global economy …. That research also suggests that, for the average investor, diversification is a good idea.
A few different types of stock-index funds — growth, value, international, etc. You want to have the right percentage of your investments in stocks and in the other classes that you invest in.
For the youngest investors, when you first start obviously, you should be percent in stocks. Obviously it can be really hard for the average person to take in and execute all this investment advice on their own. So you might consider hiring a financial advisor. But not just any financial advisor, Pollack says:. I understand in a transparent way your financial incentives. Tell us if we should do something different. Some of them had absolutely excellent investments that have been designed by financial professionals in low-cost index funds and things like that.
The ones that had excellent investments, the majority of the financial advisers they talked to recommended that they actually not do that, that they do something that is essentially a more expensive imitation of that. This is not meant to besmirch the reputation of all financial advisors. The more assets we gather and the better those assets perform, the more revenue the firm sees. We should think of our home as something that we use and consume and something that helps us with our life, not as the major pillar of our wealth.
You have to be careful about that. That means when you have a nice 20 percent down payment, which lets you get good terms on your loan. It means getting a vanilla-ice-cream-fixed-rate year or year loan, rather than to try to do something like an adjustable-rate mortgage. It means buying a home that you can afford and still have a strategic reserve if you move in and your hot water heater breaks or a raccoon eats its way through your roof or all the things that can happen to a home.
In this case, your mortgage payment is a forced savings plan. Pollack sees the value in this thinking — but the lock, he says, can be fairly flimsy. Home-equity loans used to be called second mortgages. There was a certain stigma to getting them. They were not common. One of the challenges we discovered in the foreclosure crisis was there was a lot of people that were trying to dip into their home equity.
When their value of their home dropped, boy, that could really blow up on you. So many types, so much pressure and fear. The purpose of insurance is to make sure that you are protected if you have a life-changing event.
You need life insurance in case the people that depend on you need you after you die. One of the things that we advise people in general is get the largest deductible that you can. First of all, it costs money for the insurer to honor all these smaller claims. Insurance is important to guard against the big things, not the little things. It is not actually about personal finance. Secondly, to the extent that my story is a part of our book, it would not be fully honest if I left off Rule No. At the beginning of our conversation I talked about how my brother-in-law Vincent moved into our home and what a challenge that was because of his intellectual disability and his medical challenges.
We would have absolutely gone bankrupt without his Social Security, Medicare, and Medicaid that prevented our family from losing everything taking care of him. What the social safety net does, what social insurance does, is it is it allows us to protect each other against these risks that would just crush any one of us if we had to face it alone. But you cannot guard against everything in life. And you know I should be doing the same thing for other people. The idea here is we hope that this card is helpful. Take it out, put it on the refrigerator.
A lot of recent social-science research suggests that reminders like this, nudges like this, are pretty effective. Will a simplified choice always lead to optimal outcomes?
But will it generally produce a better outcome than either avoiding the problem or doing something really stupid? Experience is also pretty valuable; I guess that goes without saying. So to conclude this primer on personal finance, maybe it makes sense to hear a bit more from the most experienced investor I know — Vanguard founder Jack Bogle. At almost 88 years old, I might be the most blessed man in the United States of America.
I was only 31 years old, had it on a tennis court. See the Chicago Manual of Style for more on public domain and fair use. Asking for permission Let's say you have some material you'd like to reprint and you would like to contact the rights holder for permission. Your best bet is to start with the company that produced the work, such as a publisher. Call and ask to speak to the permissions or rights department.
If the company doesn't have this kind of department, just explain what you're trying to get permission for.
Chances are, you'll have to send a request in writing, but calling ahead can help you find out where to send your query. Also, sometimes the permissions person may be able to tell you on the phone if they have permission to the work or who to talk to if they don't. What if the work is out of print?
That's a little trickier. If the publisher or periodical is still around, contact them as you would normally. In some cases, you'll have to contact the actual author or artist. I had to do this quite a bit since the people who delivered the unpublished graduation speeches I used held the rights to them.
Just approach them the way you would a publisher or other company. If you're trying to locate the agent or representative for a particular person, try contacting their publisher, movie company, record label, etc. If that fails, check your local bookstore -- there are books that have public relations contacts for celebrities and other public persons. When writing your permissions letter, you need to address two key elements.
First, be as specific as possible regarding the material you would like to reproduce and how you intend to use it. Then, after your letter, have an agreement that the rights holder can sign, giving you permission to use the work. You may want to have a lawyer who specializes in copyright law look over your agreement. Agents and other representatives may send their own agreement in lieu of yours, especially if they want money. For some examples of letters and agreements, again check out the Chicago Manual of Style.
To get permissions cleared for the odd speeches used in Graduation Day, it took a couple of months and quite a bit of money.
This is a guide for all writers. Many writers today are not really sure how to use a comma - even though they think they are - but it's not their fault. (No, it doesn't. Everything You Always Wanted to Know About Sex: But Were Afraid to Ask [ David Is it /not/ written in a casual yet dismissively authoritative style that seems to.
My situation was a little extreme, but even if you are only getting one or two permissions, be prepared to wait and spend some cash. Or, in the worst case, you won't get permission at all.
Whatever you do, always get permission before reproducing something unless you're sure it's public, because the legal headaches from illegally using someone else's work make the permissions process look like a cakewalk. Brandon Trissler is a copywriter for a Chicago advertising agency.