A Freakonomics Radio podcast I just listened to, Everything You Always Wanted to Know About Money (But Were Afraid to Ask), stated that studies have shown that in the USA and in nearly every other country studied, the percentage of people who are financially literate is under 30%. That’s the bad news.
The good news was Harold Pollack’s “all the financial advice you’ll ever need fits on an index card” conversation. I took notes:
- save 20% of your income
- pay off your credit card bill in full every month
- max out 401k & other tax advantaged accounts
- it reduces your tax burden today
- matching employer contributions are free money
- never buy or sell individual stocks
- buy inexpensive and well diversified index and ETF funds
- make your financial advisor adhere to the fiduciary standard
- buy a home when you’re financially ready
- homes are something we use and consume
- when are we ready?
- have 20% in hand
- fixed rate 15/30 year mortgage
- still have reserves for home maintenance
- insurance: be protected against losses > your reserves
- get the largest deductible
- do what you can to support the social safety net
- bad stuff happens
- lots of people need help