10 Simple Money Rules // One Index Card

• The financial industry complicates personal finance.
• Managing money is simpler than it seems; just some fundamental rules are necessary.
• Saving money, managing credit cards, and smart investing are key strategies.
• Insurance and supporting social safety nets are also important aspects of personal finance.
• Simplicity in finance leads to better financial health.

The financial industry loves to make money complicated. You need to invest in 18 different asset classes. You need a 22-page budget spreadsheet in order to manage your money. And you need a highly polished financial advisor in order to beat the stock market.

But let me tell you a secret that the financial industry doesn't want you to know. Money doesn't have to be complicated. Just like living a healthy life boils down to a simple few habits — sleeping, eating well, and exercising — getting our finances in order can be as simple as understanding a few rules that'll fit on a three by five index card.

So in that spirit, let me share with you 10 simple money rules from the index card why personal finance doesn't have to be complicated.

Rule number one from the index card: strive to save 10 to 20% of your income.
Most of us, when faced with a choice of saving or spending, can't help ourselves but gravitate towards spending. We've all heard of the famous MasterCard commercial. There are some things money can't buy. For everything else, there is MasterCard.

With ads like this plastered everywhere, we don’t need to be told how to or where to spend our money. These days, it's as easy as a swipe of our finger or a tap of our credit card to spend. Many companies go as far as providing payment plans to make spending easier.

Thus, it's not a surprise that today almost 47% of Americans report not being able to come up with $400 without selling something, borrowing from a friend, or worse, resorting to increased credit card debt. So, what we need is to get better at saving money. We need to learn how to save.

So how to do this? Well, let me share with you a few of my favorite tactics:

1. Monitor your spending. Get a good grasp of where your money is going every single month. You can use pen and paper, a Google sheet, or my favorite — use an account aggregator. There are many free or paid personal finance apps that’ll automatically aggregate all your spending for you in one place. This way, you can see all your spending by different categories in real time.

2. Once you're able to see where your money is going every month, aim to refine your spending over time. If you're noticing that you're spending on Amazon more than you'd like, aim to cut this little by little every month.

3. Automate your savings. Set aside a specific amount each month to be transferred from your checking account into your savings account. Remove the temptation to spend by letting the system do the heavy lifting for you.

4. Lastly, don’t be so hard on yourself if saving is not something you're used to. Start small; even $1 saved is one step forward and something to be celebrated. It's better to save 1% consistently than try to fail over and over again to save 10 to 20%.

Rule #2 from the index card: Pay your credit card balance in full every month.
Debt in general is dangerous, but high-interest debt like credit card debt can be detrimental if not managed well. One of the cardinal rules to managing a credit card well is to ensure you're paying the balance in full every single month. In the US, the average credit card debt per household is approximately $8,000.

What's worse is that almost half the people fail to pay off their credit card bill in full every month. When credit card debt piles up and compounds, the interest alone could end up being more than the initial debt itself. Do not get yourself in that situation.

Here are a few tips to manage your credit cards better:

1. If you're really having a problem, stop using them. Lock them up in your drawer, or if you want to take it to the extreme, cut them up. Remember, you can always order new ones once you have your debt under better control.

2. Automate your credit card bill payment so the full amount is paid every single month. Do not leave this to chance; you will forget or justify not paying the full amount for whatever reason. Let the system do the hard work for you.

Rule number three from the index card: Max out your 401k and other tax-advantaged savings accounts.
Put as much money as possible into your tax-advantaged retirement accounts. You will never regret having saved too much money. On the contrary, you'll always wish you saved more.

When you invest in tax-advantaged accounts like your 401k, IRA, and HSAs, you’re able to save more because you're saving money on taxes. There are many tax-advantaged accounts, so here's a general framework to help you think about the ideal order of investment:

1. Start out with your employer 401k match. Invest in your 401k to get the full match. Even if the stock market isn't doing well, you'll get an instant return on investment when you invest up to the match.

2. Once you've invested up to your 401k match, look to max out your Roth IRA. With a Roth IRA, contributions are made on an after-tax basis, but any growth and withdrawals are tax-free.

3. Third, after you max out your Roth IRA, go back to your 401k and max that out in 2024. The contribution limit for anyone under the age of 50 is $23,000.

Now, you don't have to follow the exact order I listed here, but it provides a good framework.

Rule number four from the index card: Never buy or sell individual stocks.
Many years ago, there was a company called Kodak. In the 1970s, Kodak controlled almost the entire film market in the United States. Many believed that buying Kodak's stock was a sure winner. But it did go wrong; Kodak started to struggle, filed for bankruptcy in 2012, and became a failure.

In hindsight, many of us might think we knew that was going to happen. But the truth is that no one knows the stock's future. Many so-called professionals might claim to know, but there are too many variables that can affect a company's performance.

Rule number five from the index card: Buy inexpensive, well-diversified indexed mutual funds and exchange-traded funds.
Instead of trying to beat the street, we would all be better off just trying to keep up with it. Warren Buffett recommends investing in a simple, low-cost, well-diversified index fund — specifically the Vanguard S&P 500 index fund.

For one, an S&P 500 index fund doesn't try to beat the market; it just follows the market. Because there's less trading and no highly paid active fund manager, the cost is rock bottom.

Rule number six from the index card: Make your financial advisor commit to the fiduciary standard.
When we sit down with a financial professional, it’s easy to believe they are acting in our best interest. However, make sure you understand this key term: fiduciary. This means that the financial advisor has a legal duty to act in your best interest and is not getting paid to steer you into buying overpriced investment products.

Here are a few tips when interviewing financial advisors:

1. Check their credentials. Certified Financial Planner, CFP, Registered Investment Advisor, RIA, and fee-only advisors are good indicators of fiduciary standards.

2. Ask this specific question: Do you work to the fiduciary standard at all times? Sometimes there are fine prints that allow an advisor to stray from fiduciary standards.

3. If it doesn't feel right, feel free to walk away. Don't let anyone pressure you.

Rule number seven from the index card: Buy a home when you're financially ready.
It's easy to get into a mindset that we all need to buy a home. However, understand that homes are one of the most expensive purchases we'll make in our lifetime.

Here are a few recommendations to follow when buying a home:

1. Before home shopping, get your debt under control. If you're struggling to pay off debts like credit cards or student loans, you might want to wait.

2. Aim to save 20% down as a down payment. This will lower your monthly mortgage payment and avoid private mortgage insurance (PMI).

3. Stick to a fixed mortgage. Avoid adjustable-rate mortgages; you don’t want your financial well-being dependent on future interest rates.

4. Stick to your budget. Once you start home shopping, it’s easy to get tempted to upgrade budgets.

Rule number eight from the index card: Insurance — make sure you’re protected.
Here are some golden rules of insurance:

1. For life insurance, stick with term insurance — 20 to 30-year term.
2. For property insurance, the higher the deductible, the better.
3. Ensure your hospital and doctor are on your health insurance plan.
4. Maintain adequate liability coverage that is at least twice your net worth.
5. Avoid complicated annuities.
6. Keep an emergency fund.

Rule number nine from the index card: Do what you can to support the social safety net.
It’s easy to complain about taxes, but many of us have benefitted from the programs that these taxes fund.

If you're in a good financial position, do what you can to support the social safety net. Almost all of us have been helped by government offerings at some point in our lives.

Final rule from the index card: Remember that personal finance doesn't have to be complicated. The financial industry loves to overcomplicate money because that's how they make their money.

But it can be as simple as all the lessons that can fit on a single 3x5 index card. So remember that. Thank you for watching!