Quiz • Closed book/closed notes • Phones & computers put away • You may collaborate with your team • You are responsible for the answers on your quiz • You do not have to choose the same answers as your team
All the financial advice you need in one slide* • Strive to save 10–20% of your income •Pay your credit card in full every month • Max out your 401(k)/tax-advantaged savings •Never buy/sell individual stocks • Buy inexpensive, diversified mutual funds • Make financial advisors commit to fiduciary std. • Buy a home when financially ready •Insurance—make sure you're protected *Adapted from The Index Card, Harold Pollack.
Debt vs. Savings •Harold has $7000 in credit card debt and $7000 in an emergency savings account. •Helaine has $0 in her savings account, but also has a $0 credit card balance. Who's in better financial shape?
Credit card repayment Harold has two credit cards: •$5000 balance, 25% APR •$2500 balance, 10% APR Both cards have a minimum payment of $25, and has can pay $150/month. How should he pay them off?
$5,400 $5,600 $5,800 $6,000 $6,200 $6,400 $6,600 $6,800 $7,000 $7,200 $7,400 Low balance first Even payments High interest first Debt after 3 years Debt after 3 years
Debt repayment •Be a deadbeat •Pay more than the minimum •Rank your debt •Negotiate credit card bill •Beware debt consolidators •Bankruptcy is an option
Investment Accounts •Random Walk Down Wall Street •Efficient capital markets hypothesis •Can't beat the market •Actively managed vs. index •Low-load/no-load •80–90% managed funds underperform •2 in ~3000 beat mkt after fees
Financial Advisors •If you're not paying, the product is you. •If you sit down to a game of cards and don't know who the sucker is—it's you. •TANSTAAFL •Commission? •"Fee-based" •Fee-only •Fiduciary standard at all times •Suitability standard
Houses are terrible investments •Risky •Highly leveraged •Illiquid •Low rate of return flickr photo by lorenkerns https://flic.kr/p/gs7g2w shared under a CC (BY) license
Golden rules of insurance •For life insurance, stick with term •For property insurance, higher deductibles are better •Double check that hospital & doctor are on health insurance plan •Liability insurance should be twice net worth •Avoid complicated annuities •Keep an emergency fund
Further reading •The Index Card: Why Personal Finance Doesn't Have to Be Complicated, Helaine Olen & Harold Pollack • The One-Page Financial Plan : a Simple Way to Be Smart about Your Money, Carl Richards* •A Random Walk Down Wall Street, Burton G. Malkiel* •The Elements of Investing, Burton G. Malkiel & Charles D. Ellis* * Available in SSCC library.
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