Searching Amazon.com for personal finance books yields 39,375 titles. One is The Index Card: Why Personal Finance Doesn't Have to Be Complicated, which discusses why just about everything an individual needs to know about managing money can be jotted down on an ordinary index card.
Harold Pollack, the University of Chicago professor who co-authored the book with financial journalist Helaine Olen, scribbled ten personal finance tips on an actual index card after casually suggesting during an interview with Olen that it would be possible. An online photo of the card went viral, and led Pollack to write a book about it.
The first index card tip covers retirement saving. "Max your 401(k) or equivalent employee contribution," Pollack urges. Next is "Buy inexpensive, well-diversified mutual funds such as Vanguard Target 20XX funds."
After that, he takes on investing in general: "Never buy or sell an individual security." That one merits some explanation: "The person on the other side of the table knows more than you do about this stuff," Pollack wrote.
Next up, basic money management. "Save 20% of your money," he advises. Then: "Pay your credit card balance in full every month."
It's not exactly rocket science, which Pollack says is exactly the point. His Ph.D. is in public policy, not personal finance, and he only became interested in the topic when a family member's health issues required his wife to stop working and precipitated a lingering household financial crisis.
"One of the first tings I learned was that what the experts have to say about that topic is a lot more straightforward than the cacophony of the personal finance media," Pollack says. Too much complexity in money advice is bad, Pollack says, because it makes understanding difficult and that leads to poor decisions.
Investors typically start with the wrong questions, he adds. "Most people want to know where to invest," Pollack says. "That's a five-minute conversation. The real question is how to live below my means."
Individuals need to focus first on controlling expenses, he says. What they most need to know is how to save 10% to 25% of earnings. "Once I'm saving effectively, where to put the money is a much easier problem," he says.
Scott Goble, a certified public accountant and financial advisor in Chattanooga, Tenn., likes the idea of simple personal finance rules. "I believe it is feasible to get the main points on a 3 by 5 index card," Goble says.
Pollack's advice to maximize 401(k) contributions, use low-cost index funds and take advantage of tax-advantaged Roth, SEP and 529 accounts is solid, Goble says. If he were shrinking personal finance to advice card size, Goble adds, he would include a prohibition against trying to beat the market.
"That's a big mistake that people will make," Goble says. "They believe they'll play the stock market and make a lot of money. That doesn't happen." Another item on his hypothetical short list would ban thinking any individual's taxes are simple. "Nobody's tax situation is simple," he says. "I just don't believe in that."
Goble says the topic gets unavoidably complicated once past the math of finance and taxation and into the realm of people's relationship with money and how they'll motivate themselves to make smart choices. "When you look at the psychology of personal finance, that's far more than one could put on a 3 by 5 index card, or in volumes," he says.
Pollack agrees at least in part, or he wouldn't have written a book elaborating on the index card. The book expands on topics such as saving for college, using annuities to fund retirement and how retirees should spend their money. And Pollack says still more detail can be helpful.
"I'm a big believer in going to a fee-only fiduciary advisor, because I think having another pair of eyes is very valuable," Pollack says. Echoing Goble, he adds, "There's also a psychological component that's so critical."
The book modifies some of the card's advice. For instance, the card suggests saving 20% of income. The book specifies 10% to 20%. Pollack says some readers felt 20% was too much. "A lot of people were so discouraged when they saw that that they just did nothing," he explains.
Pollack feels that individual investors are reacting to excess financial complexity as evidenced by growth of index funds. From 2000 to 2015, the 2015 Investment Company Factbook shows annual net new cash flow into index funds grew six-fold, from $26 billion to $148 billion.
Index fund inflow nearly doubled between 2012 and 2013, from $59 billion to $114 billion, according to the Factbook. Today, 30% of mutual fund-owning households own at least one equity index mutual fund.
Pollack next hopes to develop a similar card for people of modest means. "Like, here are some ways you can save if you're making $30k a year and you're a single mom," he says.
For now, when challenged to produce even briefer personal finance advice, no more than would fit on, say, a fortune cookie message, Pollack has to think for a moment. Then he says, "Live modestly, invest boringly, for the long term."