The story goes that Scott Adams wanted to publish this as a one-page book, but he couldn’t find a publisher to do it. In fact, he is quoted as saying that “if God materialized on earth and wrote the secret of the universe on one page, he wouldn’t be able to find a publisher” either on CBS Marketwatch. Instead, he weaved it into a Dilbert cartoon-based book called Dilbert and the Way of the Weasels (368 pages).
Everything else you may want to do with your money is a bad idea compared to what’s on my one-page summary. You want an annuity? It’s worse. You want a whole life insurance policy? It’s worse. You want to invest in individual stocks? It’s worse. You want a managed mutual fund instead of an index fund? It’s worse. I could go on, but you get the point.
Overall, the book is pretty funny if you like Dilbert and understand the corporate hell that he lives in. Otherwise, without further ado, here is Dilbert’s One-Page Guide to Everything Financial:
- Make a will.
- Pay off your credit cards.
- Get term life insurance if you have a family to support.
- Fund your 401k to the maximum.
- Fund your IRA to the maximum.
- Buy a house if you want to live in a house and can afford it.
- Put six months worth of expenses in a money-market account.
- Take whatever money is left over and invest 70% in a stock index fund and 30% in a bond fund through any discount broker and never touch it until retirement.
- If any of this confuses you, or you have something special going on (retirement, college planning, tax issues), hire a fee-based financial planner, not one who charges a percentage of your portfolio.
From Vanguard article:
Does Adams live by his financial rules? For the most part he does. Adams said he’s allergic to debt and makes a habit of saving half of his income.
“I found that people who had massive credit card debt were asking me how they could invest in stocks, or how they could borrow money from their credit card to invest in stocks,” the cartoonist recalled.
However, Adams said he no longer follows his rule to invest 70% in a stock index fund and 30% in a bond fund. The best-selling author says he invests primarily in municipal bonds today, which are tax-exempt, and also owns land in his adopted home state of California.
If I had his amount of money, I’d probably be investing only in muni bonds as well!
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Wise comments from Dilbert…It’s amazing how simple the good financial advice is. The unfortunate thing is that it’s a tough pill to swallow; who wants to live below their means and save for a rainy day when they can have instant gratification with their credit card today? Obviously, there aren’t too many of us.
PVI is one muni bond fund I have. Current price 25.05 with monthly yield of about 3.8% tax free.
Baughmann – Agreed, being both simple and easy is rare in the financial world. I wonder if that will ever change.
Terry – PVI looks interesting, I was not aware of this new ETF that tracks VRDOs. 0.25% expense ratio doesn’t look too bad.
Municipal bonds look risky to me, since they are not default proof like the US government. I think that Certificates of Deposits up to the FDIC limits is the best way to invest in fixed income.
The max on many 401Ks this year will be 16.5K and if you are over 50, 22K. Funding to the max is just not possible for a lot of people. The max for a Roth is more feasible. To do both, and say if you are over 50, means that you can do without 30K of your income. And your spouse, too, right? That’s a lot of put away. I totally agree this is key to a secure retirement — but not everyone can afford it.
I wouldn’t be investing in California muni’s right now. Arnold and his clownish legislature have made a complete mess of the state’s finances.
I read once that Suze Orman keeps all her money in muni’s as well. When someone asked why she didn’t take her own investment advice she said, when you have $25 million the safe 4% tax free return of muni’s is more than you need.
if i had $25million i would open up 2500 high yield savings accounts and live on the $25-250 bonuses and 3% interest.
I don’t make enough to max out both a 401K and Roth IRA unless I live under a bridge and eat only oatmeal. Even then, it would be tight.
Do not use 401k as you cannot write off tax loss.
Jed,
There is only one reason people invest and that is because they expect their money to grow. If it grows, the best place for it is in a 401K where that growth is tax sheltered.
By stating you shouldn’t use a 401K, you are implicitly saying that you are investing expecting to have a loss. If that is your initial presumption, you shouldn’t invest anywhere!
That said, if you invest because you think things will go up at some point, then a 401K is best.
I like simple. I like Dilbert. I will probably like this book.
I would add “and long-term disability insurance” to #3 but other than that it seems like the perfect strategy and should be taught starting in kindergarten until high school graduation!
Super post. Thanks!
in this economy, i think 6 months of saving may not be enough. some people will be unemployed for a year or longer. so i say have at least 1 year of living expenses in a saving or money market account.
Dilbert’s advice is great, especially the bit about hiring a financial planner if any of his other advice is confusing to you. When choosing a financial planner, remember that Personality fit is often an over-looked factor. You want to make sure that you share the same basic philosophies with your planner. For example, if your planner is going to insist that you cut out your lattes each day, but you find them to be a $3 slice of heaven, you may not agree on larger issues either.
The list needs a few clarifications:
-get the right amount of term life insurance, ideally based on a financial plan
-only touch your 70/30 portfolio to rebalance it
-fee-based planners are fiduciaries, which is the important point; an advisor can charge a fee based on your assets and still be a fiduciary as long as you put your clients interests first
So, I would like to fund my 401K to the max, but it seems that my company makes it difficult to do so. Still, I am okay on past decisions, except that the stock market seems to have gone south again. Go figure.
I am still amazed on why people do think buying a house is a “must do” even from a financial point of view. At least in Canada housing is crazy these days, and renting has been recommended for several reasons.
Is buying a house really that important from the financial point of view?
We have had a lot of appreciation lately, but I’m still not sure I will “make” money on my house when I factor in housing related expenses over the decades.