Dilbert/Scott Adams' guide to personal finance...

[soupcxan]

Saw this list reprinted in another personal finance book while at B&N tonight and I was surprised by its generally good advice in such a concise form. Obviously it's not for everyone but I would definitely recommend it to my friends who are not as PF savvy. I might also add #10: live within or below your means.

1. Make a will.

2. Pay off your credit cards.

3. Get term life insurance if you have a family to support.

4. Fund your 401(k) to the maximum.

5. Fund your IRA to the maximum.

6. Buy a house if you want to live in a house and can afford it.

7. Put six months expenses in a money market account.

8. 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.

9. If any of this confuses you, or you have something special going on (retirement, college planning, a tax issue), hire a fee-based financial planner, not one who charges a percentage of your portfolio.

There's also an article about it:
http://www.fool.com/news/commentary/2003/commentary030730rb.htm

 

[Nords]

Six months' expenses?!?

I'd favor six months of mortgage payments & groceries, or maybe six months of austerely-budgeted expenses, but not six months of your average budget's spending.

Envision losing your job. Do you say to yourself "Well, at least I can spend more time with the family doing the things we enjoy. Let's double the entertainment budget!!" or "Hey, I finally have the time I need to go SUV shopping!" or do you say "Whoa, clamp that wallet shut."

With today's interest rates I'd even consider financing that emergency cash in home equity loans or credit cards.

But aside from slashing spending to the bone, the best cash-stash suggestion I've seen is I bonds or CDs. Buy one or ladder them over a couple of years, and only cash them in when you absolutely need them. You'll take an interest penalty but you'll fund that emergency with zero percent interest.

As some of us have noted before, the real epiphany is slashing expenses and realizing that they've dropped below 4% of your portfolio. THEN what do you do?!? ER on a frugal lifestyle or go find another means of supporting your possibly frivolous spending?

 

[Whakamole]

Re: Six months' expenses?!?

I'd favor six months of mortgage payments & groceries, or maybe six months of austerely-budgeted expenses, but not six months of your average budget's spending.

But some of us have already cut spending down significantly, to save for RE.

If I lost my job - I'd be saving money on gas (by not driving to work - I can walk to the grocery store) and I wouldn't be eating out for lunch. I'd put off some other expenses, but the budget would be similar.