Financial advise

Your financial advice on one card

There are many financial advisers out there who want you to believe that managing money is complicated and that you need their advise to run your own household finances. Personally, I believe in common sense and simplicity. I have never used a financial advisor, but I do believe that there are financial advisors out there who can help you with financial areas you might be struggling with, for example when it comes to mortgages.

Personal finance doesn’t have to be complicated. And financial journalist Helaine Ollen and University of Chicago professor Harold Pollack have made that very clear. When the two of them met, professor Pollack stated that everything you need to know about managing your money, should fit on an index card. And hence the below index card was born!


Although this is focused on the United States, you can use the above advise for any other country in the world. In their book (2016) “The Index Card – Why Personal Finance doesn’t have to be complicated” they explain the ten rules in detail. In my blogs, I will focus on a couple of these rules, which I have been following since I became an adult. I will show you how it works for me and how it might work for you as well.

To start, I have written down some explanations of the words in the Index Card, of which I think not everybody knows the exact meaning:

Rule #3: In the United States, a 401(K) plan is a defined-contribution pension account. Under the plan, retirement savings contributions are provided by the employer, deducted from the employee’s paycheck before taxation and limited to a maximum pre-tax annual contribution. So with a 401(K) pension plan, you will set aside money for your retirement through investments.

Rule #5: What is a Mutual Fund?
A mutual fund is a basket of stocks, bonds or other types of assets. Mutual funds are managed by an investment company on behalf of investors who don’t have the time or know-how to buy a diversified collection of securities on their own.The investment company invests the fund’s capital and attempt to gain more capital for its investors and match the investment objectives stated in its prospectus. In exchange for their efforts, the fund charges investors a fee, which may be 1% of the invested assets annually or more. That means Euro 10 for every Euro 1,000 you invest. But please check: Vanguard is one of the largest investment companies in the world with the lowest fee rates. Instead of 1% they charge 0,20%.

What is an Index Fund?
An index fund is a type of mutual fund where its portfolio is constructed in a way that it matches or tracks a market index, for example the Standard & Poor’s 500 Index (S&P 500). Instead of picking certain stocks, an index fund buys all the shares that make up a particular index. The aim is to replicate the performance of that entire market. Since index funds buy and hold and don’t trade frequently (meaning no expensive analysts required who analyze the companies) they are much cheaper to operate. The returns are also lower, since you own all good and bad stocks that make up a market. You’ll earn about “average” returns of all the stocks in that market.

Rule #6: When you decide you would like the advice of a financial advisor, please make sure the advisor commits to the fiduciary standard to ensure he / she operates ethically. When a financial advisor accepts the fiduciary standard, he or she is required to act in your best interest. He or she is expected to manage the assets for the benefit of you rather than for his or her own profit, and cannot benefit personally from the management of your assets.

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