Keep it Simple, Stupid

Keep it Simple, Stupid.

The concept is so easy it makes you feel stupid just thinking about it.

And by you, I do not really mean you.  I mean me.

I have been stupid many times.  Maybe even more times than I have been smart.  Why else at the age of forty-seven do I have a new boss fifteen years my junior, who has far less than thirty-two forty-sevenths of my wisdom, wants to "do economic development" like a bull charging through a china shop and would favor a quick nickel, when I favor slow dimes?

When it comes to money, I have often charged something for thousands of dollars while procrastinating on refinancing our mortgage as rates continue to rise and rise and rise...

My wife and I "purchased" the home where I write this nearly seventeen years ago, just ten days before 9/11, and it is barely worth more than what we paid for it.  Meanwhile, my sister and husband's home that my son and I just lodged at for a week in NOLA has appreciated by about half a million dollars since they purchased it in the wake of Katrina.

For years, I did not send any funds to my own or my wife's IRA accounts, all the while contributing five hundred per month to each of our children's 529 accounts.  Many of those years, my wife was a stay-at-home mom and we would only have a few hundred dollars left after our mortgage, car payments, utilities, insurance and all our bills were paid.

It feels good now to be able to pay for our son's undergraduate education, and to contribute to our daughter's in four more years, but to what expense?  I may end up tearing movie tickets if theaters still exist in the distant future.  Perhaps greeting Walmart shoppers or whatever brick-and-mortar retailers are left.  You may have me take your family's photo on Main Street USA ten years from now while my wife loads you onto a ride in Adventureland.  Who knows?  I do not know the future.  Do you?

What I do know is that I found several articles about Harold Pollack and his famous index card fascinating.

Harold Pollack's original financial index card.

In a Daily Herald article, Pollack admitted that the advice can be a little much for working class folks and is geared more toward middle classers like myself.  

"The advice was good," he said.  "But it had one key limitation: the card has a decidedly middle-class shading.  If you're a cashier earning minimum wage or a senior citizen on a low fixed income, you're not obsessing over the proper investment mix in your 401(k) account.  I received many colorful emails of the sort: 'Dear Prof. Pollack, I am a 28-year-old single mom.  You just told me to save twenty percent of my income.  If I could do that, I wouldn't need your card."

This is a great point.  I am a forty-seven-year-old married dad and I cannot save that much.

Because of the middle-class bent to this, Pollack updated his famous card.

Pollack's newer and improved financial index card.

I think that if you framed your financial philosophy by this card, it would render my words and those of all financial bloggers, writers and pundits unnecessary.  What more is there to say?

Setting and pursuing financial goals that excite you, following a budget, not buying financial products endorsed by celebrities, buying cheap index funds and using free financial coaches are all excellent pieces of advice.

When I think on some of the things that I have invested in, like thousands of shares of NUGT that have me down thousands of dollars, purchasing call options that expired worthless or allowing shares of stocks that I own to be called away as a result of having sold a call option, I want to kick myself.

When I think of some tech stocks that I thought would take off but went bankrupt instead (Powerwave Technologies) or having sold my Nvidia shares for a tenth of what the stock trades at today, I feel quite stupid.  I have a saying about my stock buying that I tell anyone who will listen.  I am great at buying stocks, but horrible at selling them.

What has fared well is my investments in cheap index funds like John Bogle, Harold Pollack and my late grandfather advise.  Low-cost Vanguard funds like the S&P 500 Index fund, the Wellington fund and the Primecap fund have done very well for my family.  My Roth IRA, divided between the T. Rowe Price Blue Chip fund and the Capital Appreciation fund, has fared well.  Simple, well-run, low-cost funds that I contribute to steadily.

I admit to taking a major gamble on NUGT, and it has paid off in the past.  Citing another old cliche, it will not be a loss if I do not sell it for one.  I may hold the shares until they bottom out, or I may cash them out to great profit in the future.  Once again, I do not have a working crystal ball, so I do not know the future.  Just like you don't.

Anyhow, after reading about the index card, I made out my own.  Some of them are the same as Pollack's card, because it is damned good advice.  Others are more particular to my own philosophy and also includes two keys that are missing from Pollack's: one is to do whatever you can to increase your income, whether it be via blogging, making stuff and selling it on Etsy, EBay or Amazon or your own eCommerce business or taking on extra gigs via Fiverr or whatever.  The second is to enjoy spending some of your hard-earned cash.  

I spent too many years grinding away while my kids were very small although I always tried to maximize family time as much as my job schedule and bank account would allow.  But for those of you who stumble across this post and have young 'uns at home, believe what they say, these years are going to fly by.  Not that my children are fully grown, but it amazes me how quickly they grow up.

I will share my financial index card with you, although it is largely for my own benefit.  I feel that after I write something down, I own it more than just reading someone else's index card.  I urge you to do the same and, if you do, please drop a note to me via this blog or on my Twitter account and I would love to read it.

The Money Mensch's financial index card.

Ciao and remember, when I say or write to Keep it Simple, Stupid, I am referring to myself.