Link of the week: “Everything you need to know”?

I’m very drawn to simple, overarching financial strategies that leave lots of room for customization. Of course once you commit to a strategy, you have to dig into each step and figure out exactly how you’re going to accomplish them. But I love a simple blueprint. That’s why I simplified my own overarching philosophy down to just three words: “present, past, future.” It’s also why I love All Your Worth‘s six steps and 50/30/20 budget philosophy.

So I loved this blog post from The Simple Dollar entitled “Is This Everything You Need to Know About Financial Planning?” The author and blog owner Trent Hamm dissects a section of Scott Adams’ 2002 book Dilbert and the Way of the Weasel that purports to sum up financial planning in 9 short instructions, beginning with “Make a will” and ending with “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.”

Hamm largely agrees with the summation but highlights a few weaknesses in it. (I was especially interested in how he said money market funds are not a good place to stash short-term savings right now, because that’s one of the options for holding our down-payment fund I was planning to research.)

Here’s how my family’s financial life stacks up against the nine items (though do check out Trent Hamm’s post first, because his responses are as valuable as the original list itself):

Make a will. (Check.)
Pay off your credit cards. (Check.)
Get term life insurance if you have a family to support. (We haven’t done this because we could easily live on two full-time incomes or even one.)
Fund your 401(k) to the maximum. (No, only to the employer match, because we don’t feel our 401(k)s are the best way to invest.)
Fund your IRA to the maximum. (No, because we agree with Hamm’s response to this list item: “If you have non-retirement goals, I’d say it’s a good goal to be saving 10% of your income for retirement and throw everything else you can toward that non-retirement goal.”)
Buy a house if you want to live in a house and you can afford it. (Working on it! We do own a condo and a flat and we can afford them, but working toward the next step of full home ownership.)
Put six months’ expenses in a money market fund. (We only have three months, technically, although it would probably stretch farther than that. I’ll tackle this in a blog post next week!)
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. (No, because again, we’re saving for a short-term goal and don’t want the money in a high-risk account.)
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. (We’ve sought advice from various sources but haven’t yet hired a planner. So far we seem to be working things out on our own pretty well, even though our financial life is quite unusual.)

financial future

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