27. July 2016 · Comments Off on Top Librarian Podcasts · Categories: Uncategorized

These librarian podcasts appeared earlier in the year in ALA Magazine (January/February 2016 pages 16 to 17) and I thought I would put their names and links here for the reader.

Cyberpunk Librarian

Dear Book Nerd

Documents that Changed the World


Open Paren

Reading Envy

T is for Training

Worst Bestsellers


15. July 2016 · Comments Off on The Index Card: Why Personal Finance Doesn’t Have to Be Complicated by Helaine Olen and Harold Pollack · Categories: Uncategorized

index card

Do I agree or disagree with the ten principles of The Index Card?

1: Strive to Save 10 to 20 Percent of Your Income: Absolutely Agree! This is the principle tenet of opening chapters of highly regarded personal finance books like the Wealthy Barber and More Money Please. It is imperative that people automate their savings. In addition experts say (page 30) that no more than 50 to 60 percent of take home pay should be put toward non-discretionary expenses such as housing, transportation, and health care. A suggestion is made to use cash instead of card to keep better track of spending. Finally, money should be set aside for an emergency. An emergency fund worth three months of expenses is suggested.

2: Pay Your Credit Card Balance in Full Every Month: Again Absolutely Agree! More Money Please has this as a mandate as well. What I liked in this chapter is the discussion about being aware of debt consolidators. The book notes that debt consolidation is still debt. What I did not know until reading the book is that debt consolidation loans need to be secured by a possession such as a car or home (page 57). Olen and Pollack suggest that consumers use the nonprofit organization National Foundation for Credit Counseling. “However, it’s important to remember even the most honest players can have conflicts of interest. Some of the nonprofits funded with bank and credit card money, for instance, will rarely recommend bankruptcy, no matter how dire your situation. (page 58)” The authors mentioned that while peer to peer lending through a company like Lending Club is possible, people who are in the most difficult circumstances may not be able to use the service. Olen and Pollack conclude with using bankruptcy as the best method to deal with severe debt problems. As noted on page 59, “Bankruptcy is not an easy process, but it just might be easier than dedicating years of your life to paying off bills that the courts would agree are too much for you to handle on your income and assets.” I like the discussion about the pros and cons of bankruptcy. The disadvantages are that it will be tough to access credit for several years. The authors note that “some future employers are likely to look down on it.” On the other hand the advantages are that collection agencies can no longer contact you. Finally, the discussion of student loans is enlightening and the big take away I got was that you should always borrow from the federal government first as the government is far more most flexible than private lenders.

3: Max Out Your 401 (k) and other tax advantaged savings account: Agree! On page 68 the authors clearly state, “After your emergency fund, saving for retirement is probably the most important savings you’ll ever undertake. When it comes to planning for retirement, play-ground rules apply-no do-overs.” The time value of money is an important consideration and it pays to save as early as possible in your career. If you start saving too late you’ll have a lot of work to do to catch up. Also key are the tax benefits to using workplace retirement plans such as a 401 (k) or a 403 (b). Additionally, taking advantage of the employer match is recommended by almost every financial professional. As stated on page 79, “If your employer offers a retirement account with a match, this is likely the best shot you will ever get at earning money for doing absolutely nothing. Don’t turn it down.” I am also in agreement with the authors statement that one should never take money from a retirement account unless they are out of options. One thing that I did not know is that workplace retirement plans “almost always come with lower-fee investment options and stronger regulatory protections than you will get on your own.” This chapter ends with a look at Coverdell Education Savings Account and the 529.

4: Never Buy or Sell Individual Stocks: Disagree! While I would not recommend solely using individual stocks to build an entire portfolio (the chapter starts with the cautionary tale of Kodak’s stock falling from grace), I think that there are grounds to consider investing in individual stocks. If you have an adequate emergency savings fund, you have automatic withdrawals going into retirement savings by which you are positioning yourself in a good financial place for retirement, and you have automatic contributions going into a number of index funds (the subject of the next chapter) there is no harm in buying individual stocks from reputable companies. Ideally you would purchase large cap stocks that yield adequate dividends and have knowledge of the company that you are buying stock in. A small portfolio of stocks from across a variety of industries will prevent you from putting all your eggs in one basket. Money Magazine and Morningstar can be consulted to see what financial analysts think about the companies you are considering buying stock in. I would look for companies under good management, have a good long term track record, make a valuable product few can replicate, and successfully adapt to change. If you have firsthand knowledge of the company’s products and are a fan of what they do, that also should be considered. Again, I would not suggest doing this until you have an emergency savings fund, are in a good place with your retirement savings, and you are contributing to index funds. Be prepared to hold the stocks for the long term.

5: Buy Inexpensive, Well-Diversified Indexed Mutual Funds and Exchange-Traded Funds.: Absolutely Enthusiastically Agree! As noted on page 116, “An index fund doesn’t seek to do better than the index it is meant to replicate. On the other hand, it won’t do worse. That, it turns out, is the magic investing formula. It’s the opposite of active management. It’s passive management.” The authors do a good job explaining the differences between mutual funds and exchange traded funds (ETF). These are worth mentioning. From pages 120-121, “Mutual funds are not always index funds. Exchange-traded funds are almost always pegged to an index or other benchmark. Exchange-traded funds can be traded like stocks. Mutual funds can be bought and sold only at the end of the business day. Exchange traded funds almost always have lower expense ratios but higher trading costs than mutual funds.” The authors suggest funds that offer a mixture of stocks and bonds. On page 125, they suggest that you subtract your age from 100 and use that number as the percentage of assets that should be invested in stocks. The chart on page 127 is helpful and matches the general pattern I have seen of a well balanced index fund portfolio where a domestic stock index fund, a international stock index fund, and a bond index fund are used. The authors go a bit further and also suggest the use of a small cap index fund. In total their suggest portfolio for a 40 year old is a total of 60% of the portfolio based on stocks (70 % S& P index fund, 15% small-cap index fund, 15% international fund) the remaining 40 % is invested in a bond index fund. The authors do not recommend target date funds as they find that those funds are high-fee investments. I would not rule target date funds out entirely, you have to do the background research (one example would be to find out what Money Magazine/ Morningstar ratings the target date fund has), and then find out what the costs are.

6:Make Your Financial Advisor Commit to the Fiduciary Standard: Agree! This was a chapter where I learned a lot! For starters the definition of a fiduciary is (from page 135), “a financial advisor who has a legal and regulatory duty to put your interests ahead of his or her own. A financial advisor working to the fiduciary standard 1) has a legal duty to act in your best interests; and 2) is not getting paid to steer you into buying overpriced investment products you don’t want or need.” On page 149 the authors identify a fiduciary as having these credentials: certified financial planner (CFP), registered investment advisor (RIA), and fee-only advisor. The writers suggest visiting http://cfp.net/ and http://www.napfa.org/ to research potential fiduciaries. The Committee for the Fiduciary Standard’s website is at http://www.thefiduciarystandard.org/. The oath you can have your advisor sign is found at http://www.thefiduciarystandard.org/wp-content/uploads/2015/02/fiduciaryoath_individual.pdf. Also of interest to me was the brief discussion of robo-advisors which use algorithms to suggest a series of investments. Despite the appeal, the authors still recommend that you need to ask if the robo-advisor is a fiduciary.

7: Buy a Home When You Are Financially Ready: Agree, but only because of the operative phrase “when you are financially ready.” The chapter discusses the pros and cons of renting vs. owning a home before moving onto the financial basics of purchasing a home. For me the most important part of the chapter was the list of basic tips that should be considered when thinking about buying a home. On page 164, the authors emphasize that experts suggest spending a third (or less) of your take-home pay on housing. Also the three most important things in a real estate purchase are (from page 165) “location, location, and location. The creakiest home in a desirable neighborhood will likely do better for you- at least financially-over the long run than a gorgeous home in a lesser locale.” On page 166, it is noted that homes are a long term investment and it may take at least five years to have a shot at breaking even on the purchase. Also recommended on page 167 is putting 20 % down on the home while having other debt under control. On page 170, Olen and Pollack prefer buyers look into the “traditional 15 or 30 year fixed payment mortgage, preferably with 20 percent down.” An emergency savings account should still be kept intact and should not be raided to pay for down payment costs. Critical is the need to research mortgages before buying the home. The authors suggest using http://www.consumerfinance.gov/know-before-you-owe/ and http://www.bankrate.com/ to compare mortgages. Also, don’t engage in real estate speculation!

8:Insurance-Make Sure You’re Protected: Agree! This chapter is a good reiteration of the basics of insurance. For life insurance (page 181) Olen and Pollack suggest a thirty-year level term life policy, even if you are not convinced you will not need the policy for that long.” Getting disability insurance from your employer is strongly urged. Property insurance is best handled with a high deductible plan. Auto insurance should have collision and liability coverage. Liability insurance should be twice the amount of your net worth. There is discussion of comparison shopping for health insurance. For retirement protection, longevity annuities that are fixed and low cost are recommended. Buying insurance from a reputable company (i.e. one that does well in Consumer Reports) is recommended.

9: Do What You Can To Support the Social Safety Net: Agree! Olen and Pollack say this the best on pages 206 to 207. “It is important to show our support for programs like Social Security and Medicare so that you can turn to the insurance broker of last resort, the government, if things go wrong.” I’ll jump ahead a little and quote them from page 207, “When someone decries Social Security as a Ponzi scheme, remind him or her that many elderly would lead much poorer lives without it. When you hear someone say the government should keep its mitts off Medicare, speak up and say it is a government program.”

10: Remember the Index Card: Agree! Read the book!