I’m a big fan of Scott Adams. He’s the witty cartoonist behind Dilbert. It’s an “office” comic that pokes fun of big business innefficiency and “stupid people.” In the latest book The Way of the Weasil, the world famous cartoonist took a jab at the topic of financial planning… he described a one-page financial plan that everyone should use. Funny thing is… it’s not half bad.
Adams wrote in the book:
“Everything else you may want to do with your money is a bad idea compared to what’s on my one-page summary. You want an annuity? It’s worse. You want a whole life insurance policy? It’s worse. You want to invest in individual stocks? It’s worse. You want a managed mutual fund instead of an index fund? It’s worse. I could go on, but you get the point.”
The book is fantastic and everyone should read it for the humor and implied efficiency lessons alone. Still, the financial plan has made some waves for being a great minimal plan for people who want everything laid out in short form. This is the plan:
- Make a will.
- Pay off your credit cards.
- Get term life insurance if you have a family to support.
- Fund your 401k to the maximum.
- Fund your IRA to the maximum.
- Buy a house if you want to live in a house and can afford it.
- Put six months worth of expenses in a money-market account.
- 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.
- 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.
Of course, there’s nothing inherently wrong with the “plan.” It’s great for someone who wants to focus on long-term results, and believes that an economic shift isn’t occuring. It’s also great for someone who plans on a typical career and won’t be learning to create their own way of making money.
The next article for Learn Financial Planning is about how to figure out what your financial goals should be, and then how to actually write the financial plan. These next two articles will be the “meat and potatoes” of this site, so enter your email below and I’ll send them to you when I finish them.