K.I.S.S. for Success?
Everyone has heard the old bit of advice –keep it simple stupid, or K.I.S.S. That is getting harder to do. Personal finance used to mean getting paid and then using money to buy things that were needed. Today, most of us don’t get cash or even checks and we’re told that we “need” an iPad or iPox or iPut or some new device from Apple each year. We’re also told that we can’t pay for things because we have to charge to get a good credit score and that investments should include CDOs, derivatives and whatever hedge funds sell (hedges?)
At the same time that complexity is growing, the number of scams is also increasing. And, in case you wondered, there is no “Federal bail out plan for credit card debt”. That is a scam. If someone wanted to master everything there is to know about managing money it would be a full time job. Most of us can’t invest that time and yet we can’t trust the advice that most people offer. Smart people are probably trying to take advantage of us and who wants advice from a brother-in-law who can’t handle parking meters?
Here is The Budget Doctor’s prescription for keeping it simple:
1. Use one checking account. Pay all your bills from one account that you balance (with a calculator) every time you write a check, use a debit card or authorize an EFT.
2. Have a savings account linked to your checking account. Have your savings direct deposited into a savings account and have that savings account set up to cover overdrafts on the checking account (in case the calculator fails).
3. Don’t invest in anything you can’t describe. A bond is a loan. A mutual fund is a pot of money that buys a mix of different stocks and bonds for added safety. If you can’t define an investment in twenty words, don’t invest.
4. Put the Better Business Bureau on your bookmarks. You should not trust anyone. Never write a check to a person or company you don’t know and always ask a trusted advisor before making any important decision. The Better Business Bureau is a trusted advisor. Get in the habit of checking out everyone.
5. Ask for help. Government employees, non-profit credit counselors and housing counselors and people at other charitable organizations are supposed to give free advice. It may not always be perfect or even automatically correct, but it is the place to start.
Odds are you will never fully understand how credit scores are computed. So don’t try. Pay your bills, save for a rainy day and don’t listen when someone tells you how they outsmarted “the system” in real estate, stocks, commodities or anything else. People who played it safe during the last ten years are much better off than the “smart” people.
And before you ask, you really don’t need an iPox or an iPut and probably couldn’t describe them in twenty words anyway. But just in case you feel creative, take a shot at describing what these devices might be and send your suggestion to Budgetdoctor@takechargeamerica.org. There will be prizes for the best entries and they could be huge, at least as candy bars go.