Paul Farrell writes about Scott Adams’ (of Dilbert fame) simple 9-point formula that captures “everything you need to know about personal investing”. Here is the list (with one slight modification for Canadians. I’ve removed “Fund your IRA to the maximum” and added point #6):
- Make a will
- Pay off your credit cards
- Get term life insurance if you have a family to support
- Fund your RRSP to the maximum
- Buy a house if you want to live in a house and can afford it
- Pay down your mortgage (if you have one) as fast as possible
- 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
It is hard to quibble with the list, though I would have probably said “a few months worth of expenses” for #7. The sad truth about personal finances is that simple is usually best and most of the fancy products that the investment industry keeps churning out (hedge funds, principle-protected notes, wrap accounts) are best avoided. Now, if you would excuse me, I’ve been putting off making a will, so I’d better get right to it.
