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The money advice you need fits on an index card

August 29, 2019

No one teaches us about money. Consequently, many have little of it. Here is a terrifying statistic. The US asked people how they would pay for a $400 emergency. In 2018, four in ten adults would struggle with that expense (Federal Reserve Board, 2018). Of these four, three think they can borrow money from friends and family, or a bank. The last one cannot come up with the money at all.

But this isn’t only an affliction of cab drivers, cashiers, and sales assistants. College graduates suffer too. In 2016, Neal Gabler wrote an article in The Atlantic. Neal looked successful: he had a house in the Hamptons and sent two daughters to college. Yet he wrote:

‘I know what it’s like to have to borrow money from my daughters because my wife and I ran out of heating oil’ (Gabler, 2016: na).

Money is everyone’s problem. When we start our first job in our twenties, we rejoice. Now we can buy the iPhone we wanted. When in our thirties, we want a flat, and balk at the interest our mortgage demands. When in our forties, our parents will fall sick. We’ll have to pay for their hospital bill. If only I had saved more, we’ll think.

1) Spend less than you make.

No rule is more important. Making a lot of money is no guarantee for keeping it. Take the example of lottery winners. They are suddenly rich. Yet they are more likely to bankrupt themselves than the average person (Hankins et al, 2009). Because they spend more than they should.

2) Save as much as you can.

Save between 20–50% of your income.

3) Track your spending.

Many are shocked at the end of the month. They spent too much, and didn’t realise. These days it is easy to track. American Express, Revolut, and the like have mobile apps. At the flick of a wrist, you can overlook your accounts.

4) Buy few things.

In your thirties, you will move. You’ll realise how much stuff you have, and start throwing it away. Why did I waste my money on that? you’ll think.

Things will clutter your home. You’ll find it difficult to find your keys because twenty magazines and two iPads cover your kitchen table. You’ll waste a lot of time managing your stuff: your VR headset broke and now you need to call customer service. There will be a point when the things you own will make you unhappy.

5) Buy on sale.

Companies slash prices at predictable times, e.g. at the end of summer and at the end of winter. That is the time to buy. You can buy food cheaper when they are about to expire. You can use coupons. You can buy things in bulk, e.g. toothpaste. Clothes, video games, music, and movies are a bargain once they are a year older.

6) Stay away from temptation.

Don’t browse unless you need something. There is evidence that willpower depletes, and you will give in, buying things you don’t need (Baumeister and Tierney, 2012). Browsing wastes time you could use to clean your flat, apply for jobs, or read a book.

7) A small leak will sink a great ship.

Many think that small charges do not matter. They do, however, add up.

‘Let’s eat out on Monday,’ friends will say. ‘And why not eat out on Thursday, Friday, Saturday too?’ You subscribed to Netflix. Why not subscribe to Amazon Prime, Hulu, and HBO too? you’ll think. Better to eat out only once. Better to subscribe to one.

8) Put your money into the S&P 500.

Many have their savings and pensions in some obscure fund. Many of these funds, even if expensive hedge funds, underperform the S&P 500 (Berkshire Hathaway, 2018). We are paying higher fees for below-average returns. For most, the S&P 500 is the best place to invest their money. Even Warren Buffet recommended that his wife put her money into that after his death.

You can speak to your pension provider and ask that they transfer your money, for example, into the Vanguards S&P 500 VUSD ETF. You can transfer your other savings if you speak to a broker such as Vanguard or Hargreaves Landsdown.

9) Don’t try to be clever

Once you make money, people will whisper in your ear. They will tell you about how to double your money. 'You only need,' they'll say, 'to invest in Bitcoin, this new company that makes widgets, or — why not — tulips.' Your neighbour just did that, and he is less clever than you are. So hey, what do you have to lose?

Don’t listen to the whisperers! You can lose what you have. A large UK study looked at people who select their own companies to invest in and those that invest in the S&P 500 (Barber and Odean, 2000). Those who invest in their own companies made 6% less money on average.

There is a fable about a dog with a bone in his mouth. The dog walks up to a pond and sees another dog, which has another bone in his mouth. But there is no other dog. It is the reflection of the dog in the water. So the dog snatches at the other dog, hoping to get the second bone. But when the dog opens its mouth, it drops the bone into the pond. The dog ends up with no bone at all.

Note. The book The Index Card by Hellaine Olen and Harrold Pollack inspired the title of this article. Here we give you different advice than the book does, though there is overlap. We write from our experience as poor students, young professionals, and aging startup founders.


Barber, B. and Odean, T. (2000), ‘Trading is hazardous to your wealth: the common stock investment performance of individual investors.’ The Journal of Finance . LV(2), 773–806.

Baumeister, R. and Tierney, J. (2012), Willpower: rediscovering our greatest strength. Penguin: London.

Berkshire Hathaway (2018), Letter to shareholders. Berkshire Hathaway: Omaha.

Federal Reserve Board (2019), Report on the economic well-being of U.S. households in 2018. Board of the Governors of the Federal Reserve System: Washington, DC.

Gabler, N. (2016), ‘The secret shame of middle-class Americans.’ The Atlantic. May issue.

Hankins, S., Hoekstra, M., and Skiba, p. (2009), ‘The ticket to easy street? The financial consequences of winning the lottery’. The Review of Economics and Statistics. 93(3), 961–969.

About this blog

Poor Alexander is a website that helps job applicants do well in interviews. Here we write about interviews, CVs, employment, money, and psychology. Our articles are based on the primary research we do, the literature we review, and our own experience.

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