The Index Card by Helaine Olen simplifies personal finance. From getting a good mortgage deal to selecting life insurance, opening a savings account, and choosing a financial advisor, this book covers everything.
You may be wondering if you should read the book. This book summary will tell you what important lessons you can learn from this book so you can decide if it is worth your time.
At the end of this book summary, I’ll also tell you the best way to get rich by reading and writing.
Without further ado, let’s get started.
The Index Card Book Summary
Lesson 1: Compare mortgage rates from multiple lenders and save thousands of dollars.
Most people start their housing budget with the amount they can borrow. It’s a common problem that buyers, after finding their ideal home, wonder if they can afford to increase their mortgage amount by any amount.
Unfortunately, this is where a big mistake is made. Stick to your financial limits and do not spend more than you can afford. A good rule of thumb is to save 20% of the total price of the home as a down payment.
You can buy a $100,000 home with a $20,000 down payment if you want to. The higher the down payment, the lower the monthly mortgage payment.
Lower debt service results from a smaller loan. Over the life of the loan, a larger down payment can save the borrower thousands.
This can result in a lower interest rate. A lower interest rate is possible because smaller loans represent less risk to the lender.
And the higher the down payment, the less likely it is that the value of the home will fall below the value of the mortgage. A collapse in the real estate market is a big problem if you need to sell your home quickly. In this case, the real estate market would have no chance to recover.
For this reason, we require a 20% down payment. You are ready to apply for mortgages.
However, before committing to a mortgage loan, most borrowers inquire about other providers. How would this make sense?
To illustrate, consider the difference between a $200,000 loan at 4.5% and a loan at 4%. The first scenario requires an annual premium of $700. Over the course of 30 years, you would spend $21,000 more if you did not look for alternatives.
Lesson 2: If you want to retire comfortably, you need to start saving now and explore your options.
Let’s say you’ve finally found a job you like and are ready to sign on the dotted line. You find a retirement plan that requires you to contribute a certain percentage of your annual income.
The fact that you’re young and healthy means nothing to you. You might as well forgo your future. A simple mistake like this is easy to avoid.
Many people don’t save enough for retirement because they make logical mistakes. Most retirees say they were forced to retire earlier than they planned, but many think they’ll never make it anyway.
It’s true that only 20% of the older population is employed. Sometimes life throws a wrench in the works, whether it’s a health problem, ageism or a crisis at home.
A common misconception is that people have decades to save for retirement, so there’s no reason to start now.
However, this view is complicated by compound interest. If you start setting aside $104 a month at age 25 and invest in a retirement fund that earns 5 percent annually, you’ll have $200,000 available at age 65.
To achieve the same wealth in retirement if you start investing at age 45, you’ll need to save $430 a month.
Is it really necessary for you to save that much?
According to experts, 15% of your gross monthly income should be saved for retirement. However, your superiors may be the most important factor in your later success, so don’t disregard them just because they seem like a lot.
That’s because many companies participate in their employees’ retirement contributions. Typically, companies contribute up to 6% of an employee’s annual salary to a retirement plan, doubling the employee’s contribution dollar for dollar. Get the most out of this situation by making a larger investment.
According to studies, 25% of employees don’t take advantage of their employer’s supplemental benefits. That’s almost like “getting paid to do nothing”!
Lesson 3: You should plan for the worst case scenario.
When you buy insurance, you often think about the worst-case consequences for your loved ones, which can be a depressing and discouraging experience. Frankly, no one wants to deal with that.
The potential consequences of an accident in which you do not have adequate insurance are even scarier. Think about the consequences of your death. Will they have money problems? Given this scenario, life insurance is mandatory.
When the insured person dies, the policy pays the benefit. But not all life insurance policies are the same. In terms of value for money, term life insurance is unrivaled.
The term of this type of life insurance is limited, and the author suggests setting it at 30 years.
The policyholder pays an annual premium to maintain coverage during that time, and the term of the policy can be changed at any time. You can cancel your coverage at any time by simply stopping your monthly payments.
However, it is important to choose a term life insurance policy where the annual premium payments remain the same throughout the policy term.
Although the point of life insurance is to provide financial security in the event of an accident, accidents happen every day; therefore, it is also important to purchase property insurance. Insuring your home appropriately is something like “asset insurance” because your home is probably your family’s most valuable possession.
Therefore, it is of utmost importance to be aware of the level of protection that each plan offers. When comparing rates, think about the worst-case scenario, such as if a tornado destroys your home, a forest fire devastates your town, or a massive flood occurs.
Check with your insurance agent to see if your policy covers such situations. It’s not enough to rely on his or her word; you must also have written proof. Having everything documented will protect you from having a claim denied on a technicality.
Lesson 4: Do your research before choosing a financial advisor and be prepared to pay.
Find out about a potential financial advisor’s qualifications before you hire them. Investors trust financial advisors because of their reputation.
That’s why there are more than 50 names for those who focus on retirement planning.
Which of the many financial advisors should you hire?
You only need to look at one job title, and that’s good news. Financial advisors should be chosen based on whether they adhere to the fiduciary standard. A fiduciary is required by law to look out for your best interests, and that is very important.
She is trustworthy, and you can rely on her to give you unbiased financial advice, warn you about risky investments, and protect your interests.
While anyone can claim the title of “financial advisor,” only those who are committed to acting in the best interests of their clients (as defined by law) can be considered “fiduciaries.” Such “advisors” are not required by law to put your needs ahead of their own.
The services of a trusted financial advisor are not cheap. Be sure to make direct payments to your financial planner. Many financial advisors who are not fiduciaries offer “free” services in exchange for commissions on your investments.
Fiduciaries, however, are allowed to charge whatever fees they deem appropriate. According to one estimate, the hourly rate for specialized investment advice is $500, while the cost for debt management advice is more like $50.
In some cases, such as the preparation of a comprehensive financial plan, a fiduciary may charge a single apartment fee.
Look for a financial advisor who can give you good advice and help you get your finances in order, no matter what level you are at.
The Index Card Book Review
The Index Card is a great book I’d like to recommend to anyone who is interested in personal finance. If you spend some time digesting the ideas, it might make a positive impact on your life.
When it comes to retirement planning, good financial planning makes the difference between a secure future and a deferred future.
The good news is that you can simplify your relationship with money and get your financial house in order by following a few basic rules. By planning ahead, you can avoid debt and ensure a comfortable retirement.
Social programs like Medicare and Social Security make our lives much more comfortable and manageable financially, but they often get a bad rap from the public.
Yet they are critical to a comfortable retirement, and without them, it might not be possible. Whether it’s a student loan, a mortgage deduction, or unemployment insurance, 96% of all Americans rely on some form of government financial assistance.
Everyone has a duty to defend these initiatives against negative criticism, and you can do your part by joining the discussion.
About the Author
Halaine was named by Business Insider. Olen is one of the top 50 Women Changing the World.
Harold Pollack is a professor at the University of Chicago.
Buy The Book: The Index Card
If you want to buy the book The Index Card, you can get it from the following links:
How To Get Rich By Reading and Writing?
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