Can Eight Simple Rules Make You a Financial Success?
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Is it possible to fit everything you need to know to be financially successful on one index card? That’s the conceit of a new book out this month called “The Index Card: Why Personal Finance Doesn’t Have to Be Complicated.”

The idea sprang from a conversation between co-authors University of Chicago professor Harold Pollack and Helaine Olen, a financial journalist, in which Pollack said all the best money advice could be written on one card. When a reader of his blog challenged him to do it, he uploaded this.

The post went viral, and it’s now been expanded to a 256-page book.

Why a book that long to explain what can be written on a 4X6 card? “I can tell you to invest in an index fund, but you may not know what it is,” says co-author Olen. “It’s worth writing a book to explain what these things are, why they’re important, and how to follow them.”

The recommendations themselves are pretty straightforward and many are standard guidelines for success. Follow them and you could even end up a millionaire–eventually. Yet just as we know we should be exercising more and eating fewer fries, it’s hard to put that into practice without a plan. Your doctor may say you need to lower your BMI, but you’ll still want to know why, what that is and how to get started.

That may help explain why so many people aren’t already following the recommendations (which include eight you can put into practice, plus one to promote safety-net programs like Social Security and unemployment insurance). “For one, people don’t know them,” says Olen. “Life also has a way of throwing us off-balance.”

Which is a good reason to start with the fourth on the list: saving.

“Having clarity about cash flow and savings is critical to success,” says Cathy Curtis, a Certified Financial Planner and founder of Curtis Financial Planning in Oakland, Calif. “An easy first step is to create a budget and then automate your savings to [regular] accounts and retirement accounts.”

How much? Olen and Pollack recommend saving 10 to 20 percent of your income each year. “Though no one is saying you have to do 10 or 20 percent tomorrow,” assures Olen. “The goal is to get there.”

Even if you start small and increase your contributions later, investing savings regularly into a diversified portfolio can pay off exponentially over time. Someone who starts with a balance of $5,000 at age 30 and then adds another $500 each month, for example, could have nearly $1 million after 40 years (assuming an average annual return of 6 percent).

Olen and Pollack recommend maxing out retirement accounts like a 401(k) or IRA—that’d mean contributing $18,000 or $5,500 in 2016, respectively, if you’re under 50 years old. Or, if that’s too difficult, put in at least enough to get any employer match money. (That’s free money!)

Both those accounts have helpful tax advantages: The money in a 401(k) or regular IRA isn’t taxed ’til you take distributions in retirement, when you’re likely to pay less in taxes on them. (A Roth IRA works the opposite way: you put money in post-tax, but can take it and earnings out later tax-free.) It’s not just about retirement: You may also be able to take penalty-free early withdrawals from your IRA for higher education expenses or to buy your first home.

Olen and Pollack—along with successful investors like John Bogle—recommend putting the money you invest into inexpensive, well-diversified funds instead of buying and selling individual stocks. That means looking for funds that mirror indexes like the S&P 500 and the Dow Jones Industrial Average and come with low expense ratios (or annual fees) of .25 percent or less. If you want to invest in an “active” fund, which has a professional managing it, look for an expense ratio of .50 percent or less. That translates to $2.50 to $5 for every $1,000 invested.

“Choosing low-cost mutual funds is an extremely effective strategy to build a diversified portfolio for most investors,” agrees Stacy Francis, a Certified Financial Planner and CEO of Francis Financial in New York City. “If one company or one part of the economy falters, the rest of your portfolio will act as the airbag and cushion the loss.”

If you’re going to get advice from a financial planner or advisor, Olen and Pollack (and the Labor Department, among others) recommend checking that person adheres to the “fiduciary standard,” which means putting your best interest above everything.

That seems pretty straightforward, but many advisors aren’t required to stick to it—only to offer suitable options. So while the advice you get may be good, it may not be the best for you. (It’s also a good idea to ask how your advisor is paid and to check on credentials and complaints through FINRA.)

Finally, the pair recommend paying your credit card balance off in full each month. Sure, this probably won’t come as a big revelation to anyone with a credit card, and Olen and Pollack are hardly alone in giving that advice. But some calculations might provide extra incentive to pay your balance off faster.

Just as compounding can help you turn $500 a month into $1 million over time (since you’re getting earnings on your earnings as well as on the money you invest each year), interest on your credit card bill can keep you in debt for a lot longer than you anticipated—and cost you much more than you imagined.

If you have a $1,000 balance with a 16-percent APR, the current average, and you pay the minimum (interest plus 1 percent of the balance) each month, for example, it will take nine years to pay off that balance, and you’ll pay $792.87 in interest. But pay $50 a month instead and you’ll have it paid off in two years with $171 in interest.

Of course, being financially successful—not to mention, getting rich—is about more than getting to zero debt; it’s about building wealth. And “wealth” is essentially just money you’ve built up in savings and investments. That’s something you can do even as you’re paying off your debt.

Can these eight rules make you rich? Maybe—if you follow them early, closely and consistently enough. But even if you don’t follow them exactly, using them as guidelines can keep you on the path to financial success. That doesn’t mean it’ll be easy, but it can be that simple.