Dilbert’s Unified Theory of Everything Financial

Scott Adam is the writer and illustrator of Dilbert, a very popular comic strip (as well as TV show and book series) read by millions every day. Adam’s, however, is an outspoken guy, and isn’t shy about forging a successful path beyond office satire. His new book, ‘Stick to Drawing Comics, Monkey Brain!‘ is excerpts from his blog, about life, philosophy, and even religion. His quirky one liners, like “If I’m dumb enough to buy water, I’m certainly dumb enough to pay too much for it.”, and “If you had to design a dating website that matched people on just two criteria, what would those criteria be?”, always bring a smile to my face. His blog is a daily reading of mine, his topics are always random yet strangely relevant to my own life.

Adam’s has managed to write down a 9-step, one page formula for financial success. It is his opinion that the average person tries to over complicate something which can be made extremely simple. As Paul Farrell puts it:

Thanks to Adams’ formula, the average irrational investor can ignore Wall Street: “Everything else you may want to do with your money is a bad idea compared to what’s on my one-page summary. You want an annuity? It’s worse. You want a whole life insurance policy? It’s worse. You want to invest in individual stocks? It’s worse. You want a managed mutual fund instead of an index fund? It’s worse. I could go on, but you get the point.”

Forget everything else, just re-examine these 9 steps. What are the 9 steps, I hear you ask? Easy:

1. Make a will

2 .Pay off your credit cards

3. Get term life insurance if you have a family to support

4. Fund your 401k to the maximum (Ed Note: For Australian’s, this means super contributions)

5. Fund your IRA to the maximum (Ed Note: Not relevant for Australian’s)

6. Buy a house if you want to live in a house and can afford it

7. Put six months worth of expenses in a money-market account

8. 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

9. 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

Its almost simple to a fault. The reader is thinking ‘there has to be more to it then this, right?’. There really isn’t. Exploit the predictable, compounding money makers. Be consistent. Exploit government tax-breaks. Cover yourself with basic life insurance plans. Take advantage of the stability and tax breaks of owning a house. Don’t leave your assets in limbo when you die. Have a back up plan in an expenses savings account. Pay off the most expensive item first (e.g. your credit cards). In the end, this advice is the best a laymen can ever hear. Adhere to this, and financial security is yours till death, irrespective of market or personal conditions.