Scott Adams’ Financial Advice

A few years ago I read some short financial advice by Scott Adams, the author and creator of the Dilbert cartoon. It’s great advice–it’s perfect for 95% of Americans’ finances and investing. Without further ado, here is Dilbert’s One Page Personal Finance List:

  • Make a will.
  • Pay off your credit card balance.
  • Get term life insurance if you have a family to support.
  • Fund your company 401K to the maximum.
  • Fund your IRA to the maximum.
  • Buy a house if you want to live in a house and can afford it.
  • Put six months’ expenses in a money market account.
  • Take whatever is left over and invest it 70 percent in a stock index fund and 30 percent in a bond fund through any discount brokerage company and never touch it until retirement
  • If any of this confuses you, or you have something special going on (retirement, college planning, tax issue), hire a fee-based financial planner, not one who charges you a percentage of your portfolio.

This advice is completely spot on. I’m not going to add anything more in this post–this advice stands on its own incredibly well.

Thanks to Scott Adams for permission to reproduce this list. I read the advice in a book and at the time I couldn’t find it on the web. So in 2010 I emailed Mr. Adams and asked for permission to reproduce the advice, and he replied and said that was fine.

29 Responses to Scott Adams’ Financial Advice (Leave a comment)

  1. I agree with you Matt. These advice are really good. The most important aspect is to ” Make a will”. Thanks for sharing these useful information.

  2. Adams’ new (ish) book is fantastic, btw.

  3. Francis Imperial

    I really love this advise. I just wish I had more money to do all of it.

  4. Some advices are really required to follow. But where is Health Care Insurance?
    It is quite impossible to live without health insurance as health care charges is
    so high in some cases that we all can effort at all.

  5. i think Scott Adams was spot on, though I also bought copies of “The Richest Man in Babylon” for my sons and their offsprings consumption. Based on some help sheets distributed by an Insurance company in the early 20th Century, it also covers the basics of Compoud Interest, the avoidance of investments in wishful schemes with no demonstrable track record, and the fallacy of participating in game schemes (read: lotteries and gambling). Scott’s advice is a more concise list of that books assertions.

  6. Bishan – I don’t have that problem – but then I live in the UK where contributions for healthcare deducted are deducted at source.

  7. Put six months’ expenses in a money market account ====>I can’t get which market you mention about …

  8. The bad thing is the author of Dilbert never answers the question, “how much home can I afford?”. A quick and easy way is to know if you’re ready is if you can answer “yes” to the following questions.
    1. Are you out of debt?
    2. Is the house not larger than 2x your annual income?

  9. Echo the advice to buy health insurance, especially now that it is so much more widely and easily available.
    Echo this as well: “Get term life insurance if you have a family to support.” I’d only add that if you can afford to forego a latte a day, you should put that money into permanent life insurance. This might not be necessary if you’re single with no family to consider, but if there’s a family — buy permanent insurance. You will need it permanently, i.e., as long as you live.

  10. Very good advice fir those that reside in the USA. Although other countries’ socialized medicine take some of the stress from life, all of the other financial advice given by Mr. Adams is very sound. Your salary is a machine that prints money in the basement – these are the oil you need to keep that machine printing.

  11. Why a fee-based consultant versus one that takes a %, say 1%, of your portfolio growth? Just curious about how that changes the broker’s incentive to help you make the most out of your earnings. What are the learnings there?

    • I don’t know Matt’s logic on this one, but I would say the that one reason to do so would be to avoid an investment broker who’s looking to be very active. If you have a lot of money, the guy who takes 1% will pay a lot of attention to your account. If you don’t, they won’t. Ideally, you’ll looking to get some sound general advice, and invest in no-load mutual and bond funds that manage themselves, rather than being actively managed (which incurs fees).

    • I don’t speak for Matt, but if you don’t have a whole lot of money, it’s harder to get the attention of a broker who is getting a percentage. And IME brokers who take a percentage tend to churn your investments more, so you have more fees. Modest investors do better I think with no load balanced mutual funds–fees are low, returns reasonable, typically very stable.

      • bil, if I had to summarize the personal investing/broker side of things, it would be “Open an account with Vanguard.” As a shareholder-owned company (much like a credit union instead of a bank), Vanguard’s incentives are much better aligned with their customers. In my experience, Vanguard’s philosophy is spot on and their fees are very low.

    • As I understood it; the person who works for a % makes money when you trade. As such, they have a compelling reason to get you to make trades regardless of whether that is in your best interest or not. The extra trades are also new fees for you.

      That may not be universal, though.

      The person who works on a fixed fee does not have that incentive.

      • Jeffry, I don’t agree with you here. Someone who is paid by their assets under management is often looking to get more assets, so they might prioritize getting more clients over taking good care of your money.

        You’ll also want to review this data about realtors: Even though realtors receive a percentage of a house’s selling price, it often creates incentives for realtors to move quickly instead of maximizing the percentage they receive on a particular transaction.

        • “We address this question using a unique data set pertaining to sales of faculty and staff homes on the Stanford University campus.” How is this helping the public? It seems like you’re trying to mislead consumers that this unique study = America.

          In the US, Real Estate agents have a fiduciary duty mandated by law to uphold client interests above their own. They are licensed by the State and are a professional 3rd party that facilitate a transaction by providing a service. They also lobby congress to ensure laws continue to protect consumers regarding real property. Just like any industry, some agents are better than others. Often buyers and sellers are not forthcoming with information that will affect the sale of a home. Real estate is considered a bundle of legal rights and an agents job is to sell and to ensure you’re protected through the course of selling/buying and closing the sale of real property.

          “so they might prioritize getting more clients over taking good care of your money.” It looks like you’re agreeing with the comment, it seems like you’re not even paying attention.

          How do you suppose they get more clients by taking bad care of your money? Great referrals of how bad you are?

  12. What’s his advice for someone without a job, whose career was prematurely cut short and got cheated out of money?

    • That’s a loaded question if I’ve ever seen one! Still, I’ll bite.

      I would say that the advice is the same, except that person needs to worry first about getting their income up. You can’t do any of those things without money. Check out Dave Ramsey’s 7 Baby Steps, they are very similar to the author of Dilbert’s list, and they don’t change based on circumstances. Neither should Scott Adams’ list.

  13. Two other things I’d like to add to this that most people don’t know.

    1) Get tax software. If you have to, pay for it, but there is software such as Studio Tax for Canadians that is legitimately free for use (sorry, rest of the world…I don’t know of any other examples). There are often deductions and things you can claim just by using the software that you may not know about otherwise.

    2) Visit your library. On occasion, tax planners and preparers offer free seminars at libraries as a means of generating business. You might find your tax planner there, or at least get a few pointers along the way.

  14. Thanks Matt for this round up! It’s a great short-list of rules, clear and direct advice within less than 150 words. Without any special situation, anyone can implement this framework.

  15. Read the intelligent investor by Benjamin Graham (Buffets Mentor) and before you buy any funds remember if you buy an index fund you have to accept that you will be committed to staying with dog shares such as enron / tesco till the bitter end.

    One of my IT’s (Investment companies for the USA) read the writing on the wall and dumped tesco before then crash no FTSE 100 index fund is ever going to over take it now just from that one stock pick.

  16. Not strictly financial, but something important that goes along with making a will. Make a living will a part of your financial will. Otherwise your savings may be drained at end of life by persons/entities seeking to keep you alive at all costs. If that’s something you want, fine. But be aware that it happens.

  17. These are time tested advice that every one should apply and implement in their own lives.

  18. This is a very good advice. I do make some financial plan for my money, but sometimes I fail to stick on it 🙁

    But thanks anyway for the list 🙂

  19. Thank you Matt for summarizing the Adams Book. Actually speaking, these are great point. And of course the first point is very important “will” to do it.

  20. I’m going to be buying a home in a few months. I need to have a bigger place to raise my family. I’m going to have to take out a home loan, but I have obviously never done this before. I want to talk to a financial adviser before I do anything. That way, I can know exactly what I am getting into.