What Holds You Back?


Scott Adams, creator of Dilbert, wrote a book called “The Way of the Weasel.” In it, he lays out a one-page list for how to manage your money. While I recognize that a book consisting largely of cartoon is an unorthodox place to find sound financial advice, I think he is spot on — if you do these things you will be fine:

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 401(k) to the maximum.
5. Fund your IRA to the maximum.
6. Buy a house if you want to live in a house and can afford it.
7. Put six months 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, a tax issue), hire a fee-based financial planner, not one who charges a percentage of your portfolio.

Done. I get it, and if you are here reading this blog you get it also. OK, so how many items on the list have you actually completed? We’ve done four of the first eight, but I believe we can hit all eight by the end of the year — I’m showing the list to my wife and am going to hold us to it.

If you had shown me this list seven years ago I’d have still been working on getting my credit cards paid off — the rest of the list would have seemed a distant dream.

There are really three challenges facing people:

  • Knowing what to do (easy, see above)
  • Being able to do it, i.e. having money to save, invest or buy a home (hard, a lot of good decision need to be made to get you to this point)
  • Making the decision and taking action to fund retirement. You know what to do, you saved the money, and now you just have to do it (should be easy, but it’s not)

Putting money into 401(k)s and funding IRAs is hard. There are always reasons to not do it, but they really boil down to an unwillingness to take action with money. I’ve spoken to friends about why this might be and the reasons vary, but they usually come down to this one thing: we don’t want to make a bad decision, so we don’t make any decisions at all…which is of course a bad decision.

My new goal with money isn’t to get things perfect, and instead get it mostly right, i.e. Get the nine things on the list done. I believe if we do this, over the next 35 years, we’ll be fine when it comes time to retire.

Fear of making a mistake held us back, but I’d be curious to hear from people where they are being held up in their financial goals?

30 Responses to “What Holds You Back?”

  1. Casey Says:

    Great article… I’ve done all but #1 and #3 (no wife or kids yet)….

    I’m 27 years old and wouldn’t be as financially sound as I am without reading the Total Money Makeover by Dave Ramsey… it’s a must read for EVERYONE.

  2. Mark Says:

    My wife and I are on the way to fulfilling most of this stuff ourselves. But I reminded I need to get that will going. We just paid off all our debt a month ago, fully funded our IRA’s and started a pension plan for my business and have recently paid cash for our latest car.

    A budgeting spreadsheet I made helped us out quite a bit. It’s amazing how helpful budgeting can be to reduce debt and save.
    Here it is if anyone is interested: http://www.ratestate.com/news/index.php/free-budgeting-tool

  3. J Says:

    Since most people are not able to or do not fully fund their 401k and their IRA, it is much better to fund the 401k the minimum to get the employer sponsored match. Then fully fund the IRA (preferably a Roth IRA). Finally fund the 401k with any spare money.

  4. Jason Knight Says:


    What you say is really interesting because you are describing a situation that many people find themselves in: “I’ve got x what should I be doing?â€? X might not be “big pictureâ€? enough to rate space in most books, but it can have an impact on someone’s retirement account. Thanks for the comment!

    With respect to Dave Ramsey, he is great. When people want to know about personal finance that is the book I give them. He is, however, a little severe when it comes to the use of credit cards.

  5. Ron Merritt Says:

    Good set of points. You sure it’s the same Scott Adams?

    When we do financial counseling for young couples planning to get married I boil it down to one point:

    1. Spend less than you earn.

    Most couples are entirely shocked by this revolutionary piece of information and would like to learn some less difficult technique.

    Dave Ramsey gets my vote as well. We had him in for a series of teachings and he was really entertaining as well as on the mark.

  6. F Says:

    I disagree with the advice from J to fund an IRA before a 401k. Funding a 401k is tax deductable while funding an Roth IRA is not. The only advantage of the Roth IRA is that you can remove yor contribution (but not gains) without penalty, but you don’t want to do that anyways. Putting the $3K into a 401k nets you a tax savings of close to $1K immediately.

  7. Carleton Wu Says:

    re: #8- this is *bad* advice. As you approach retirement, you should shift your portfolio towards less volatile investments (money markets, short-term bonds, etc). Otherwise, you risk a bear market at age 64 that leaves you short of retirement funds, and you’ll have to: 1)delay retirement, 2)stay in the volatile market longer to recoup your losses (ie even more risk), or 3)retire on less than you had planned to.
    One rule of thumb is that the percentage of low-volatility investments in your portfolio should be roughly your age. Of course, this also depends on your particular situation- if you inherit a lot of money young, then you ought to be more conservative. If you started saving at age 40, you probably need the higher rate of returns even if you have to live with the volatility. Or, if you’re planning a big purchase (eg a house), shift towards low-volatility investments with the money you’re planning to use as you approach the purchase.

    My parents tried to cheat volatility by riding the 90s stock boom for too long. Result- they’ll have to work a few extra years past when they’d wanted to in order to make up the difference.

  8. Josh Blair Says:


    The initial tax advantage of a traditional IRA is one thing. When you go to use that money at retirement age, you hope that money has earned interest and grown into a sizable amount -BUT you will have to pay taxes on that amount.

    One advantage of a Roth IRA is that although you put money into it after tax, loosing ~28-33% upfront, when you go to use that money at retirement age, you get it taxfree.

    I think a mix of post-tax and pre-tax savings is important.

    Although YMMV.

  9. Jason Knight Says:


    I think that Scott Adams addresses your parents situation in point 9, and says that for retirement purposes…they should pay an expert to make certain they don’t run into problems. The fact that your parents have retirement accounts is great – many people don’t, and will need to depend on social security.

  10. Jim Goss Says:

    Sound advice which I’ve been adhering to for years. Basic premise of what is advocated at http://www.fool.com as well.

    The great things about these “rules” are:

    – Not complicated and generally don’t require you to pay someone to help and you can do it all yourself
    – I sleep very, very well at night, in spite of the fact that I have recently joined the unemployed

  11. Mike Says:

    This is a really good post! Thanks for sharinng with everyone, it really helped me to get the ideas straight in my head and to know someone else has done it gives me hope I can achieve it too.

  12. Priscilla Says:

    Good post, thanks for the info! I think I’m gonna have to follow

    9. If any of this confuses you, or you have something special going on (retirement, college planning, a tax issue), hire a fee-based financial planner, not one who charges a percentage of your portfolio.


  13. Jason Knight Says:

    Here is a link to where you can find a fee based financial planner. However, my personal experience is that once you pay off the credit cards and begin living below your means…half the items on the list fall into place – that second half is a doozy.


    Mike, you can totally do this!

    Scott Adams really did a fantastic job of distilling personal finance down to the fundamentals

  14. Dan Says:

    It’s really nice to have a simple list to look at. Sometimes I think it’s a little too overwhelming to think about getting your money in order because you have no idea where to start.

    Just starting at number 1 and moving up(down?) the list takes away the difficult decisions and give you a nice way to track your progress.

  15. simplbudget Says:

    9 steps is all you need for personal finance…

    Have you ever read Dilbert? It’s even funnier if you actually work in a cubicle. Don’t ask me how I know that, I just do.
    It turns out that Dilbert’s creator, Scott Adams is a pretty good with the personal finance advice. Here’s…

  16. js Says:

    Oooh, wooh I fund my 401k. It’s earning 2.75% now, in stocks and bonds. Oh well, at least it isn’t losing money anymore, like it was last quarter.

    I could earn more in a fricken inc. bank account for heabens sakes, what a fricken joke the 401k is. And the employer contributes nothing, it’s all my own money anyway. It does have real tax advantages, but than an IRA in a CD would have the same tax advantages, and sadly would pay more.

  17. Samuel Peery Says:

    Those are good points although I would switch the order around and get a short-term emergency fund before maxing out the retirement savings. It helps to have specific steps to follow because people are able to focus more. It also makes it that much more vital to have total control over your finances. You need to stop the leaks and become a financial “black belt”. Then you can meet any of these steps with great speed and focus.

  18. Jason Knight Says:


    I think you have a good point about renumbering the actions in the list, and I used to think the same way, for example, I’d start with paying down the credit cards. But what if you just had a kid? Perhaps the “will� and the “life insurance� should be a higher priority. I think that is one of the benefits of such a short list – you can’t go too far wrong doing anything on the list and the flexibility makes it easier to take action.

    Oh, and I’m pro-credit card (if they can be used responsibly).

  19. glen martin Says:

    Actually, I’m not sure that for medium->high income earners a 401K is always a good idea.

    The 401K and other registered vehicles operate under the assumption that future tax rates will be much lower than current. For many, especially comparing working to retirement, this may be a reasonable assumption.

    But consider relatively younger or middle-aged folks with long investment horizons. With a very large federal deficit, underinvested social welfare, and baby boomers leaving the workforce, we seem aimed at a time in which overall tax rates must increase, possibly a lot, in order for the government to continue to deliver social services. If my retirement horizon were 5 years or so this will probably not make much of a difference. In that it is around 20 years, I’m not so comfortable that my tax rate will actually decrease in retirement.

    Another factor is deductible mortgage interest. Living on the San Francisco peninsula I have a rather high mortgage (for a modest house, thank you). Itemizing my deductions against income and working through my return, my marginal tax rate drops pretty dramatically despite having a pretty decent income. In retirement I hope I won’t have this high mortgage, but that really means that I won’t have artifically depressed tax rates either.

    Add it up. The assumption underlying registered plans such as a 401K are not guarateed to hold.

    Despite this, it may still make sense to invest in a 401K, especially if your employer matches your contributions. But I’ve been directing a good portion of my savings to non-registered plans. YMMV

  20. Dogberry Says:

    If 6 months of income is set aside in a Money Market, that is quite a chunk of change ‘out of the market’. If I feel I should have 60% of my money in the stock market shouldn’t that take into account this ‘Emergency Fund’?

    I write this question out in a little more detail on my post Dogberry’s Personal Financial Management Plan – Help Wanted

    I also wonder why so much money should be in a money market fund rather than an investment account that can be liquidated if necessary.

    Money & Investing Dogberry Patch

  21. Silver Sage Says:

    The best advice anyone has given came from Ron Merrit:

    Making more than you spend is my definition of “wealth”. Having said that, let me respond to the dangerous Dilbert list:
    1. Make a will.
    And all the other “death documents”. That is, if you care about the people you leave behind. The best software deal I’ve found is at http://www.nolo.com. When you are done, spend 1/2 hour in legal fees and have it reviewed by an attorney.
    2. Pay off your credit cards.
    Monthly. If always pay them off montly, use cards that give you rebates or air miles. If you don’t always pay them off monthly, don’t use them anymore.
    3. Get term life insurance if you have a family to support.
    Yes, get term life if you don’t care if the policy is in force when you actually die. Universal life, on the other hand, can be kept your whole life and actually has a negative net cost, usually by the 20th year.
    4. Fund your 401(k) to the maximum.
    This depends on so many factors that you should see a financial planner first. For example, it depends how the account is invested, whether you get matching, how much, whether you can control allocation in the account, your current tax bracket. etc.
    5. Fund your IRA to the maximum.
    This also depends. Should you do a Roth or Traditional? Online calculators abound for figuring this out.
    6. Buy a house if you want to live in a house and can afford it.
    Or condo or townhouse.
    7. Put six months expenses in a money market account.
    Far better is an online bank, some of which have checking accounts paying more than moneymarket accounts. See bankrate.com
    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.
    No. No. No. The mix depends on your age, your income, your retirement goals, your current assets, your risk tolerance, your time horizon, etc. Take a look at http://www.assetallocation.org
    9. If any of this confuses you, or you have something special going on (retirement, college planning, a tax issue), hire a fee-based financial planner, not one who charges a percentage of your portfolio.
    Or both. An hourly fee-based planner may be the best bet for getting started. And if the adviser has a good track record and a low % fee, that might be worth it too.

  22. Gabe Says:

    I am surprised that so many are flat out wrong when it comes to saving.

    Simple Formula – Assuming you are Credit Card debt free – if not, then dump all your money into paying them off. It will save you a ton of money in the long run)

    1.) Put just enough in 401(k) to get Employer Match (Where else will you get a 100% return on your investment?)

    2.) Put the rest in Roth until you max it out (It will be tax free in the future. Have you ever known taxes to go down? No, so the safe bet is to lock up as much money as you can in a tax free vehicle)

    3.) Only after Roth is maxed out should you start putting money in 401(k).

  23. man at work Says:

    easy make money…

    Good reading! Makes my boring days at work work more pleasurable.. well.. I’m always bleating about something. Have a nice day!…

  24. anonymous Says:

    what would be better is a money building strategy like: How to maintain sanity while working 2 plus jobs? or How to maintain mental toughness to work overtime to get out of a rut becuase you have been stuck in the same job for 3 years with no promotions!!!

  25. Matilda Says:

    Guess that’s a “mind” building strategy someone is searching!!!!!!

  26. Daniel Says:

    I think there are a few more things to add, people seem to be too focused on 401k/IRA accounts as the source to cure everything retirement related. As with stocks, the biggest games in the long run are made by avoiding the big losses in between:
    – Protect your income potential (get short-term/long-term disability insurance)
    – Make sure you have decent health care coverage
    – Get an umbrella insurance (personal liability coverage)
    – The little things add up (get no-load funds and compare the expense ratios in your portfolio, and diversify(!), compare at http://www.morningstar.com, http://www.smartmoney.com, http://www.kiplinger.com, etc.) and get checking/savings/creditcards with good rates (check fool.com or bankrate.com).
    – When you save money (such as by switching your car insurance), really save it and don’t spend it somewhere else
    And for the non-monetary side:
    – protect your income ability by continuing education
    – stay healthy/treat your body and mind as an investment too (eat well, do sports, eat vitamins, get proper treatment when needed)
    – take your yearly vacation and recharge/reward yourself
    – travel, expand your mind, spend time with friends and family
    – keep your mind fresh by doing/learning things you have not done before
    While those four might costs some money initially, they will save you thousands over the remaining time of your life!!! That should be part of your retirement planning as well!

  27. Howard Marks Says:

    Cool thanks for posting – Scott Adams is clearly a man of many skills!

    For anyone in the UK who has not written their will yet I highly recommend Sure Will, who wrote let you write your will online. It was a bargain at £49 and I was actually able to talk to a human being on the phone, something we don’t often get in this day and age!


  28. morganusvitus Says:

    The site looks great ! Thanks for all your help ( past, present and future !)

  29. RaymonWazerri Says:

    I love what you’e doing!
    Don’t ever change and best of luck.

    Raymon W.

  30. StephenG Says:

    Really nice site you got here.
    I’ll come back more often and check it out.

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