Is Wall Street hazardous to your wealth?

A Hymn to the Simple Financial Life
Most of us can manage wonderfully, using just a few strategies and tools. That sounds crazy at first. All financial advertising tells us we're incredibly special, needing products that have to be tailored to us personally. A smiling “financial adviser” — a wizard, by implication — stands ready to steer you through the mysteries for a fat, though often hidden, fee.

Pooh. The only wizard that Wall Street resembles is the Wizard of Oz. Out front, a mighty voice and megaphone; behind the screen, an ordinary person trying to impress. Financial firms love to make investing look complicated, so you'll need their help. But all good financial advice springs from the same short list of principles that you already know: Save more, borrow less, pay attention to taxes, invest regularly, diversify, limit risk, and hold down fees. You can do that yourself, without a wizard in sight.

Once you start looking into easy ways of managing money, you'll get two big surprises.

First, you don't need discipline. Save your discipline for your diet, where you'll need it more. You can set up your finances so you'll get rich (or at least rich enough) without thinking about it. You can reach this comfortable goal on an ordinary salary, without hitting the jackpot in business or investing in a lucky stock. You don't even need a financial adviser to help. All the tools exist to do the job properly, while you sleep. You just have to trigger them and then yawn off.

The second surprise is how few things you really need. Sure, there are thousands of financial choices out there in Money World, but when you look at them closely you find that they're mostly fluff. It's a world of copycat mutual funds, funds whose high fees will demolish your returns, seemingly safe (but actually risky) investment annuities, costly insurance policies, mortgages that never end — all salable products, but often stupid and sometimes even deceptive. You even have to be careful with useful investments, such as low-fee mutual funds. There are too many to choose from, especially in your 401(k) or Individual Retirement Account, and it's easy to make mistakes. When you can't investigate every investment, or don't have a basis for choosing, you often put off making any choice at all. Or you don't revisit choices you made ten years ago because — as usual — you have no time.

To cut through the clutter and help you make good, new decisions fast, I've made a short list of things that work. They're not money “basics” — this isn't a kindergarten class. Just because something is simple doesn't make it naïve. In fact, this book's investment strategy is pursued by hundreds of major institutions that invest billions of dollars of workers' pension money and college endowment funds. The strategies for insurance and savings are endorsed by top academics and financial planners.

I'm not proposing a cookie-cutter system, with just one plan for everyone. Life is personal. We all make choices with our money. What I'm saying is that the list to choose from — the good list — is surprisingly small.

There are just two little secrets to personal finance. First, managing money isn't hard. Sure, you can complicate it, but why would you want to? Lots of evidence proves that the simpler things work better than the alternatives touted by the Great American Financial Sales Machine. Once you've cleared your mind of what Wall Street says, you'll hit on the other little secret: You don't need what they're selling! Difficult to believe, I know, but true. You can ignore almost every financial ad you see and everything your friends boast about when they talk money (remember, some of them lie!). This program works better, and with less risk.

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