March 23, 2023

Off the Shelf: ‘Pound Foolish’ Eyes Problems of Personal Finance Advice

Ms. Olen writes that the “financial therapy movement,” for all of its flaws, “has hit on one universal truth: When it comes to money, the vast majority of us are nuts. Bonkers.” She counts some of the ways: “We don’t open our 401(k) statements. We ‘forget’ to pay our bills or file our taxes until the last minute.” Financial literacy is alarmingly low. Many of us don’t budget at all.

With a flood of financial advice available on the Internet and on television, and through books and newspapers, what’s the disconnect? Aren’t we listening?

The problem, Ms. Olen writes, is that “most of the financial advice published and dished out by the truckload is useless” — that it is simply “oblivious to the messiness of the human condition.”

What most advice fails to factor in — and what we often choose to overlook ourselves — are the costly realities of things like job loss, protracted unemployment, medical bankruptcy and high-interest debt. Even when we do save, plummeting interest rates, falling home prices and other economic events imperil our best efforts.

A former personal finance columnist for The Los Angeles Times, Ms. Olen uses as examples people who are desperate for help with managing their money. These include a real estate investor whose combination of bad luck, unemployment and poor decision-making left her in foreclosure. There is also a commercial pilot whose pension was cut and who invested in real estate that ended up plummeting in value.

Desperation, fear and insecurity can be a salesperson’s best friend. Ms. Olen learns how lucrative it is to sell financial services to the elderly, many of them terrified of outliving their savings. A 2009 AARP survey found that nearly one in 10 people over 55, or about 5.9 million Americans, had attended a free financial seminar in the last three years.

At the World MoneyShow, an annual event in Orlando, 80 percent of attendees were over 55. The author writes that “a panicked baby boomer is their best customer.”

And while Ms. Olen roundly attacks the myth that women are too emotional or ignorant to handle money well, she notes that they often lack confidence in their money management skills. Women also live longer than men and earn less. Saving more money, as women are exhorted to do, isn’t the issue, Ms. Olen says: “How they should do this with a lesser income that’s expected to do more goes unsaid.”

Unusual, and refreshing, is her inclusion of so many women’s voices throughout the book, such as the writer Jane Bryant Quinn; the financial adviser Manisha Thakor, the labor economist Teresa Ghilarducci, and Elizabeth Warren, recently elected to the Senate from Massachusetts.

One woman who comes in for some scathing treatment is the best-selling financial adviser Suze Orman, whom Ms. Olen criticizes as offering “financial platitudes” and making huge amounts of money by telling others to be frugal. Ms. Olen writes that “Orman’s supposed wisdom often contradicts itself,” and that her affiliations with companies like FICO and Lending Tree raise questions about the impartiality of her advice.

She criticizes many other financial gurus, saying they have provided unhelpful or confusing advice. These include Robert Kiyosaki, who in “Rich Dad, Poor Dad” referred to investments that “may have returns of 100 percent to infinity,” and the television personality Jim Cramer, whom the author describes as “a sweating and howling man” and who once declared that “Bear Stearns is not in trouble!” shortly before it collapsed.

Even good investing advice is often unhelpful, Ms. Olen says, because millions of Americans have saved so little money. For people who do have enough money to invest, the ability of financial services firms to charge high fees, unchallenged, is abetted by low rates of financial literacy. Many investors are unwilling to question glowing promises of double-digit returns or to read carefully the small print on a mutual fund statement. Our overly optimistic expectations of investment performance too often meet the reality of little professional oversight for all but the wealthiest.

While we know intellectually that we need to save and invest for our future, our ability to do so varies enormously, Ms. Olen points out.

“Between 1979 and 2007, the average after-tax income for the top 1 percent of earners in the economy soared by 281 percent,” she writes. “The top 20 percent would see their incomes increase by 95 percent. The middle fifth? A mere 25 percent.”

THE solutions offered by the personal finance world have been unrealistic, she says, contending that “the increasing problem Americans were having keeping up financially was not viewed as a social justice problem, but as a knowledge and smarts problem that could be solved on an individual basis, one investor at a time.”

She’s clear-eyed about the challenge of saving and investing when you simply have nothing to work with, and when decisions about spending are a daily quandary as prices rise and wages remain stagnant or fall.

Ms. Olen describes playing Spent, an online role-playing game in which players are asked to make decisions while earning minimum wages, like those often found in retailing, the nation’s largest source of new jobs. The goal is to get to the next pay cycle without debt.

“I’ve played Spent dozens of times,” she writes, “and I’ve never, ever made it to the end of the month.”

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Bucks Blog: Don’t Mistake Investing Folklore for Personalized Advice

Carl Richards

Carl Richards is a financial planner in Park City, Utah, and is the director of investor education at the BAM Alliance. His book, “The Behavior Gap,” was published this year. His sketches are archived on the Bucks blog.

Most of what we hear about investing isn’t right or wrong. It’s a matter of applying what we hear to our own situation.

When we make investment decisions, they should be tied to our goals. We get into big trouble when we either:

a) Fail to get clear about our goals

b) Invest based on someone else’s goals

I’ve written before about the first situation. But as my friend Tim Maurer says, personal finance is much more personal than it is finance. We need to take the time to be really clear about our goals.

The second situation is a more nuanced situation. It can happen subtly, because a lot of what we hear and do when it comes to investing is basically based on folklore. We end up doing things because other people are doing them, and it leads to big problems.

Here are a few examples:

  • You hear that Harvard’s endowment is buying dairy farms in New Zealand.
  • You hear your wealthy uncle talking about how important it is to own municipal bonds. He has to be really smart because he’s so wealthy, right? And what he’s saying sounds so sophisticated that you think there has to be something there.
  • You hear the cool kids who just got hired out of Stanford’s M.B.A. program talking about investing 100 percent of their 401(k) in stocks. (They must be smart too. They went to Stanford!)

In all three examples, you might be tempted to change your investments based on something you’ve heard from someone else. But while dairy farms, municipal bonds and stocks might be good investments, you aren’t just looking for good investments. You’re looking for good investments that will help you reach your goals.

Your goals are not Harvard’s. Harvard’s goal is based on a different time frame, to build an endowment that will be around forever. You, however, many have goals to meet in 10, 20 or 30 years.

And your goals are not your wealthy uncle’s goals. He’s probably interested in buying municipal bonds because of his ridiculously high tax bracket and the tax-free status of the bonds.

Finally, your goals are probably different from the goals of people who just finished business school. Clearly, these young hotshots feel like they can afford to be extremely aggressive when setting up their retirement portfolios. Most of us are in a different situation.

Your goals are just that: Yours.

It’s not that Harvard, your uncle and the business school graduates are wrong and you’re right. The point is that when it comes to investing your money, the only goals that matter are yours.

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Bucks Blog: Free Advice From Financial Planners in October

Four nonprofit groups are sponsoring a freebie that might come in handy if you’re looking to get your financial life on track: financial planning sessions in two dozen cities during October.

The groups are billing the sessions as free, “no strings attached,” one-on-one meetings with financial professionals — mostly certified financial planners, but also other members of the Financial Planning Association. The planners are volunteering their time and will not distribute business cards or sell financial products or services, according to the organizers.

The groups sponsoring the third annual “Financial Planning Days” events include the Certified Financial Planner Board of Standards, the Financial Planning Association, the Foundation for Financial Planning and the United States Conference of Mayors.

In one-on-one meetings, the financial planners can help answer questions on budgeting, managing credit, getting out of debt, income taxes, homeownership, handling mortgage foreclosures, paying for college, estate planning, insurance and other topics.

Most locations will also offer free workshops on various personal finance topics, like taxes and retirement.

The events begin this week on Thursday and Friday in Miami. The next round occurs Saturday in Baltimore; Columbus, Ohio; Huntington Beach, Calif.; Newark; Oakland, Calif.; Portland, Ore.; and San Diego. The events will be held in other cities later in the month; for a complete list of locations, cities and dates, see

You can register online in advance by clicking on the city where you want to attend, or by calling, toll free, 1-877-861-7826. You can also walk in and register on the day of the event, but preference is given to those who pre-register.

Participants do not have to bring anything, but organizers suggest they might want to bring relevant financial documents and a list of questions to make the most of their time.

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Bucks: Wednesday Reading: A Test For Fetal Gender at 7 Weeks

August 09

LearnVest: A Money-Management Site for Women

LearnVest, a personal finance site for women, has revamped its site, which now includes money-tracking tools and access to financial planners.

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Bucks: Call With Your Money Questions

August 09

LearnVest: A Money-Management Site for Women

LearnVest, a personal finance site for women, has revamped its site, which now includes money-tracking tools and access to financial planners.

Article source: