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Pound Foolish: Exposing the Dark Side of the Personal Finance Industry
If you’ve ever bought a personal finance book, watched a TV show about stock picking, listened to a radio show about getting out of debt, or attended a seminar to help you plan for your retirement, you’ve probably heard some version of these quotes:
“What’s keeping you from being rich? In most cases, it is simply a lack of belief.” —SUZE ORMAN, The Courage to Be Rich
“Are you latte-ing away your financial future?” —DAVID BACH, Smart Women Finish Rich
“I know you’re capable of picking winning stocks and holding on to them.” —JIM CRAMER, Mad Money
They’re common refrains among personal finance gurus. There’s just one problem: those and many similar statements are false.
For the past few decades, Americans have spent billions of dollars on personal finance products. As salaries have stagnated and companies have cut back on benefits, we’ve taken matters into our own hands, embracing the can-do attitude that if we’re smart enough, we can overcome even daunting financial obstacles. But that’s not true.
In this meticulously reported and shocking book, journalist and former financial columnist Helaine Olen goes behind the curtain of the personal finance industry to expose the myths, contradictions, and outright lies it has perpetuated. She shows how an industry that started as a response to the Great Depression morphed into a behemoth that thrives by selling us products and services that offer little if any help.
Olen calls out some of the biggest names in the business, revealing how even the most respected gurus have engaged in dubious, even deceitful, practices—from accepting payments from banks and corporations in exchange for promoting certain products to blaming the victims of economic catastrophe for their own financial misfortune. Pound Foolish also disproves many myths about spending and saving, including:
Small pleasures can bankrupt you: Gurus popularized the idea that cutting out lattes and other small expenditures could make us millionaires. But reducing our caffeine consumption will not offset our biggest expenses: housing, education, health care, and retirement. Disciplined investing will make you rich: Gurus also love to show how steady investing can turn modest savings into a huge nest egg at retirement. But these calculations assume a healthy market and a lifetime without any setbacks—two conditions that have no connection to the real world. Women need extra help managing money: Product pushers often target women, whose alleged financial ignorance supposedly leaves them especially at risk. In reality, women and men are both terrible at handling finances. Financial literacy classes will prevent future economic crises: Experts like to claim mandatory sessions on personal finance in school will cure many of our money ills. Not only is there little evidence this is true, the entire movement is largely funded and promoted by the financial services sector.
Weaving together original reporting, interviews with experts, and studies from disciplines ranging from behavioral economics to retirement planning,Pound Foolish is a compassionate and compelling book that will change the way we think and talk about our money.
“What’s keeping you from being rich? In most cases, it is simply a lack of belief.” —SUZE ORMAN, The Courage to Be Rich
“Are you latte-ing away your financial future?” —DAVID BACH, Smart Women Finish Rich
“I know you’re capable of picking winning stocks and holding on to them.” —JIM CRAMER, Mad Money
They’re common refrains among personal finance gurus. There’s just one problem: those and many similar statements are false.
For the past few decades, Americans have spent billions of dollars on personal finance products. As salaries have stagnated and companies have cut back on benefits, we’ve taken matters into our own hands, embracing the can-do attitude that if we’re smart enough, we can overcome even daunting financial obstacles. But that’s not true.
In this meticulously reported and shocking book, journalist and former financial columnist Helaine Olen goes behind the curtain of the personal finance industry to expose the myths, contradictions, and outright lies it has perpetuated. She shows how an industry that started as a response to the Great Depression morphed into a behemoth that thrives by selling us products and services that offer little if any help.
Olen calls out some of the biggest names in the business, revealing how even the most respected gurus have engaged in dubious, even deceitful, practices—from accepting payments from banks and corporations in exchange for promoting certain products to blaming the victims of economic catastrophe for their own financial misfortune. Pound Foolish also disproves many myths about spending and saving, including:
Small pleasures can bankrupt you: Gurus popularized the idea that cutting out lattes and other small expenditures could make us millionaires. But reducing our caffeine consumption will not offset our biggest expenses: housing, education, health care, and retirement. Disciplined investing will make you rich: Gurus also love to show how steady investing can turn modest savings into a huge nest egg at retirement. But these calculations assume a healthy market and a lifetime without any setbacks—two conditions that have no connection to the real world. Women need extra help managing money: Product pushers often target women, whose alleged financial ignorance supposedly leaves them especially at risk. In reality, women and men are both terrible at handling finances. Financial literacy classes will prevent future economic crises: Experts like to claim mandatory sessions on personal finance in school will cure many of our money ills. Not only is there little evidence this is true, the entire movement is largely funded and promoted by the financial services sector.
Weaving together original reporting, interviews with experts, and studies from disciplines ranging from behavioral economics to retirement planning,Pound Foolish is a compassionate and compelling book that will change the way we think and talk about our money.
304 pages, Paperback
First published August 2, 2012
171 people are currently reading
3563 people want to read
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Displaying 1 - 30 of 286 reviews
April 12, 2013
POUND FOOLISH: "You are being robbed by almost everyone involved in managing your personal finances."
YOU: "Wow! Any advice on how we can prevent that from happening to us?"
POUND FOOLISH: "Nope."
THE END.
YOU: "Wow! Any advice on how we can prevent that from happening to us?"
POUND FOOLISH: "Nope."
THE END.
September 29, 2019
Essential reading for anyone who has ever gotten caught up in the Dave Ramsey/suze Orman/rich dad poor dad or whoever the new financial guru is. No one knows what they’re talking about and financial education is not a great remedy to anything. I’m not saying we shouldn’t learn about finance and debt and credit—we all should, but learn from the people not trying to sell you something.
I’m so glad I found this book because I feel like I’ve been screaming this message into the void. I think we all have shame and lots of other weird emotions about our money and these financial gurus know how to manipulate that.
I’m so glad I found this book because I feel like I’ve been screaming this message into the void. I think we all have shame and lots of other weird emotions about our money and these financial gurus know how to manipulate that.
April 6, 2013
I admit that I didn't finish this book, but that is because I thought the half I read was such a huge waste of time. Here's my thoughts on what I did finish:
1. Her reactions to finance "personalities." How is this any different than other personalities out there telling you to do stupid things? If Paula Deen tells you to add a stick of butter to everything and you do it without any other research, then yes, you have only yourself to blame when you tip the scales to obesity. Same thing with Suze Orman and David Bach. If you take their advice without any due diligence on your part, that's your fault.
2. Her anger that the financial services industry wants to make money. Um, really? Everyone is out to make money. Why would you think that your broker or your advisor that tells you to invest in a retirement vehicle that his company manages isn't going to collect some sort of fee for that? The check-out clerk in the grocery line tries to sell you things for crying out loud, why wouldn't your bank teller do the same thing?
3. Preaching to the choir. She is complaining that people who attend finance seminars and listen to radio shows are being convinced to make poor choices. Well, none of those people is going to pick up this book and read it, so essentially, this is the entirely wrong medium to reach the consituency that Olen has in mind. First rule of marketing: determine your audience and choose the best method to reach them. Fail.
4. My biggest issue with the book is that she eviscerates all sorts of savings vehicles, schemes, and advice that try to tell people to be more reasonable. She blames the poor state of personal finances on the fact that we aren't a socialist society and there aren't enough safety nets. I felt like she was preaching that financial prudence was beyond the reach of everyone but the top 1% of earners. I have an issue with that. I'm not saying there aren't issues beyond the responsibility of individuals. I'm not saying that the rise in healthcare costs and the extended poor economy isn't hurting millions of people. But I also think that advice to individuals to take what care they can isn't misplaced. Do what you can individually while you work together to fix the bigger issues in the system.
5. Which brings me to my fifth and final rant. While tearing apart all financial advice being spouted anywhere in popular culture right now, she never offered any solutions or suggestions for change or decent choices. Again, I only read half and maybe that came in the second part, but I never saw her say, "here is what's broken and here's a suggestion of how to fix it." I realize everyone needs to rant sometimes. But I can't stand it when people continuously complain, yet never try to solve the root problem that is causing their issues. Now you are just a waste of space.
So, in order not to be one of those people that complains, yet offers no solution, here is mine: do not read this book. For any reason. Unless you feel you aren't spending enough on healthcare and you need your blood pressure to rise so you can pay for a doctor's visit.
1. Her reactions to finance "personalities." How is this any different than other personalities out there telling you to do stupid things? If Paula Deen tells you to add a stick of butter to everything and you do it without any other research, then yes, you have only yourself to blame when you tip the scales to obesity. Same thing with Suze Orman and David Bach. If you take their advice without any due diligence on your part, that's your fault.
2. Her anger that the financial services industry wants to make money. Um, really? Everyone is out to make money. Why would you think that your broker or your advisor that tells you to invest in a retirement vehicle that his company manages isn't going to collect some sort of fee for that? The check-out clerk in the grocery line tries to sell you things for crying out loud, why wouldn't your bank teller do the same thing?
3. Preaching to the choir. She is complaining that people who attend finance seminars and listen to radio shows are being convinced to make poor choices. Well, none of those people is going to pick up this book and read it, so essentially, this is the entirely wrong medium to reach the consituency that Olen has in mind. First rule of marketing: determine your audience and choose the best method to reach them. Fail.
4. My biggest issue with the book is that she eviscerates all sorts of savings vehicles, schemes, and advice that try to tell people to be more reasonable. She blames the poor state of personal finances on the fact that we aren't a socialist society and there aren't enough safety nets. I felt like she was preaching that financial prudence was beyond the reach of everyone but the top 1% of earners. I have an issue with that. I'm not saying there aren't issues beyond the responsibility of individuals. I'm not saying that the rise in healthcare costs and the extended poor economy isn't hurting millions of people. But I also think that advice to individuals to take what care they can isn't misplaced. Do what you can individually while you work together to fix the bigger issues in the system.
5. Which brings me to my fifth and final rant. While tearing apart all financial advice being spouted anywhere in popular culture right now, she never offered any solutions or suggestions for change or decent choices. Again, I only read half and maybe that came in the second part, but I never saw her say, "here is what's broken and here's a suggestion of how to fix it." I realize everyone needs to rant sometimes. But I can't stand it when people continuously complain, yet never try to solve the root problem that is causing their issues. Now you are just a waste of space.
So, in order not to be one of those people that complains, yet offers no solution, here is mine: do not read this book. For any reason. Unless you feel you aren't spending enough on healthcare and you need your blood pressure to rise so you can pay for a doctor's visit.
April 25, 2013
This is a smart book. But first and foremost, let's get one thing out of the way. Olen isn't going to tell you where to invest your money.
The point of this book isn't to clarify what constitutes good investment advice, or to directly blame the financial services industry for being an army of snake oil salespersons. The point of this book is to make a critical statement about the financial environment we have created for ourselves in the US. In the 1950s and 1960s, we had a system of corporate and government support. Pensions placed the risk burden on corporations to take care of their employees. The G.I. Bill allowed veterans to go to college and buy low-cost housing at fixed and minimal interest rates. But this was followed by a movement toward a self-funded retirement, pushing more financial responsibility on individuals.
In today's financial environment, people are far more empowered than ever before. But empirically, we have a lot more people who don't end up with enough money saved for retirement. The result has enriched the financial services industry but it hasn't done much for most Americans. "The unwillingness or inability of both government and corporations to look at the fees their employees were paying to save their money ensured this; so too, did the culture of commission, where so-called financial advisers made their best money not by offering up the best advice for their customers, but the best advice for their own bottom line."
Whether the reader agrees with Olen's conclusion that consumers need more protection from the financial services industry (as well as themselves), it is certainly clear that a lot of Americans are not faring well in our existing environment. (Olen likens the problem to the obesity epidemic. Whether you believe people are fatter because they are fat and lazy or because our health environment is flawed, everyone can agree we have a societal-level problem.) Olen would like to see more people avoid poverty in their old age. When push comes to shove, she is vague with respect to how she would reform the system. Her main point is that the system itself is broken, and that the financial service industry is making a lot of money while (frequently) not helping those they purport to help.
In that respect, she does tell you who you should not listen to. And plain and simple, the average Joe is ill prepared to face the existing system in several different respects.
1. Consumers aren't saving enough to prepare for retirement. Some analysts are quick to criticize people for not socking away enough for old age, and consequently their problems are of their own making. But Olen makes a strong case that the main culprit here is the growth of wealth inequality in the last 40 years. Buying televisions isn't the issue for most Americans. The problem is the fixed costs, the things it's hard to cut back on. Housing, health care, and education cost the average family 50 percent of discretionary income in 1973, but that figure is up to 75 percent in the 2000s. The rising cost of medical expenses is now the most common route to bankruptcy court. So it's not a simple matter of consumers not setting aside enough money. The middle class has been squeezed.
Most polls show a solid majority of the public believes the current retirement system is going to leave them destitute in old age, and unfortunately, they are mostly right in this assessment. Empirically, shifting responsibility to workers and bullying them from the pulpit to save like professional money managers has encouraged the high income, not the low, to save in individualistic ways and created a whole industry of vendors. Sure, more lower income people have individual retirement accounts than they did in the past, but too many have too little saved because they can't afford it. As for the individual control over the investments they do have, is that really a good thing? That brings us to Olen's next issue.
2. Consumers aren't protected in the marketplace from making poor choices, and many are making poor choices. The meat of the book is really here: the interest of the consumer is very different from the interest of brokers and mutual fund companies, and it's certainly different from most sales people. On the skeezy side, there are the televangelists like Suze Orman, the Rich Dad Poor Dad guy, Jim Cramer and the other yahoos on CNBC. She describes Suze Orman's appeal this way: "personal finance as self-affirmation. Discussions never get very complicated or technical, and are usually as much about feelings as money management." And the advice is typically not very good. Suze Orman has the incentive to sell you her products and her licensed prepaid debit card. Stocks touted on Jim Cramer's show tend not to perform well in the long run. So who can consumers rely on? There are people in the "financial advice arena" that a consumer movement can broadly claim, including Jane Bryant Quinn. But they are not often strictly "independent" either. In the media, where there is personal finance coverage, there is a vast industry of financial services advertising to be appeased. ("How many people are going to watch a program which opens up with Jim Cramer screaming night after night, 'You need to get out of the game!'?" How many financial services firms would advertise on that network?)
Even on the more professional side, there are mutual fund companies and the plan providers, and they don't necessarily have your interests at heart either. Thanks to the magic of compound interest, an additional 1 percent of fees and expenses can reduce your account balance at retirement by a substantial amount -- in the hundreds of thousands of dollars, if your contributions are high enough. "Think your 401(k) provider is offering up the best of the mutual funds? Well, sometimes that is true. But it's just as likely a mutual fund company has agreed to take over a portion of the administrative fees on the funds and, in return, the record keeper lists their products in front of the 401(k) captive audience." In effect, 401(k) plan providers are bookies. They don't necessarily get a larger cut if consumers pick winning portfolios. Instead, they have the incentive to steer consumers to high-cost active management over lower-cost and more efficient funds. And most consumers don't pay close enough attention to how large a cut they lose, in no small part because the mutual fund world is confusing.
John Bogle, the force behind Vanguard's low-cost index funds, has said that the mutual fund and retirement industries collect so much money in fees that the entire system is a "train wreck".
But fees are only one piece of the puzzle. She cites studies that show that brokers frequently don't correct client investment biases, and they almost always recommend massive portfolio changes, even if none is called for. And consumers can't even tell if they are getting bad advice. We are sheep at a slaughterhouse, and we don't even realize it.
What about investors who avoid brokers, commissioned salespeople and other shysters? The news isn't always great for them either. She cites the work of Barber and Odean, behavioral finance experts who report that individual investors (1) underperform standard benchmarks (e.g., a low cost index fund), (2) sell winning investments while holding losing investments (the "disposition effect"), (3) are heavily influenced by limited attention and past return performance in their purchase decisions, (4) engage in naive reinforcement learning by repeating past behaviors that coincided with pleasure while avoiding past behaviors that generated pain, and (5) tend to hold undiversified stock portfolios. Yikes!
Most people will not beat the stock market indexes. Period. We are underinformed and overconfident. "Only half of Americans aged fifty and above have an accurate understanding of how compound interest and inflation interact with their savings." But brokerages are happy to entice people to do their own trading. "Capital One is offering lessons in financial literacy [to students]. Meanwhile, the company is notorious for targeting the least credit-worthy among us for high-interest, high-fee credit cards."
"When it comes to money, the vast majority of us are nuts. Bonkers. Batshit crazy. We are natural born fuckups. We engage in so many self-defeating behaviors it's impossible to list them all. We don't open our 401(k) statements. We 'forget' to pay our bills or file our taxes until the last minute. We spend decades trading individual stocks, convinced the next one is going to be 'it.' We got so into extreme couponing that people like childless Lauren Liggett of Carthage, Missouri, bought thirty cans of infant formula because, thanks to coupons she saved up, she earned a $1.22 store credit on each container she purchased."
In sum, we have salespeople who aren't properly incentivized to care for their clients' welfare. We have a system that puts consumers at a significant informational disadvantage when it comes to understanding what the products they are buying. And the stakes - the lifetime savings of pretty much every American - couldn't be higher. If you add consumers' cognitive biases to the equation, it's something of a perfect storm.
But for Olen, the bad news doesn't end there.
3. Even for those consumers who do save and make "safe" investment decisions, there are still no guarantees of success, since the market can't be predicted. Olen keeps coming back to emphasize that the past can be a poor indicator of the future. Stocks don't always win. Bonds don't always win. Gold doesn't always win. Real estate can have a bubble too. Either in the short-term or the longer-term. During the thirty-year period between 1981 and 2011, in the United States, bonds beat stocks by almost a full percentage point.
Bad things did happen to good savers and investors in the 2000s. No amount of personal initiative and savvy could guarantee anyone an exemption from broader negative economic and social trends.
This isn't to say that she is advocating that we all put our money in our mattresses. But she is telling us that there is no such thing as a sure thing. Anything that promises returns of 7 percent, even in the long run, is high risk. If anything, she seems to agree with Barber and Odean, who say that we'd be better off placing our funds in an assiduously diversified set of index funds (with low management fees) and leaving it alone.
All told, I really enjoyed this book, considering how freaking depressing it all is. It's a quick read, and for any of her claims she offers copious citations. I'm sure Olen has burned a few bridges. I'm sure she will be called a socialist. But I'm equally sure that this book is sitting on a few bookstore shelves alongside a lot of much crappier books.
The point of this book isn't to clarify what constitutes good investment advice, or to directly blame the financial services industry for being an army of snake oil salespersons. The point of this book is to make a critical statement about the financial environment we have created for ourselves in the US. In the 1950s and 1960s, we had a system of corporate and government support. Pensions placed the risk burden on corporations to take care of their employees. The G.I. Bill allowed veterans to go to college and buy low-cost housing at fixed and minimal interest rates. But this was followed by a movement toward a self-funded retirement, pushing more financial responsibility on individuals.
In today's financial environment, people are far more empowered than ever before. But empirically, we have a lot more people who don't end up with enough money saved for retirement. The result has enriched the financial services industry but it hasn't done much for most Americans. "The unwillingness or inability of both government and corporations to look at the fees their employees were paying to save their money ensured this; so too, did the culture of commission, where so-called financial advisers made their best money not by offering up the best advice for their customers, but the best advice for their own bottom line."
Whether the reader agrees with Olen's conclusion that consumers need more protection from the financial services industry (as well as themselves), it is certainly clear that a lot of Americans are not faring well in our existing environment. (Olen likens the problem to the obesity epidemic. Whether you believe people are fatter because they are fat and lazy or because our health environment is flawed, everyone can agree we have a societal-level problem.) Olen would like to see more people avoid poverty in their old age. When push comes to shove, she is vague with respect to how she would reform the system. Her main point is that the system itself is broken, and that the financial service industry is making a lot of money while (frequently) not helping those they purport to help.
In that respect, she does tell you who you should not listen to. And plain and simple, the average Joe is ill prepared to face the existing system in several different respects.
1. Consumers aren't saving enough to prepare for retirement. Some analysts are quick to criticize people for not socking away enough for old age, and consequently their problems are of their own making. But Olen makes a strong case that the main culprit here is the growth of wealth inequality in the last 40 years. Buying televisions isn't the issue for most Americans. The problem is the fixed costs, the things it's hard to cut back on. Housing, health care, and education cost the average family 50 percent of discretionary income in 1973, but that figure is up to 75 percent in the 2000s. The rising cost of medical expenses is now the most common route to bankruptcy court. So it's not a simple matter of consumers not setting aside enough money. The middle class has been squeezed.
Most polls show a solid majority of the public believes the current retirement system is going to leave them destitute in old age, and unfortunately, they are mostly right in this assessment. Empirically, shifting responsibility to workers and bullying them from the pulpit to save like professional money managers has encouraged the high income, not the low, to save in individualistic ways and created a whole industry of vendors. Sure, more lower income people have individual retirement accounts than they did in the past, but too many have too little saved because they can't afford it. As for the individual control over the investments they do have, is that really a good thing? That brings us to Olen's next issue.
2. Consumers aren't protected in the marketplace from making poor choices, and many are making poor choices. The meat of the book is really here: the interest of the consumer is very different from the interest of brokers and mutual fund companies, and it's certainly different from most sales people. On the skeezy side, there are the televangelists like Suze Orman, the Rich Dad Poor Dad guy, Jim Cramer and the other yahoos on CNBC. She describes Suze Orman's appeal this way: "personal finance as self-affirmation. Discussions never get very complicated or technical, and are usually as much about feelings as money management." And the advice is typically not very good. Suze Orman has the incentive to sell you her products and her licensed prepaid debit card. Stocks touted on Jim Cramer's show tend not to perform well in the long run. So who can consumers rely on? There are people in the "financial advice arena" that a consumer movement can broadly claim, including Jane Bryant Quinn. But they are not often strictly "independent" either. In the media, where there is personal finance coverage, there is a vast industry of financial services advertising to be appeased. ("How many people are going to watch a program which opens up with Jim Cramer screaming night after night, 'You need to get out of the game!'?" How many financial services firms would advertise on that network?)
Even on the more professional side, there are mutual fund companies and the plan providers, and they don't necessarily have your interests at heart either. Thanks to the magic of compound interest, an additional 1 percent of fees and expenses can reduce your account balance at retirement by a substantial amount -- in the hundreds of thousands of dollars, if your contributions are high enough. "Think your 401(k) provider is offering up the best of the mutual funds? Well, sometimes that is true. But it's just as likely a mutual fund company has agreed to take over a portion of the administrative fees on the funds and, in return, the record keeper lists their products in front of the 401(k) captive audience." In effect, 401(k) plan providers are bookies. They don't necessarily get a larger cut if consumers pick winning portfolios. Instead, they have the incentive to steer consumers to high-cost active management over lower-cost and more efficient funds. And most consumers don't pay close enough attention to how large a cut they lose, in no small part because the mutual fund world is confusing.
John Bogle, the force behind Vanguard's low-cost index funds, has said that the mutual fund and retirement industries collect so much money in fees that the entire system is a "train wreck".
But fees are only one piece of the puzzle. She cites studies that show that brokers frequently don't correct client investment biases, and they almost always recommend massive portfolio changes, even if none is called for. And consumers can't even tell if they are getting bad advice. We are sheep at a slaughterhouse, and we don't even realize it.
What about investors who avoid brokers, commissioned salespeople and other shysters? The news isn't always great for them either. She cites the work of Barber and Odean, behavioral finance experts who report that individual investors (1) underperform standard benchmarks (e.g., a low cost index fund), (2) sell winning investments while holding losing investments (the "disposition effect"), (3) are heavily influenced by limited attention and past return performance in their purchase decisions, (4) engage in naive reinforcement learning by repeating past behaviors that coincided with pleasure while avoiding past behaviors that generated pain, and (5) tend to hold undiversified stock portfolios. Yikes!
Most people will not beat the stock market indexes. Period. We are underinformed and overconfident. "Only half of Americans aged fifty and above have an accurate understanding of how compound interest and inflation interact with their savings." But brokerages are happy to entice people to do their own trading. "Capital One is offering lessons in financial literacy [to students]. Meanwhile, the company is notorious for targeting the least credit-worthy among us for high-interest, high-fee credit cards."
"When it comes to money, the vast majority of us are nuts. Bonkers. Batshit crazy. We are natural born fuckups. We engage in so many self-defeating behaviors it's impossible to list them all. We don't open our 401(k) statements. We 'forget' to pay our bills or file our taxes until the last minute. We spend decades trading individual stocks, convinced the next one is going to be 'it.' We got so into extreme couponing that people like childless Lauren Liggett of Carthage, Missouri, bought thirty cans of infant formula because, thanks to coupons she saved up, she earned a $1.22 store credit on each container she purchased."
In sum, we have salespeople who aren't properly incentivized to care for their clients' welfare. We have a system that puts consumers at a significant informational disadvantage when it comes to understanding what the products they are buying. And the stakes - the lifetime savings of pretty much every American - couldn't be higher. If you add consumers' cognitive biases to the equation, it's something of a perfect storm.
But for Olen, the bad news doesn't end there.
3. Even for those consumers who do save and make "safe" investment decisions, there are still no guarantees of success, since the market can't be predicted. Olen keeps coming back to emphasize that the past can be a poor indicator of the future. Stocks don't always win. Bonds don't always win. Gold doesn't always win. Real estate can have a bubble too. Either in the short-term or the longer-term. During the thirty-year period between 1981 and 2011, in the United States, bonds beat stocks by almost a full percentage point.
Bad things did happen to good savers and investors in the 2000s. No amount of personal initiative and savvy could guarantee anyone an exemption from broader negative economic and social trends.
This isn't to say that she is advocating that we all put our money in our mattresses. But she is telling us that there is no such thing as a sure thing. Anything that promises returns of 7 percent, even in the long run, is high risk. If anything, she seems to agree with Barber and Odean, who say that we'd be better off placing our funds in an assiduously diversified set of index funds (with low management fees) and leaving it alone.
All told, I really enjoyed this book, considering how freaking depressing it all is. It's a quick read, and for any of her claims she offers copious citations. I'm sure Olen has burned a few bridges. I'm sure she will be called a socialist. But I'm equally sure that this book is sitting on a few bookstore shelves alongside a lot of much crappier books.
February 18, 2013
Pound Foolish is an excellent overview of the American personal finance system, from the "gurus" who help, to the companies that service, and all the scams in between. This book also puts all the analysis into a historical context. Helaine Olen clearly took the time to do the research and weave it all together to explain where everything happened and where it is going. The author shows the rise of Ramsey, Orman, and a host of other personal finance darlings, but also where they go wrong, where their conflicts of interest lay, why they sometimes don't follow what they preach, and how they became what they are. A significant portion of the book is devoted to unraveling how the financial companies have a stake in consumer education, or ignorance. Pound Foolish doesn't offer any guidance on what to do, this isn't that kind of book, but it does explain how consumers got to where they are now. With the fall of defined pensions, very complex finance products, and lack of a strong social safety net, it is little wonder why many look back on the 1950's and 1960's and wonder where everything started to go wrong. This book will help with that.
September 6, 2014
This book can be a little all over the place and hyperbolic. But the author does a good job of pointing out how personal finance advisors a) often don't have your best interests at heart, b) may in fact be working against you to enrich themselves, and most importantly c) are disregarding political and social reasons for money ills and making it all about you and your behavior. 401(k)s are not good substitutes for the more stable pension plans that came before. Your daily latte is probably not having the same detrimental impact on your finances as a shitty salary, unexpected health crises, or predatory lending practices. Income inequality, the lack of class mobility, and fewer government safety nets have more to do with our collective financial woes than our spending habits or savings rates. She writes effectively about how the personal finance industry has taken on the tropes of self-help, but helping yourself is less effective in this case than demanding political change.
June 4, 2013
There's an aside that the author makes a couple of times that would have been a much more interesting thesis for a book: that the problem with the personal finance industry is that it focuses people on individual action, when the financial problems causing the biggest problems in society today require a collective response. The book is best when it talks about how popular culture's/the media's focus on personal finance distracts from financial issues with a bigger impact on many people's lives, like wage stagnation and increases in the cost of higher education and healthcare that far exceed inflation. I agree that the media and personal finance industry has focused more on THAT the personal savings rate has fallen than WHY the personal savings rate has fallen, and that too much focus is on how to work within the existing systems (e.g., how to use an IRA to save for retirement), and not whether the system is structured fairly (e.g., to what degree the risk should be on the individual vs. shared).
That said, I think she came down too far on the side of saying that the personal finance industry is entirely evil. For example, at one point, she has an anecdote of someone who "followed the rules", only to have their entire emergency fund and retirement savings wiped out by a health issue. She seems to say that the emergency fund and other savings were worthless, when I wonder what situation that person would have been in if they *hadn't* had those savings. You can think that and still, at the same time, feel we need health care reform to prevent medical issues from causing people to go into bankruptcy.
Her "the personal finance industry is entirely is bad" thesis seems to stem from a view that you have a boolean choice of Dave Ramsey vs. A More Helpful Government Program. Seen that way, yes, personal finance is inadequate for many problems. My view has always been that it's more Dave Ramsey (or Suze Orman or whoever) against the Buy! Buy! Buy! Consumerism that's invading our every waking minute. I think it's good to have someone out there attempting to counterbalance the short-term pleasure impulses of consumerism with pleas for longer-term thinking and delayed gratification. A person with a small emergency fund and their credit cards paid off may not be as well off as their father, who grew up in a fairer economy, but he's still much better off than his neighbor who is in debt, and that's a start.
That said, I think she came down too far on the side of saying that the personal finance industry is entirely evil. For example, at one point, she has an anecdote of someone who "followed the rules", only to have their entire emergency fund and retirement savings wiped out by a health issue. She seems to say that the emergency fund and other savings were worthless, when I wonder what situation that person would have been in if they *hadn't* had those savings. You can think that and still, at the same time, feel we need health care reform to prevent medical issues from causing people to go into bankruptcy.
Her "the personal finance industry is entirely is bad" thesis seems to stem from a view that you have a boolean choice of Dave Ramsey vs. A More Helpful Government Program. Seen that way, yes, personal finance is inadequate for many problems. My view has always been that it's more Dave Ramsey (or Suze Orman or whoever) against the Buy! Buy! Buy! Consumerism that's invading our every waking minute. I think it's good to have someone out there attempting to counterbalance the short-term pleasure impulses of consumerism with pleas for longer-term thinking and delayed gratification. A person with a small emergency fund and their credit cards paid off may not be as well off as their father, who grew up in a fairer economy, but he's still much better off than his neighbor who is in debt, and that's a start.
December 21, 2013
Fantastic. And important. It kills me that people don't educate themselves enough about this. This is a deeply pleasurable excoriation (yes, OK, sounds gross) of the inherently flawed personal finance industry. That is, the commodification of... money? The way that a combination of 1970s self-help trends with American individualism and the near-constant attack on and retreat of any form of social welfare in America has led to everyone (1) being a lot poorer, and (2) feeling like it's all their fault.
Featuring the work of many of my fave people in both economics research (Sendhil Mullainathan, Richard Thaler, Antoinette Schoar) and politics (Elizabeth Warren), with cameos from some other hell-raising notables (Barbara Ehrenreich, Cornel West), the author, Helaine Olen, builds up a strong argument: as employer-provided pensions disappeared from American industry, as Social Security dried up, and as everything got replaced by 401ks and Individual Retirement Accounts (IRAs), two things happened. First, disguised as deeply American individualism, people were encouraged to "take responsibility" over their finances: saving diligently, investing wisely, and reaping the benefits. This is the old "if you're poor, it's your fault" argument. Second, an entire industry of quacks and charlatans was established to guide us and judge us on how we're not saving enough, or investing in the right way, or whatever.
And, meanwhile, the elephant in the room: that even the most Frugal Angela's diligent 401k would never have survived the tanking stock market of 2008, or the spasms of a contracting American economy (with its attendant job loss and slow recovery). I especially loved Olen's chapter on "women and money": the story women are told is that they're highly emotional, irresponsible spenders who can't possibly understand complex financial products like an annuity, and must thus be guided through the personal finance thicket by a (male) adviser (for a price, of course). Meanwhile, all the data points to the opposite: men are more emotional about their money, trading stocks based on feelings, spending more, and so on. The real reason women often have less money than men (as Olen states, but SHOULD BE OBVIOUS): THEY EARN LESS THAN MEN FOR THE SAME WORK. For the love of God. Olen's blunt, obvious prescription: instead of telling women they're too weepy to understand an index fund, maybe we should be lobbying for gender equality and eliminating the gender wage gap!?
And there is more of this ilk. So, ultimately, a great book for this female economist called Frugal Angela, but also a great book for broader social issues of politics, income inequality, and our future. Oh yeah, and the only safe bet in navigating these stormy economic seas: buy bonds.
Featuring the work of many of my fave people in both economics research (Sendhil Mullainathan, Richard Thaler, Antoinette Schoar) and politics (Elizabeth Warren), with cameos from some other hell-raising notables (Barbara Ehrenreich, Cornel West), the author, Helaine Olen, builds up a strong argument: as employer-provided pensions disappeared from American industry, as Social Security dried up, and as everything got replaced by 401ks and Individual Retirement Accounts (IRAs), two things happened. First, disguised as deeply American individualism, people were encouraged to "take responsibility" over their finances: saving diligently, investing wisely, and reaping the benefits. This is the old "if you're poor, it's your fault" argument. Second, an entire industry of quacks and charlatans was established to guide us and judge us on how we're not saving enough, or investing in the right way, or whatever.
And, meanwhile, the elephant in the room: that even the most Frugal Angela's diligent 401k would never have survived the tanking stock market of 2008, or the spasms of a contracting American economy (with its attendant job loss and slow recovery). I especially loved Olen's chapter on "women and money": the story women are told is that they're highly emotional, irresponsible spenders who can't possibly understand complex financial products like an annuity, and must thus be guided through the personal finance thicket by a (male) adviser (for a price, of course). Meanwhile, all the data points to the opposite: men are more emotional about their money, trading stocks based on feelings, spending more, and so on. The real reason women often have less money than men (as Olen states, but SHOULD BE OBVIOUS): THEY EARN LESS THAN MEN FOR THE SAME WORK. For the love of God. Olen's blunt, obvious prescription: instead of telling women they're too weepy to understand an index fund, maybe we should be lobbying for gender equality and eliminating the gender wage gap!?
And there is more of this ilk. So, ultimately, a great book for this female economist called Frugal Angela, but also a great book for broader social issues of politics, income inequality, and our future. Oh yeah, and the only safe bet in navigating these stormy economic seas: buy bonds.
May 11, 2013
Financial journalist Helaine Olen is not very happy with the "personal finance" industry. "Personal finance" in this context includes all those who write (Suze Orman et al), advise (financial planners), entertain (Jim Cramer and his Mad Money screamfest), manage money (Fidelity and all the other fund managers) for individuals, and so forth. The idea is to build wealth for retirement, kids' college, buying a house -- in short, it's an industry that is central to the quality of people's material well-being. The short version of Olen's diagnosis of this industry's problem is that all these people are in it for the money AND that because they are in it for the money, they will steer you wrong and rob you blind if it serves their interests. OK, so how is that different than dealing with many other businesses, such as buying a car or selecting a cell phone provider? She doesn't actually directly answer that question in a comparative way, but she suggests several possible reasons:
1) finance is unusually complicated, and the industry tries to make things even more complicated by making their products "non-transparent" through contract fine print and financial babble;
2) the time horizons are really long, and people are not good about making sacrifices now that may not pay off for years;
3) financial markets are inherently chaotic and unpredictable, and so our human tendency is to search for comforting answers from witch doctors who claim to be able to predict the future;
4) the game has been rigged because the industry controls such huge wealth -- vastly more than even such powerful industries as auto manufacturers and telecommunications companies -- that it uses that wealth to buy politicians and prevent effective regulation.
5) we don't make good decisions when we're fearful and the economic tides are moving against us. Try being rational with every purchase decision when you're stressed by living paycheck to paycheck, your health costs are soaring, you can't afford to send your kids to college, you have no pension, and your income is lower now than it was 10 years ago.
Needless to say, Olen does not have to look far for examples of how the industry does us wrong. Suze Orman blithely told her fans that real estate was the best investment they would ever make in their lives, and then when the housing crash occurred, said "Oops, I was wrong. But hey, I've got this new book you should buy." Managers of actively managed funds (as opposed to market index funds), on average under-perform the market, year after year -- but relentlessly promote their high-expense services just the same. 401K fund plans for employees offer high expenses combined with limited fund selection -- and the reason that employers choose such poor fund plan providers is that they offer cheaper plan administration fees to the employers themselves! And so it goes. If you have been following this stuff, you won't be shocked. If you have NOT been paying attention through the last couple of market crashes, you will indeed be shocked.
So what's distinctive about the author's analysis that you will not hear from every other critic of the financial industry? For me, it was two things.
First, she points out that the personal finance industry tries to lay the responsibility for financial failures and successes almost entirely at the feet of the individual. It's a case of a "moralizing minority" telling everyone else that it's their fault that, over the last 25 years in the US, private employer pensions have largely disappeared, median incomes have stagnated (and actually declined for the lowest fifth of the population), private health care and college tuition costs have grown at several times the rate of inflation, and wealth and income inequality has become the absolute worst in the developed world. Not only is there an elephant in the room, but the elephant has died and its rotting carcass is stinking up the entire neighborhood.
But still the moralists have barely noticed. Instead, they point to the fact that too many people feel entitled to their daily Starbucks latte. Olen argues that having people give up lattes isn't going to solve the massive public policy fiascos that underlie these long-term trends in US society. This situation needs a collective solution. In the grand scheme of things, moral exhortation to individuals isn't going to make much of a difference. However, Olen does not devote much ink to informing the reader what kinds of public policy solutions she does think are required, let alone how to actually get them enacted.
Second, Olen says that there is at best a very weak relationship between making people more informed about financial matters and having them actually make better decisions. Of course, the fact that people often seek their information from salespeople in the financial business is obviously a part of the problem. Conflict of interest seldom leads to happy outcomes. But there is an even bigger problem. People are people, and will continue to fall into all the emotional traps that human beings have always embraced. They will continue to fall for well-packaged hucksters like Jim Cramer and to stick with their long-time financial planner who has sold them the whole life insurance policy they don't need. They will continue to fearfully hold too much money in cash and invest too little in assets that can produce income and capital gains. They will continue to save too little for retirement. But isn't this just putting the blame back on the individual, the same "too many Starbucks lattes" fallacy that she debunked earlier? I don't think this is a contradiction with Olen's point #1. I believe it just makes it all the more obvious why it's the unusual individual who is able to overcome those larger forces. Knowledge alone isn't enough. It takes a lot of emotional self-control. More important (back to point #1), it takes collective action to solve a collective problem.
1) finance is unusually complicated, and the industry tries to make things even more complicated by making their products "non-transparent" through contract fine print and financial babble;
2) the time horizons are really long, and people are not good about making sacrifices now that may not pay off for years;
3) financial markets are inherently chaotic and unpredictable, and so our human tendency is to search for comforting answers from witch doctors who claim to be able to predict the future;
4) the game has been rigged because the industry controls such huge wealth -- vastly more than even such powerful industries as auto manufacturers and telecommunications companies -- that it uses that wealth to buy politicians and prevent effective regulation.
5) we don't make good decisions when we're fearful and the economic tides are moving against us. Try being rational with every purchase decision when you're stressed by living paycheck to paycheck, your health costs are soaring, you can't afford to send your kids to college, you have no pension, and your income is lower now than it was 10 years ago.
Needless to say, Olen does not have to look far for examples of how the industry does us wrong. Suze Orman blithely told her fans that real estate was the best investment they would ever make in their lives, and then when the housing crash occurred, said "Oops, I was wrong. But hey, I've got this new book you should buy." Managers of actively managed funds (as opposed to market index funds), on average under-perform the market, year after year -- but relentlessly promote their high-expense services just the same. 401K fund plans for employees offer high expenses combined with limited fund selection -- and the reason that employers choose such poor fund plan providers is that they offer cheaper plan administration fees to the employers themselves! And so it goes. If you have been following this stuff, you won't be shocked. If you have NOT been paying attention through the last couple of market crashes, you will indeed be shocked.
So what's distinctive about the author's analysis that you will not hear from every other critic of the financial industry? For me, it was two things.
First, she points out that the personal finance industry tries to lay the responsibility for financial failures and successes almost entirely at the feet of the individual. It's a case of a "moralizing minority" telling everyone else that it's their fault that, over the last 25 years in the US, private employer pensions have largely disappeared, median incomes have stagnated (and actually declined for the lowest fifth of the population), private health care and college tuition costs have grown at several times the rate of inflation, and wealth and income inequality has become the absolute worst in the developed world. Not only is there an elephant in the room, but the elephant has died and its rotting carcass is stinking up the entire neighborhood.
But still the moralists have barely noticed. Instead, they point to the fact that too many people feel entitled to their daily Starbucks latte. Olen argues that having people give up lattes isn't going to solve the massive public policy fiascos that underlie these long-term trends in US society. This situation needs a collective solution. In the grand scheme of things, moral exhortation to individuals isn't going to make much of a difference. However, Olen does not devote much ink to informing the reader what kinds of public policy solutions she does think are required, let alone how to actually get them enacted.
Second, Olen says that there is at best a very weak relationship between making people more informed about financial matters and having them actually make better decisions. Of course, the fact that people often seek their information from salespeople in the financial business is obviously a part of the problem. Conflict of interest seldom leads to happy outcomes. But there is an even bigger problem. People are people, and will continue to fall into all the emotional traps that human beings have always embraced. They will continue to fall for well-packaged hucksters like Jim Cramer and to stick with their long-time financial planner who has sold them the whole life insurance policy they don't need. They will continue to fearfully hold too much money in cash and invest too little in assets that can produce income and capital gains. They will continue to save too little for retirement. But isn't this just putting the blame back on the individual, the same "too many Starbucks lattes" fallacy that she debunked earlier? I don't think this is a contradiction with Olen's point #1. I believe it just makes it all the more obvious why it's the unusual individual who is able to overcome those larger forces. Knowledge alone isn't enough. It takes a lot of emotional self-control. More important (back to point #1), it takes collective action to solve a collective problem.
January 30, 2019
It's pretty astonishing how much of the greater personal finance industry is just layers of scams and misleading advice. What makes this book especially good is that it hints at what makes this possible - even stuff like the self-help movement and straight up superstitions. A lot of the profits come from grey area markets that would seem clearly a conflict of interest if explained in plain terms. Underlying all this are regulatory shifts that opened up areas to exploit in a compounding way. One gets the sense that simplification of the financial system would actually be a great thing for most consumers.
Read
November 5, 2021Matt Levine recently described financial literacy as "giving people quizzes about compound interest as a substitute for a decent social safety net." Helaine Olen made the same point ten years earlier. Talking about lattes and avocado toast shifts burden towards the individual and away from issues that might require societal change, like student loan debt or catastrophic medical costs or why women might have a harder time saving for retirement than men! Also there isn't even evidence that financial literacy initiatives work.
The book is very post-Global Financial Crisis, pre-Robinhood, pre-r/wallstreetbets, pre-crypto. It roasts some personal-finance-industrial-complex personalities who are relevant to my dad but not to me. My friends don't need to read this, but that's not a ding against the book or anything.
PS: Did you know that Beth Kobliner, a personal finance commentator who championed the 10-part Sesame Street series For Me, For You, For Later: First Steps to Spending, Sharing, and Saving is also the wife of David E. Shaw, hedge fund billionaire? I'm sure the advice on her website is sound enough, but it's very "do as I say, not as I do." You can read about "Free tools to simplify the FAFSA" from someone who donated "$1 million annually to Harvard, Yale, Princeton, and Stanford and at least $500,000 each to Columbia and Brown" starting a few years before her eldest child applied to college. Or you can read about "How to contend with the high cost of city living," but none of the tips are "marry well," either. ¯\_(ツ)_/¯ While my friends don't need to read this book, they definitely need to read this hilarious New York Magazine profile of Shaw.
The book is very post-Global Financial Crisis, pre-Robinhood, pre-r/wallstreetbets, pre-crypto. It roasts some personal-finance-industrial-complex personalities who are relevant to my dad but not to me. My friends don't need to read this, but that's not a ding against the book or anything.
PS: Did you know that Beth Kobliner, a personal finance commentator who championed the 10-part Sesame Street series For Me, For You, For Later: First Steps to Spending, Sharing, and Saving is also the wife of David E. Shaw, hedge fund billionaire? I'm sure the advice on her website is sound enough, but it's very "do as I say, not as I do." You can read about "Free tools to simplify the FAFSA" from someone who donated "$1 million annually to Harvard, Yale, Princeton, and Stanford and at least $500,000 each to Columbia and Brown" starting a few years before her eldest child applied to college. Or you can read about "How to contend with the high cost of city living," but none of the tips are "marry well," either. ¯\_(ツ)_/¯ While my friends don't need to read this book, they definitely need to read this hilarious New York Magazine profile of Shaw.
October 28, 2019
This was disappointing. Olen does an admirable job of detailing the hazards of the personal finance industry – the self-help gurus that provide faulty advice, the financial advisors that are primarily just trying to sell you stuff to line their own pockets, the entire financial services industry that really only cares about its own profits which are not necessarily correlated with your personal financial security. I agree with much of this analysis. So, caveat emptor (let the buyer beware) is a valuable message to those trying to save for retirement.
But Olen really doesn’t supply any further advice to those trying to navigate through these investment obstacles, other than some vague intimations that since personal financial discipline is hard, and since many people end up making bad decisions, it would therefore be better if the government just took over this responsibility on our behalf.
Each of her chapters critiques a different area where scammers and shysters have harmed consumers, but she doesn’t bother to include a chapter showing how government intervention has likewise failed to live up to its promises. Social Security comes immediately to mind. I for one, would prefer to keep my FICA “contributions,” read a few books, and invest for my own retirement. But Olen doesn’t think I should be allowed this option (or even my own 401k). Since some people make poor decisions, the government “experts” should decide for all of us.
But Olen really doesn’t supply any further advice to those trying to navigate through these investment obstacles, other than some vague intimations that since personal financial discipline is hard, and since many people end up making bad decisions, it would therefore be better if the government just took over this responsibility on our behalf.
Each of her chapters critiques a different area where scammers and shysters have harmed consumers, but she doesn’t bother to include a chapter showing how government intervention has likewise failed to live up to its promises. Social Security comes immediately to mind. I for one, would prefer to keep my FICA “contributions,” read a few books, and invest for my own retirement. But Olen doesn’t think I should be allowed this option (or even my own 401k). Since some people make poor decisions, the government “experts” should decide for all of us.
March 12, 2013
Pound Foolish certainly reinforced my cynicism about the financial services industry. I'd always suspected that the goal of the DIY retirement was not to make the average person financially secure but rather to further enrich those selling us these services. Hagy's examples reinforce that notion. I guess we'll be working until we drop.
October 10, 2019
This book was well-conceived and extremely well-executed. It's organized, researched, and holistic. I wish all the non-fiction books I read were this well-done. I devoured it. I really want everyone to read it and love it.
May 10, 2013
Pound Foolish is an eye-opening book filled with important advice about how to take care of your money. Or at least, how NOT to allow others to fool you into giving your money away. Worth reading, even if you think you already know all about the personal finance. There are some surprising misrepresentations being perpetrated.
The shocking truth behind the book is that Americans are not well educated in how to manage their money. The only ready source of education comes from the financial industry itself. There are other sources of good education, but Americans tend not to want to pay for good education. Why? Because the prevailing mythos is: "You can do this yourself."
The DIY mentality leads Americans too often to seek advice directly from the salesmen who are selling them products where there exists a large and hidden big conflict of interest. Olen documents studies that show that such salespeople tend to fill the portfolio with products which earn the salesperson a commission. Imagine that!
Why does the public put up with this? There is confusion over the role of such people. Positioned as "advisers" they give "consultations" on what to do with your product. This makes it sound like they have a fiduciary responsibility to advise you in a way that is best for you, but it turns out they don't. They are actually just salespeople selling you whatever they make the most on. The fact that most people don't know this is the most salient point in the book.
Olen covers a lineup of "Financial Self-Help Gurus": Suze Orman who tells you it just takes courage to be rich. David Bach, who claims that your money woes just come from buying too many lattes. David Ramsey who had a show telling people to just get out of debt. These hawksters tell a good story, but the problem is that it really just does not stand up to scrutiny. These media personalities get paid to say what people want to hear, not what it is actually good for them.
Chapter 4 retirement system: IRAs and 401(k). It is an inefficient way to save for retirement in all ways except one: the finance industry benefits, mainly by advisers that steer money into funds favorable to the industry, and by mutual fund managers who simply move funds around more than then need to. Much has been written on the ineffectiveness of fund managers. But when you consider this is your retirement they are playing with it becomes more like a crime.
Chapter 5 discusses the commission culture. A study from Harvard had students with fake portfolios ask for financial help, and found they were routinely pushed to services that made money for the consultant. The shocking result was that 70% of the students thought the advice was good and wanted to go back with their own money. JPMorgan Chase brokers always push their own branded mutual funds. Dan Ariely says "It's a terrible market, worse than used-car salespeople" The financial service industry group says; "if these advisers did not make commissions they would not be able to afford to stay in business." Think about that, perhaps the industry that needs to suck blood from the public does not really need to survive. Some commissions are as high at 14% -- and you know it is the customer paying that.
Chapter 6 covers how individual investors try to beat wall street at its game, and all the snake oil salesmen who offer products to help, such as Jim Cramer. There is the Money Show where vendors pay for booth space to sell limited time offers to attendees, and where the show constantly admonished people that they must "do their own due diligence" so that the organizers don't have to feel guilty about unethical offerings.
Chapter 7 talks about the special problem of women in the financial industry. They are not treated fairly, and often targeted specifically for certain types of scams.
Chapter 8 covers real estate side of the game. Robert Kiyosaki known as the "Rich Dad, Poor Dad" inventor gives motivational talks, but is subsequently exposed as making most of it up. Yet this still sells a $100 "game" that is supposed to teach you how to control your money.
Chapter 9 covers the problem of letting financial institutions provide financial training in the schools. "Think about it for a moment. Capital One is offering lessons in financial literacy." It is a huge conflict of interest, one that the public should realize. Capital One, and the others, have a stake in selling product, and naturally their course ware is going to emphasize the benefits of that product. Ally Financial paid for a "Wallet Wise" program in 2011 "complete with a section on auto financing that somehow never manages to mention what a sub-prime auto loan is." Studies of these programs show that the students do not actually get any benefit; the financial knowledge of teenagers actually declines over those years. Yet, the teenagers described themselves as "being knowledgeable". Cue up the "do it yourself" financial programs for them next. Interestingly, public opinion is that (1) financial institutions should be doing this, and (2) questioning it is like questioning the American way.
All of this leads to an unsurprising conclusion: we need to talk about money. We need to acknowledge the conflicts of interest. There needs to be more transparency. Many of these complicated contracts could easily be replaced with a simple to read standard form, but they are complication purely to support the clandestine maneuvers of the financial industry. This chapter muses about possible steps that can be taken. Mostly it reflects on how the financial industry has become a beast perpetuating itself. And how most of the practical self help advice is patently inapplicable to the real plight of the average American.
It is a wake up call. Please, for your own good, answer it.
The shocking truth behind the book is that Americans are not well educated in how to manage their money. The only ready source of education comes from the financial industry itself. There are other sources of good education, but Americans tend not to want to pay for good education. Why? Because the prevailing mythos is: "You can do this yourself."
The DIY mentality leads Americans too often to seek advice directly from the salesmen who are selling them products where there exists a large and hidden big conflict of interest. Olen documents studies that show that such salespeople tend to fill the portfolio with products which earn the salesperson a commission. Imagine that!
Why does the public put up with this? There is confusion over the role of such people. Positioned as "advisers" they give "consultations" on what to do with your product. This makes it sound like they have a fiduciary responsibility to advise you in a way that is best for you, but it turns out they don't. They are actually just salespeople selling you whatever they make the most on. The fact that most people don't know this is the most salient point in the book.
Olen covers a lineup of "Financial Self-Help Gurus": Suze Orman who tells you it just takes courage to be rich. David Bach, who claims that your money woes just come from buying too many lattes. David Ramsey who had a show telling people to just get out of debt. These hawksters tell a good story, but the problem is that it really just does not stand up to scrutiny. These media personalities get paid to say what people want to hear, not what it is actually good for them.
Chapter 4 retirement system: IRAs and 401(k). It is an inefficient way to save for retirement in all ways except one: the finance industry benefits, mainly by advisers that steer money into funds favorable to the industry, and by mutual fund managers who simply move funds around more than then need to. Much has been written on the ineffectiveness of fund managers. But when you consider this is your retirement they are playing with it becomes more like a crime.
Chapter 5 discusses the commission culture. A study from Harvard had students with fake portfolios ask for financial help, and found they were routinely pushed to services that made money for the consultant. The shocking result was that 70% of the students thought the advice was good and wanted to go back with their own money. JPMorgan Chase brokers always push their own branded mutual funds. Dan Ariely says "It's a terrible market, worse than used-car salespeople" The financial service industry group says; "if these advisers did not make commissions they would not be able to afford to stay in business." Think about that, perhaps the industry that needs to suck blood from the public does not really need to survive. Some commissions are as high at 14% -- and you know it is the customer paying that.
Chapter 6 covers how individual investors try to beat wall street at its game, and all the snake oil salesmen who offer products to help, such as Jim Cramer. There is the Money Show where vendors pay for booth space to sell limited time offers to attendees, and where the show constantly admonished people that they must "do their own due diligence" so that the organizers don't have to feel guilty about unethical offerings.
Chapter 7 talks about the special problem of women in the financial industry. They are not treated fairly, and often targeted specifically for certain types of scams.
Chapter 8 covers real estate side of the game. Robert Kiyosaki known as the "Rich Dad, Poor Dad" inventor gives motivational talks, but is subsequently exposed as making most of it up. Yet this still sells a $100 "game" that is supposed to teach you how to control your money.
Chapter 9 covers the problem of letting financial institutions provide financial training in the schools. "Think about it for a moment. Capital One is offering lessons in financial literacy." It is a huge conflict of interest, one that the public should realize. Capital One, and the others, have a stake in selling product, and naturally their course ware is going to emphasize the benefits of that product. Ally Financial paid for a "Wallet Wise" program in 2011 "complete with a section on auto financing that somehow never manages to mention what a sub-prime auto loan is." Studies of these programs show that the students do not actually get any benefit; the financial knowledge of teenagers actually declines over those years. Yet, the teenagers described themselves as "being knowledgeable". Cue up the "do it yourself" financial programs for them next. Interestingly, public opinion is that (1) financial institutions should be doing this, and (2) questioning it is like questioning the American way.
All of this leads to an unsurprising conclusion: we need to talk about money. We need to acknowledge the conflicts of interest. There needs to be more transparency. Many of these complicated contracts could easily be replaced with a simple to read standard form, but they are complication purely to support the clandestine maneuvers of the financial industry. This chapter muses about possible steps that can be taken. Mostly it reflects on how the financial industry has become a beast perpetuating itself. And how most of the practical self help advice is patently inapplicable to the real plight of the average American.
It is a wake up call. Please, for your own good, answer it.
February 27, 2013
For the second time today I’ll remind readers that I received this book as part of a GoodReads drawing. Despite that kind consideration which saved me upwards of $12, I give my candid feedback below.
The simple premise of this little treatise is to tear everything you know about finance limb from limb. All the rot designed to help you with money from self-help to Dave Ramsey to the latest stock market guru is nothing but a fraud designed to get you to pay for something. Anybody who claims to know something you don’t is just selling something. There, now I’ve saved YOU $12.
In greater seriousness, the author has a point and she very skillfully illuminates it for us. She methodically goes from one financial fad to the next and very neatly deconstructs them. She’s even polite enough to tear everything down and at the end NOT really present us with an answer. There are some liberal leanings in which she suggests that government regulation is the real answer to our problems but even that, she admits, isn’t a panacea.
To summarize, since I have little else to say, Pound Foolish happily tells us all what we long ago suspected about the financial services industry. Nobody really knows the answer to how to get rich excepting through an inordinate amount of faith in straight up luck or perhaps getting your own talk show to sell your wares. The book is at times rather ponderous and redundant but ultimately informative with its most important take-away being the attitude of realism which accompanies it rather than any specific detail the author provides.
The simple premise of this little treatise is to tear everything you know about finance limb from limb. All the rot designed to help you with money from self-help to Dave Ramsey to the latest stock market guru is nothing but a fraud designed to get you to pay for something. Anybody who claims to know something you don’t is just selling something. There, now I’ve saved YOU $12.
In greater seriousness, the author has a point and she very skillfully illuminates it for us. She methodically goes from one financial fad to the next and very neatly deconstructs them. She’s even polite enough to tear everything down and at the end NOT really present us with an answer. There are some liberal leanings in which she suggests that government regulation is the real answer to our problems but even that, she admits, isn’t a panacea.
To summarize, since I have little else to say, Pound Foolish happily tells us all what we long ago suspected about the financial services industry. Nobody really knows the answer to how to get rich excepting through an inordinate amount of faith in straight up luck or perhaps getting your own talk show to sell your wares. The book is at times rather ponderous and redundant but ultimately informative with its most important take-away being the attitude of realism which accompanies it rather than any specific detail the author provides.
March 6, 2017
You know, I couldn't understand why so many people said in their reviews that they didn't finish this book. Now I do: This book is STRESSFUL. Basically, there are no meaningful regulations on the people who manage your retirement accounts. And most personal finance "gurus" give advice that they don't take themselves. The price of essentials -- housing, healthcare, utilities -- has skyrocketed past the rate of inflation in the past few decades. Trying to pinch your pennies on life's few pleasures probably won't help you much.
I think this book would have been a lot more helpful if there were meaningful, trustworthy financial advice to counter all the bad news about most of the people who give advice. Helaine Olen, as a journalist who's covered personal finance for many years, is in a unique position to give that kind of advice. But I get the sense from reading this that there isn't actually solid advice to give. She's not withholding it; there just isn't a foolproof way to make a budget and invest your money that will make it recession-proof and personal-disaster-proof.
So yeah. This book is super depressing. Well-researched, well-written, and interesting to anyone with even a passing interest in personal finance. But you will lie awake tossing and turning at night wondering why you even bother setting aside part of your meager paycheck for retirement when it comes with so few guarantees.
I think this book would have been a lot more helpful if there were meaningful, trustworthy financial advice to counter all the bad news about most of the people who give advice. Helaine Olen, as a journalist who's covered personal finance for many years, is in a unique position to give that kind of advice. But I get the sense from reading this that there isn't actually solid advice to give. She's not withholding it; there just isn't a foolproof way to make a budget and invest your money that will make it recession-proof and personal-disaster-proof.
So yeah. This book is super depressing. Well-researched, well-written, and interesting to anyone with even a passing interest in personal finance. But you will lie awake tossing and turning at night wondering why you even bother setting aside part of your meager paycheck for retirement when it comes with so few guarantees.
March 4, 2013
Pound Foolish is thoughtful and well-researched. Well-known figures are attacked but in well-considered ways. You need not agree with everything said but you will get insights into how the personal finance industry works (or doesn't work).
The final chapter feels like a let down because there's no simple prescription, no happy ending. Instead, we're left with tough, unsettling questions about society. What can we do? What will we do?
If money matters to you, read this book. Highly recommended.
The final chapter feels like a let down because there's no simple prescription, no happy ending. Instead, we're left with tough, unsettling questions about society. What can we do? What will we do?
If money matters to you, read this book. Highly recommended.
October 9, 2019
The takedowns of various financial "experts" are fun - if you just read one chapter in this book, make it chapter three, "The Latte Is a Lie," which is all about how cutting out your Starbucks run every day won't make you a millionaire and a lot of people are making big money by shaming regular people about things like that. The real problem is stagnant wages combined with skyrocketing costs for things like real estate, healthcare, and education, combined with a massive reduction in the societal safety net. People can't save as much because they're essentially trying to do more with less. I feel like since this book came out, a lot of what's in it has become almost common knowledge, or maybe that's just that I'm friends with a lot of frustrated millennials. Either way, this was easy to read and definitely educational, though there was a lot in here that I was already aware of. And now I still have no idea what a variable annuity is, but I know I shouldn't get one.
July 24, 2014
I was eager to read Pound Foolish because figuring out how to get by with less money is a subject of great interest to me at present. This book didn’t promise to tell me how to get rich; instead, it promised to save me from trouble by exposing all the get-rich schemes (whether quick or on a 40-year time horizon) for what they were. Yet ironically, as financial gurus from Suze Orman to Dave Ramsey were exposed and taken down, I found myself longing for someone to tell me what to do. Never mind getting rich — how does one save enough to survive retirement?
The author’s very point, of course, is that saving enough has a lot to do with luck and social class, and not much to do with your self-discipline. Sure, you probably don’t need to spend $3 a day on a latte, but that habit won’t sink your budget like a bout of unemployment, a series of high medical bills or a divorce will. In a best-case scenario — namely, if nothing bad ever happens to you — then your personal discipline of saving matters a lot. If something bad happens, as it does to many, it may not matter how much you saved if you didn’t make enough money to start with.
Pound Foolish is well-written and thoroughly researched, with pages and pages of endnote citations. The author addresses many categories of the personal finance industry, including 401(k)s (did you know that until 2012, brokers weren’t required to tell 401(k) participants how much they were paying in fees for the privilege of saving their own money?), the increasingly and unnecessarily complicated vehicles being peddled to vulnerable seniors afraid of outliving their retirement savings, the movement to market financial services to women by convincing them that they needed help (probably a man’s), the conflict of interest behind most financial literacy education programs, and more. It’s a quick, easy read, but it gets a little depressing. Still, you keep reading because you don’t want to be taken in by any schemes!
Almost all of the author’s advice is implicit.
Now, the book is not perfect. The grammar Nazi in me noticed more than the average number of typos, not to mention the author’s refusal to use the word “whom” (I understand it’s a little complicated, but that’s why publishers have copyeditors). More importantly, the content leaves a little to be desired. For example, she accurately points out many failings of the 401(k) system, but fails herself to figure out just where the funding for pensions will come from when rising retiree health care costs have taken down more than a few stalwart corporations.
Her final call to action is to at least start talking about the issues. Maybe if we all are more open about money, we can remove some of the shame associated with financial failures (we all make mistakes, but some of them are less preventable than others) and realize that laws and regulations are not necessarily on the side of the 99%. Then we can figure out what to do.
The author’s very point, of course, is that saving enough has a lot to do with luck and social class, and not much to do with your self-discipline. Sure, you probably don’t need to spend $3 a day on a latte, but that habit won’t sink your budget like a bout of unemployment, a series of high medical bills or a divorce will. In a best-case scenario — namely, if nothing bad ever happens to you — then your personal discipline of saving matters a lot. If something bad happens, as it does to many, it may not matter how much you saved if you didn’t make enough money to start with.
Pound Foolish is well-written and thoroughly researched, with pages and pages of endnote citations. The author addresses many categories of the personal finance industry, including 401(k)s (did you know that until 2012, brokers weren’t required to tell 401(k) participants how much they were paying in fees for the privilege of saving their own money?), the increasingly and unnecessarily complicated vehicles being peddled to vulnerable seniors afraid of outliving their retirement savings, the movement to market financial services to women by convincing them that they needed help (probably a man’s), the conflict of interest behind most financial literacy education programs, and more. It’s a quick, easy read, but it gets a little depressing. Still, you keep reading because you don’t want to be taken in by any schemes!
Almost all of the author’s advice is implicit.
Now, the book is not perfect. The grammar Nazi in me noticed more than the average number of typos, not to mention the author’s refusal to use the word “whom” (I understand it’s a little complicated, but that’s why publishers have copyeditors). More importantly, the content leaves a little to be desired. For example, she accurately points out many failings of the 401(k) system, but fails herself to figure out just where the funding for pensions will come from when rising retiree health care costs have taken down more than a few stalwart corporations.
Her final call to action is to at least start talking about the issues. Maybe if we all are more open about money, we can remove some of the shame associated with financial failures (we all make mistakes, but some of them are less preventable than others) and realize that laws and regulations are not necessarily on the side of the 99%. Then we can figure out what to do.
April 13, 2013
A brisk read, because Olen usually picks an advisor or investment vehicle to assail, does so, then moves on. And a good dose of honesty about the realities that most Americans face in their economic lives. This book needed better editing, though, as almost every chapter has an egregious typo, and a few spots where sentences get cut off mid-way.
My response to the reviews here that fault Olen for tearing down without offering any solutions is that her answer is stated early in the book, and is cumulative through the rest: read "Personal Finance for Dummies," avoid annuities, and take everything a salesman tells you with a healthy dose of skepticism. The one surefire way to make money in the personal finance industry is to have a book or a method, an irony I'm sure isn't lost on her.
To the critics who take issue with the author's politics I say, it's her book. And it's one tiny book swimming against a strong stream of persistent American belief in individualism. One of her points is that it's unrealistic think that decisions at the microeconomic level can make up for the fact that you haven't gotten a raise in 5 years, and that inflation seems to be in check everywhere but the grocery store and the gas station. Her discussion of the Occupy movement takes up maybe 3 pages.
The one thing that's stuck with me after finishing the book is that people are no more or less sophisticated about money than they were 50-75 years ago when the financial advice juggernaut was starting up. It's that in that intervening period, an entire world has sprung up devoted largely to separating you from your money, clothed in combination of flim-flam and belief that if something bad happens to you and your money, it must have been a result of something you did.
Towards the end, Olen makes a throwaway mistake, but one I think is a metaphor for her larger point. Horatio Alger was the author, not the character. The common belief is that the characters in his book, mostly boys, are born poor and get rich solely through hard work and perseverance. In reality, his characters are born poor, and do some good deed that garners the attention of a wealthy man who takes an interest in, and then proceeds to make life comfortable for the boy. Harmless, right? Now consider the fact that Alger was dismissed from an early job for "unnatural familiarity with boys." Does that make you reconsider your opinion of the moral of the story?
To my mind, the kind of skepticism we try to teach kids about "stranger danger" is exactly what you need to engage when treading into the world of financial advice.
My response to the reviews here that fault Olen for tearing down without offering any solutions is that her answer is stated early in the book, and is cumulative through the rest: read "Personal Finance for Dummies," avoid annuities, and take everything a salesman tells you with a healthy dose of skepticism. The one surefire way to make money in the personal finance industry is to have a book or a method, an irony I'm sure isn't lost on her.
To the critics who take issue with the author's politics I say, it's her book. And it's one tiny book swimming against a strong stream of persistent American belief in individualism. One of her points is that it's unrealistic think that decisions at the microeconomic level can make up for the fact that you haven't gotten a raise in 5 years, and that inflation seems to be in check everywhere but the grocery store and the gas station. Her discussion of the Occupy movement takes up maybe 3 pages.
The one thing that's stuck with me after finishing the book is that people are no more or less sophisticated about money than they were 50-75 years ago when the financial advice juggernaut was starting up. It's that in that intervening period, an entire world has sprung up devoted largely to separating you from your money, clothed in combination of flim-flam and belief that if something bad happens to you and your money, it must have been a result of something you did.
Towards the end, Olen makes a throwaway mistake, but one I think is a metaphor for her larger point. Horatio Alger was the author, not the character. The common belief is that the characters in his book, mostly boys, are born poor and get rich solely through hard work and perseverance. In reality, his characters are born poor, and do some good deed that garners the attention of a wealthy man who takes an interest in, and then proceeds to make life comfortable for the boy. Harmless, right? Now consider the fact that Alger was dismissed from an early job for "unnatural familiarity with boys." Does that make you reconsider your opinion of the moral of the story?
To my mind, the kind of skepticism we try to teach kids about "stranger danger" is exactly what you need to engage when treading into the world of financial advice.
March 22, 2017
Having read a number of personal finance books recently, this is the book I wanted to write myself. Unfortunately, I thought it was very padded. It had enough interesting nuggets for a long blog post or magazine article, but it was stretched out to 236 pages.
When it comes to managing money, I think one's income is very important. Net worth is also important. Significantly less important is knowledge, and well after that are vices: lattes, alcohol, cable. This is a controversial assertion. Any Internet thread about income equality will have participants who argue people can thrift their way to $1 million and that savings is possible with sacrifice. I agree that it's possible. It might even be possible for two people earning $35K a year. But those people would live a spartan life that few Americans would envy. As an Internet comment I liked put it, "A guy earning $30k a year can become a millionaire as long as he keeps his budget to $10k. In 10 years he'd have enough saved up to pour into a few reliable investments and he's on his way. Still, that was never the point of the American Dream. Somewhere in there, you were supposed to fit a wife, kids, and maybe a life that was actually worth living."
http://jdunderground.com/ot/thread.ph...
Because of the increased costs in housing, health care, and education, the track of the US personal savings rate suggests it's harder for people to save money than it used to be. I'm persuaded by Elizabeth Warren's argument in "The Two-Income Trap": Two-income families have driven up the cost of housing and because of it are now more vulnerable to financial disaster due to job loss, divorce, or illness.
I've read Helaine Olen on the Baffler and I love her genre of muckraking journalism, but she doesn't match Thomas Frank's verve or humor. Some chapters are stronger than others. The best include Chapter 3: The Latte is a Lie (Overspending isn't the problem), Chapter 4: Slip Slidin' Away (The coming retirement crisis), and Chapter 8: Who Wants to Be a Real Estate Millionaire (The selling of home ownership as the cure for income and investment stagnation).
It's remarkable and telling to me how unpopular this book is compared to the "Rich Dad" series. When Americans have to choose between the salesman who tells them they can be rich and the journalist who tells them they can't, they don't seem especially interested in the skeptic!
When it comes to managing money, I think one's income is very important. Net worth is also important. Significantly less important is knowledge, and well after that are vices: lattes, alcohol, cable. This is a controversial assertion. Any Internet thread about income equality will have participants who argue people can thrift their way to $1 million and that savings is possible with sacrifice. I agree that it's possible. It might even be possible for two people earning $35K a year. But those people would live a spartan life that few Americans would envy. As an Internet comment I liked put it, "A guy earning $30k a year can become a millionaire as long as he keeps his budget to $10k. In 10 years he'd have enough saved up to pour into a few reliable investments and he's on his way. Still, that was never the point of the American Dream. Somewhere in there, you were supposed to fit a wife, kids, and maybe a life that was actually worth living."
http://jdunderground.com/ot/thread.ph...
Because of the increased costs in housing, health care, and education, the track of the US personal savings rate suggests it's harder for people to save money than it used to be. I'm persuaded by Elizabeth Warren's argument in "The Two-Income Trap": Two-income families have driven up the cost of housing and because of it are now more vulnerable to financial disaster due to job loss, divorce, or illness.
I've read Helaine Olen on the Baffler and I love her genre of muckraking journalism, but she doesn't match Thomas Frank's verve or humor. Some chapters are stronger than others. The best include Chapter 3: The Latte is a Lie (Overspending isn't the problem), Chapter 4: Slip Slidin' Away (The coming retirement crisis), and Chapter 8: Who Wants to Be a Real Estate Millionaire (The selling of home ownership as the cure for income and investment stagnation).
It's remarkable and telling to me how unpopular this book is compared to the "Rich Dad" series. When Americans have to choose between the salesman who tells them they can be rich and the journalist who tells them they can't, they don't seem especially interested in the skeptic!
December 26, 2014
I found this book after watching the PBS Frontline documentary on the Retirement Crisis, where the author is interviewed. I did enjoy this book, although there were a few chapters that were more interesting than others (Suze Orman, Dave Ramsey). Not everyone will love this "heavy on the financial facts" approach. A few facts I agreed with:
For those saving between 1999-2009, the average return of the stock market for this period was -.5%. Most people don't realize the US had their own "lost decade", but for those of us in our prime savings years, it was extremely hard to not see any traction on retirement savings and we lost 10 years of compounding power which we can't recover.
The retirement crisis is real and it is looming over the current and future generations. The disappearance of pensions and the selling of 401Ks as a magic bullet for everyone to have enough for retirement is a tragedy. The average middle and even upper middle class simply cannot save enough in these type of retirement accounts to provide for a comfortable retirement at age 65. The math simply doesn't work: meager to average savings, plus lower returns on the market, offset by inflation, does not equal enough to pay for retiree healthcare costs, let alone retirement.
This book also touches on the selling of real estate investments as another "magic bullet" to generate an abundant retirement income (think "Rich Dad" books), and the danger of using debt when the real estate market tanks (think 2009).
The bottom line is: don't buy investments you don't understand (stay far away from annuities), go ahead and plan to work for a really long time, and most importantly, financial stuff is not that complicated and you need to educate yourself and make wise choices so you won't get conned by "advisors" who make their money off commissions and fees, which reduce your hard earned nest egg.
For those saving between 1999-2009, the average return of the stock market for this period was -.5%. Most people don't realize the US had their own "lost decade", but for those of us in our prime savings years, it was extremely hard to not see any traction on retirement savings and we lost 10 years of compounding power which we can't recover.
The retirement crisis is real and it is looming over the current and future generations. The disappearance of pensions and the selling of 401Ks as a magic bullet for everyone to have enough for retirement is a tragedy. The average middle and even upper middle class simply cannot save enough in these type of retirement accounts to provide for a comfortable retirement at age 65. The math simply doesn't work: meager to average savings, plus lower returns on the market, offset by inflation, does not equal enough to pay for retiree healthcare costs, let alone retirement.
This book also touches on the selling of real estate investments as another "magic bullet" to generate an abundant retirement income (think "Rich Dad" books), and the danger of using debt when the real estate market tanks (think 2009).
The bottom line is: don't buy investments you don't understand (stay far away from annuities), go ahead and plan to work for a really long time, and most importantly, financial stuff is not that complicated and you need to educate yourself and make wise choices so you won't get conned by "advisors" who make their money off commissions and fees, which reduce your hard earned nest egg.
April 1, 2019
So I thought this book would be about uncovering the scams of expensive mutual funds with huge loads, commissions, and high expense ratios, but the only thing this book exposed was the author's petty dislikes. Now, I'll admit that these personal financial gurus have to be taken with a grain of salt but after 100 pages in this book, there was nothing substantive about the attacks she leads against these people. It seems her issue is these gurus talk about self responsibility and the "pull yourself up by the bootstraps" mentality and she would prefer to blame other circumstances. I gave this 100 pages because I thought she might highlight that someone was in the pocket of the credit card agencies or something like that but it never materialized. The closest thing to something substantive was an attack against Suze Orman for an investing newsletter she started with a third party. Turns out that this third party was pushing people into funds with an extremely high expense ratio. However, after telling us how terrible that was (which it would've been) her next paragraph had to disclose that Orman cut ties with the third party immediately.
My point is that there isn't any substance to her attacks. There are lots of scams in the finance industry but she managed to find none of them. Take everything you hear from gurus with a grain of salt but her problems were with their philosophy of do it yourself. Save yourself a ton of time and take a hard pass on this book.
My point is that there isn't any substance to her attacks. There are lots of scams in the finance industry but she managed to find none of them. Take everything you hear from gurus with a grain of salt but her problems were with their philosophy of do it yourself. Save yourself a ton of time and take a hard pass on this book.
March 23, 2017
With a pedigree that includes The New York Times, Washington Post, Slate, and Salon, I suppose it is too much to ask that the author would not lean so far to the left in this investigation of the personal finance industry.
In the introduction Olen tips her hand when she laments that one of the problems facing people is income inequality. I am not a big fan of this world view, because it begs for a solution of income redistribution. The fact is that everyone is better off than our parents and grandparents were a generation or more ago. However the rich are much better off and the poor are only somewhat better off. Somehow, in the eyes of the left this is not fair. The fact that much of people's economic situation is tied to good or bad choices doesn't seem to matter to the left.
Chapter after chapter the author rails on personal finance experts taking advantage of gullible consumers, whether it is Suzy Orman, Robert Kiyosaki, Jim Cramer, David Bach, or Dave Ramsey.
Her conclusion is that the normal consumer is never going to make the best choices so the government needs to step in and act in the interest of the consumer.
That conclusion warrants one star in my book.
In the introduction Olen tips her hand when she laments that one of the problems facing people is income inequality. I am not a big fan of this world view, because it begs for a solution of income redistribution. The fact is that everyone is better off than our parents and grandparents were a generation or more ago. However the rich are much better off and the poor are only somewhat better off. Somehow, in the eyes of the left this is not fair. The fact that much of people's economic situation is tied to good or bad choices doesn't seem to matter to the left.
Chapter after chapter the author rails on personal finance experts taking advantage of gullible consumers, whether it is Suzy Orman, Robert Kiyosaki, Jim Cramer, David Bach, or Dave Ramsey.
Her conclusion is that the normal consumer is never going to make the best choices so the government needs to step in and act in the interest of the consumer.
That conclusion warrants one star in my book.
March 21, 2013
Have to say, I was WAY dissapointed, and I badly wanted to like it. Honestly, the author fails to acknowledge even once that anyone in the finance industry (or, more specifically, the financial education industry) may be an honest broker (no pun intended). I, for one, feel that Robert Kiyosaki's materials -- for example -- are outstanding in terms of financial educational materials. For the cost of a book, one can learn a tremendous amount. In terms of "Pound Foolish," I'm reminded of the quote by Oscar Wilde: "A cynic is a man who knows the price of everything, and the value of nothing." Are you really this cynical, Ms. Olen?
March 6, 2013
The author makes some interesting points concerning the abuses of the Financial Industry. Rightly so, but not everyone in the industry is a hack, criminal, shyster, or worse yet a demon possessed banker. I get tired of reading how we need more government intervention to protect us from all evils, when the government can't seem to protect itself from making ill advised financial decisions. Financial education is not a bad thing, but it must be done without the pretext of someone trying to sell or influence the hearer into purchasing the next great financial product.
I believe the author was on the right track in many cases but never really seemed to deliver the final goods.
I believe the author was on the right track in many cases but never really seemed to deliver the final goods.
February 18, 2013
Started off pretty decent as I was most interested in hearing the authors comments on Suze, Dave, etc. While I agree with some of the comments, I also take them with a grain of salt as I do not consider those people experts on finance, but more of self-help guru's who are selling a product. The remainder of the book went too far down the psychological path and really lost my interest as the pages turned.
March 20, 2013
I didn't actually finish this one. I'm about halfway through.
Although I normally don't summarize books in these reviews, perhaps I can save you the effort of reading this book: If someone offers you financial advice and claims they can beat the market, they're not telling you the truth. If someone offers you free financial advice, there's a catch. If someone wants you to pay for their financial advice, make sure your interests are aligned.
Maybe it gets better towards the end?
Although I normally don't summarize books in these reviews, perhaps I can save you the effort of reading this book: If someone offers you financial advice and claims they can beat the market, they're not telling you the truth. If someone offers you free financial advice, there's a catch. If someone wants you to pay for their financial advice, make sure your interests are aligned.
Maybe it gets better towards the end?
March 12, 2013
Preaches a message of dis-empowerment, and blames people for not lobbying for additional redistribution.
Sure, the experts like Suze Orman and Dave Ramsey aren't perfect... but they get a lot more correct than this book does.
Sure, the experts like Suze Orman and Dave Ramsey aren't perfect... but they get a lot more correct than this book does.
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