In Pound Foolish: Exposing the Dark Side of the Personal Finance Industry, Helaine Olen traces the roots of media advising us about money—a subject many find distasteful to discuss in polite company, but nonetheless spawns a billion-dollar industry of products promising guidance as we navigate the thorny territory of debt, need, and desire.
Olen, a journalist who writes the “Where Life Meets Money” blog at Forbes, questions the “guru” model of personal-finance media, which focuses on changing the money habits of individuals with nearly no analyses of the social and economic reasons for why the gap between rich and poor is expanding beyond belief. She argues that personal-finance journalism can be revolutionary, but is often undercut by conflict-of-interest product sponsorships and simplistic solutions that are less empowering than they are appeasing.
In our interview, Olen spoke about the myths perpetuated by personal-finance gurus like Suze Orman and Jim Cramer, why women are particularly targeted by the industry, and how our personal money problems connect to crushing economic inequities.
They are the end-result of several trends in American life. The first is the rise of the self-help industry, with its insistence that there is no problem that can’t be overcome with grit, determination and a cheerful, can-do spirit.
The second was the increasing complication of our financial lives. I was born in the mid 1960s—the credit card was less than ten years old, brokerage costs were fixed, mortgages were one-size-fits-all and also fixed rate. There were no Individual Retirement Accounts or 401(k)s. Heck, the ATM machine was years in the future. People needed advice as this stuff debuted and assumed a place in our lives.
But then, these two trends combined with a third: the increasing deterioration of our economic lives. As we all now know, incomes began to stagnate and fall, even as the cost of such things as healthcare, education and housing increased at rates well beyond inflation for decades. This left an opening for people such as Orman and (Robert) Kiyosaki, who were offering themselves up as our economic saviors. As Orman said in a 2012 appearance, she viewed her job as “rebuilding America one wallet at a time.”
One thing I should say here: Orman and Kiyosaki are offering up very different solutions to the same problem. Orman’s shtick is that she is explaining it all to you, and telling you how you need to watch your pennies so you can invest and take care of yourself and your loved ones. Kiyosaki sees your lack of income and debt and views it as a cash flow problem that can be remedied—provided, that is, you follow his advice and strategies.
What makes these "gurus" dangerous?
The easy answer is that a lot of their advice is not exactly that great, to say the least. Robert Kiyosaki, for example, has promoted purchasing real estate with little money down for quick riches—this, as most of us now understand, is a quick way to end up in a lot more financial trouble than when you started out.
The other answer is a bit more complicated. Personal-finance gurus, by throwing the problem back on the individual, all-too-frequently deny or underplay the role of the greater economy on our lives. Personal finance can’t do it all. It certainly can make a valuable contribution as an adjunct—I would never argue that one should not try their best to live within their means, or that people like Suze Orman have indeed motivated some to improve their financial lives. But there is no personal-finance strategy that can fully protect us from downward spirals, nasty financial trends or plain out ill luck. Yet all-too-many of these gurus are presenting themselves as our would-be saviors and all but saying that if we follow their lead, we will survive and thrive.
Again, that’s not how it works in the real world. It’s almost as if we are living through economic Hurricane Sandy, and they are telling us that if we put up a few sandbags and umbrellas (that they might well be selling us, by the way) we’ll be fine. This stuff starts veering toward blaming the financial victim for greater economic problems.
Why are so many of us afraid to talk about our money?
We idealize the myth of Horatio Alger in this country. Anyone can make it. Anyone. But we forget that Horatio Alger was a writer of fiction. In our nonfiction lives, we are suffering from some of the worst income inequality in our nation’s history, our salaries are stagnant and falling, and our class mobility is significantly worse than supposedly class-bound Europe. Yet, to talk about our financial setbacks and inability to get ahead is to challenge the heart of the American dream. We believe we are failures and, as a result, there is deep shame involved.
David Graeber's Debt: The First 5,000 Years discusses how our language of debt is conflated with our language of morality: the words debt, reconcile, forgiveness, credit, redemption, and so on, were all once singularly business terms. Do see a connection between the "moral" stakes of who-owes-what-to-whom and the personal-finance industry?
If you are asking if I believe the personal finance and investment industries prop up the status quo instead of challenging it, the answer is hell, yes. One of my complaints with the whole personal-finance industrial complex is the censorious, judgmental tone, that all too often sounds like a modern updating of a Victorian morality tract, complete with the wealthy so-called personal-finance experts lecturing the less financially well-off on how to behave. Dave Ramsey—a man who declared bankruptcy himself—has based an entire multi-million dollar personal-finance empire on telling people that bankruptcy is to be avoided at all costs, that it can destroy your marriage, job, and peace of mind. Others tell people to that their problems are a result of luxury spending like smartphones or at-home Internet access. For better or worse, these are the basic accoutrements of modern life.
The fact is it is a lot easier to live within your means if you are a personal-finance guru who makes their money by preaching the virtues of restraint to the rest of us, than if you are a minimum wage retail worker lacking health insurance and other benefits. It would be nice if this fact were acknowledged.
Why are women a particular target for promotions from the personal-finance industry?
Women are targeted for a number of reasons. First, we control increasing amounts of wealth, with the result that we are seen as a valuable niche in the business of financial sales and advice. Second, we are more likely to turn to others (for) financial advice than men so we are, you might say, perceived as an easier sale. This might be because we are routinely portrayed—in the face of very little evidence, by the way—as less capable and knowledgeable than men when it comes to managing our funds, too emotional to get it right. This is, sad to say, a myth that even those who claim to support women perpetuate. It was Suze Orman who claimed that women lack “competence” when it comes to money. Of course, all this talk obscures the real reason women have less money than men: we earn less and live longer.
Given how much of the personal-finance media come up for critique in your book, what are the best sources of information for those of us trying to understand our money? What do you listen to or read yourself?
Liz Weston, now at MSN, taught me lots about personal finance. She’s a great resource. If you want to pick up a book, I still say Personal Finance for Dummies is the least intimidating book out there. For day-to-day news coverage, Reuters and Bloomberg are just terrific. When Linda Stern—who does the Stern Advice column at Reuters—interviewed me for a feature about Pound Foolish, I told her I was convinced it would have been an even better book if she had written it, and I wasn’t kidding. I also read a lot of economics blogs. Both Yves Smith at Naked Capitalism and Barry Ritholtz at The Big Picture offer first-rate takes on the greater economic world, not to mention daily links features that are great curated guides to the world outside of our own personal microeconomic space.
You write that financial literacy is part of the myth perpetuated by the industry. But isn't it empowering to understand how our money works, and how to use it with wisdom?
It is unbelievably empowering to learn to manage and control our own funds. But that’s a very different thing from something called “financial literacy,” which is, in reality, a mostly corporate-funded scheme that is used, at least in part, to head off more substantive government regulation. It would be much easier to offer up products that are easy to understand and lack “gotcha” clauses, but you don’t see many in the industry do that. Instead, the financial services industry uses our lack of financial literacy to justify their own ill behavior. Do you really want people learning how to manage their funds from such outfits as Capital One and Visa, both of whom sponsor extensive programs in the nation’s schools? I don’t.
You were behind The Los Angeles Times' wildly popular "Money Makeover" series for years. Do you see your own work as part of the "personal-finance industrial complex"?
Absolutely. The genesis of this book was my attempt to acknowledge my own (very small, admittedly) role in all of this.
You write that "the greatest economic wound many of our families of origin bequeath us is not a dysfunctional relationship with money, but a dysfunctional relationship with class." What do you mean?
We have a serious problem with class mobility in this country, one we rarely admit to. Most of us—no matter what our psychological financial baggage—will remain within the class we are born in, or very near to it. Yet, one of the current “it” concepts in personal finance is a thing called financial therapy. It claims to look at our financial behaviors in terms of our emotional family history with money. So, to take an example, we don’t save money because we were brought up to think money was a bad thing. Maybe that’s true for some people, but it’s not why we have increasingly limited class mobility.
What would it look like if the self-help ethos of the personal-finance industry were well balanced with a smart systemic understanding of the economy?
Instead of perpetuating the language of blame and shame, I like to think we would be asking for more changes to help all of us. Personal finance would become about “we” instead of “me.” So instead of blaming people for their excessive health care bills, our personal-finance gurus would be questioning why those bills were so high in the first place and how we got to a place where they have the ability to wipe out decades of savings in a matter of weeks. Instead of chewing (out) low-wage workers who cannot live within their not-particularly substantial means, personal-finance gurus would ask why so many jobs are not paying a living wage.
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