You can’t walk into a bookstore at the beginning of the year without seeing self-improvement, health and fitness, and “new year, new you!” books on displays plunked down right in front of the door. At our local Barnes & Noble, a table full of these kinds of books is literally about four feet from the front door, so it’s really difficult to miss. And usually, right next to the diet and weight-loss books that are there to help you keep your New Year’s resolutions are the personal finance books that promise to whip your wallet into shape and show you how to end all your monetary woes.
What a load of BS. Financial “gurus” write hundreds and hundreds of pages and stick them between shiny covers that prominently display their smiling, all-knowing faces next to promises to get you out of debt, fix your financial problems, and set you on the right path to a rich retirement. It sounds nice, of course – but did you pick out the issue here? They write hundreds and hundreds of pages. And then they slap a $25 to $30 price tag on their thick, hardcover book and spend hours of radio and television time trying to convince you how badly you need this book to right your financial wrongs.
In other words, people like Dave Ramsey, Suze Orman, and anyone else who shows up on CNBC with a personal finance book in tow, are out to sell something. They’re hocking a product to make money. Their books won’t increase your income. But it will increase their own.
Somebody like Dave Ramsey is just as much of a personal finance expert as I am. If I’m being honest, I feel like I know a whole lot more than Ramsey does when it comes to personal finance. What he has me beat on is how to sell. How to build a business empire and a brand. How to play on people’s fears and negative emotions to encourage them to purchase a solution to a problem that could easily be found on a variety of personal finance blogs authored by people a whole heck of a lot smarter than me and Ramsey both.
I sincerely doubt Dave or Suze care about your finances. They care about their businesses, just like any smart business owner should.
Why Financial Gurus Fail to Bring Anything to the Table
Before I get mobbed by crazed fans who swear these “gurus” turned their life around (or by those who were not amused by my photo editing above), let me explain four reasons why I feel these personalities fail to offer people real value:
- They sell products (most popularly in the form of books, though Orman thinks it’s acceptable to hock a prepaid debit card that includes fees). They are businesspeople interested in their bottom line, not yours.
- Yes, they offer sound advice – it’s just buried under fluff and nonsense. After all, you can’t sell a 10 page book for much, but that’s really all the paper they should need.
- Yes, they also offer bad advice. Ramsey’s belief that all debt is “bad” is flat-out stupid. His complete aversion to credit cards, and belief that there is no such thing as responsible credit card use, is ridiculous and extreme.
- They offer one-size-fits-all solutions. Their way is the right way, for everybody, period. But there is no blanket answer to every single unique individual’s personal finance problem.
Take Some Free Advice Instead
In fact, let me take that one step further. I am going to sit down and offer you all the personal finance advice you need to get started. I won’t even ask you to pay me $25 for it (although I certainly wouldn’t stop you. Email me, I’ll let you know where to send the check).
- START SAVING/INVESTING NOW. Not next month. Not next week. Not tomorrow. TODAY.
- Cut your expenses and save more. Then invest your savings into index funds (a balanced portfolio can start with a total US stock market index fund, a total international stock market index fund, and a total US bond market index fund).
- Earn more than you make now, but keep your expenses the same. What to do with that extra money? You guessed it: save it.
- Build an emergency fund. Depending on your situation, 3 to 6 months’ worth of living expenses should be fine (if you’re self-employed, aim for 8 to 12 months’ worth of expenses).
- Get out of debt and stay out. If you’re in debt thanks to credit cards or student loans, make a plan to pay it off ASAP. Pay as much as you can toward your balance every month and attack your highest-interest loan or balance first. Start working on your car loan after all other debts are paid. If you have a mortgage, you may or may not want to pay it off early – if you have a low interest rate, don’t throw extra money at your house. Take extra money and invest instead. Your returns will be far greater than the 3%-4% rate on your home loan.
- Quit wasting money on material stuff you don’t need. Value your loved ones and experiencing new things over keeping up with the Joneses’. Being rich and looking rich are two very, very different things.
That’s really it – and even that short list goes above and beyond the very basic principles I outlined in the first two points: to grow wealth, you can cut expenses and save more or you can earn more and save more. That’s really all you need to know. So keep that $25 in your pocket – or better yet, invest it – and tune out the financial gurus who are only doing what every other consumer-driven business is doing: attempting to sell you a product or an idea to increase their own wealth, not yours. Burn your idols. You don’t need them anymore.