I wasn't expecting much from Pound Foolish: exposing the dark side of the personal finance industry (Amazon link). I saw a video interview (which I can’t find) and felt author Helaine Olen was sensationalizing to sell more copies. She was picking on easy, obvious targets like Robert Kiyosaki (did he really have a Rich Dad?) and David Bach (the latte factor guy who's bad at math). I didn't disagree with her conclusions or assessments but wasn't expecting much more than a book that seeks fame by attacking the well known with sizzle.
Look Closely
To my surprise, Pound Foolish is well researched and contains valuable insights into the world of personal finance.Have societal issues contributed to the way we are? After all, previous generations seemed to do well financially — even on one income. Are we really that ignorant? Do we really overspend? Or has the world changed in ways that work against us.
Our financial options have become much more complex. We bear more risks (remember defined benefit pensions and job security?). The changes happened quickly ... faster than many can adapt.
You may have sensed something basic isn’t right. Recall the words of Morpheus in The Matrix:
“You've felt it your entire life, that there's something wrong with the world. You don't know what it is, but it's there, like a splinter in your mind, driving you mad … [The Matrix] is the world that has been pulled over your eyes to blind you from the truth.”This book helps you see what the problems might be and why we can’t easily solve them.
To use terminology from The Seven Habits of Highly Effective People, I’ve avoided talking about the circle of concern, preferring to focus on what we can do ourselves. our the circle of influence.
Are Financial Literacy Initiatives Genuine?
Seventy percent of profits in the credit card industry come from people who do not pay off their bills in full every month. Why would the financial services sector support something that has the ability to significantly impact their bottom line for the worse unless they either believed it was not a real threat or believed it to be a lesser threat to their profits than government regulation? — Pound FoolishThe author asks whether the financial sector wants us to be financially literate since that would hurt their profits. Picture Sylvester and friends looking after caged Tweety birds like us. Here are related posts:
- What are you doing about your high investment expenses?
- Do your advisors help with your financial literacy?
- The cost of getting advice from your banker
- Three reasons financial literacy eludes us
Your Views
You may not agree with everything Helaine says or appreciate her use of unnecessarily complicated words like “éminence grise” and "solipsistically". There is also unneeded profanity. Continue reading because Helaine paints an overall picture that’s worth seeing.Lessons And Reminders
In the world of finance, do not assume that people helping you have your best interests at heart or genuine skill. If you're dealing with a friend or family member, you may actually be at a bigger risk than if dealing with a stranger. When you’re confused or think you’re getting solid advice, you’re more vulnerable. That's just life. Hasn't it always been so?The author is not totally altruistic in writing her book. However she does say things that are worth our attention. I'm curious to see what she does next. Identifying problems is important. So is helping people with the solutions. Even if there aren't any easy ones.
Links
- Helaine OIen’s website
- The dark side of personal finance (Jonathan Chevreau, Jan 2013)
- Why dumping your coffee habit isn’t the best savings plan (Business Insider, Dec 2012)
- Ghastly gurus (The Economist, Jan 2013)
- Review of Pound Foolish (BusinessWeek, Jan 2013)
- How the personal finance industry preys on the public (ThinkProgress, Feb 2013)
- Why financial literacy fails (Time, Mar 2013) (new)
- image courtesy of chimicherrychonga
Podcast 207
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PS I taut I taw a puddy tat
Promod, you have added yet another excellent tidbit to your perspicacious offerings !!
ReplyDeleteThe caveat provided by any mutual funds prospectus -- that past performance is not a guarantee of future ROI -- is a message that needs heeding, in this pivot into global 21st century realm.
Just as one example, technology is impacting upon the predictablility of heretofore routine benchmarks in human development.... in the nursery school which serves children of privileged families, I observe changes to learning, processing and execution which could prove worrisome to those who imagine what the 2030 market employee/ consumer will look like... because those individuals will not mature into what is seen as the driver of the market of 2013.
ROI depends on hands / human capital actually doing work. When work is a knowledge product -- how to ascribe value ? How to recoup the time to research and develop ? when, once the answer is know and available, it is always obvious ...
Thanks for your comments Catherine. The ROI question has many implications. Sometimes we measure what's easy to measure rather than what really matters.
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