Sunday, February 27, 2011

Financial Advice is Everywhere - But What do People do with it?

Suze Orman addressing a Senate Committee.Image via WikipediaWhat is the financial literacy of this country? How many thousands of financial blogs are there? There is a money section in every newspaper. We have Money Magazine, Kiplinger and others magazines. We have Suze Orman and Dave Ramsey on TV and radio. With all this good information, why is so much of the population in a financial mess?

 Where has all this information gotten us? We are in a level of indebtedness that some think is dangerously high? People are out of work and they are afraid. With all the help out there to many people remain ill-equipped in understanding money matters.

 I propose there is to much focus on information and not enough on how it relates to real people. Author Bruce Sellery new personal finance book called Moolala: Why Smart People Do Dumb Things With Their Money (And What You Can Do About It) contends "We have given everybody more information than they can ever possibly consume, without giving them insights,”.

Sellery describes how people were not grasping the informations financial lessons. He’s developed workshops on handling money and he’s written Moolala, a very approachable, self-help book full of quotes from people he’s worked with.

 He describes a couple he was advising who had a six figure income, money in mutual funds under performing the index's, no college fund for the 2 children and 2 new cars in the driveway.

His plan for the couple was what he called the "Priority Pyramid". Starting at the bottom:

Cash Flow. Are you earning more than you are spending? Maximize income and minimize expenses.

Debt. Have you eliminated useless credit card debt? Living below your income would help this.

Savings. Are you saving enough to meet your goals. Whether they are retirement, a car or putting the kids through college.

Taxes. Are you taking care of the tax implications of your investments by using tax free or tax deferred accounts.

Investment Performance. Are your investments keeping up with the benchmark indexes. If not why not just invest in the indexes?

Optimizing Investment Returns. Using other strategies to maximize gains.

After reading a little of Mr. Sellery's advice I don't see he is much different than any other financial guru. I see the same advice as all the rest. There is nothing new to his book.

Mr. Sellery retreads the golden oldies of personal finance. If your a new comer to the personal finance world take heed of these principles they are golden. But knowing something and doing something is to different things. The author makes the point that you have to change your behaviors to carry out your goals. You're in the mess you're in now because of your behaviors. You have a basic understanding of spending and saving, everyone has, but you don't focus on it. 

Financial knowledge is only the tool you use to get to your goal. It's like like buying a diet book or joining a gym, they're tools to a purpose. The knowledge is a tool. Your problem is your sitting there waiting for the tools to do the work, ain't going to happen. 

To make this money thing work you have to change. You must change on the inside, no book will do that for you. If your a spender, stop spending. If your not making enough money, do something to make more money. You need to turn the ship around and just do the opposite of all the dumb things your doing. You don't need to be a genius to be a winner with your money. 


  1. Very true Dave! When you think about it, financial planning is that hard!

    What is hard is following the plan! As you say, most have their priorities lopsided and don't think far ahead to cushion their retirement.

  2. Hey, I know in my own life how hard it is to implement these good habits. But through murphy visits, and distractions staying on task is hard. Ask any young person if their goal of saving is retirement and they will look at you like your crazy.

  3. Nice post. There is some underlying theme in the universe that links this all together. At the community college where I teach one professor is obsessed with the idea that students' main problem is procrastination.
    Too many people are planning to get their act together (a '90s expression) tomorrow.
    Then, of course, about half the population have never read or even heard of a book like this. Approximately 40% have never tried to figure out where the money will come from for the 25 years or so they will be retired (read: unemployed).

  4. Interesting post and something I think about a lot. I achieved financial independence back in 2007 and walked away from the nine to five.

    It's a little weird really. I was so wired for savings and not spending and watching my net worth grow -- to leave a job and live with the fact of what I COULD be earning took some getting used to.

    But I love writing about finances and having the time to really think these issues through -- it is a luxury most people will never have -- the time to think deeply and for long periods about a subject they find fascinating.

    That aspect of FI and has proven, for me, to be the single greatest payoff.

    I started writing money books before I ditched the rat race and the first I wrote was like many in that it covered a wide-range of financial topics.

    Then I started communicating with my readers, doing some coaching and seminars, and what I discovered is that people need SPECIFIC and in-depth information about the particular issue they are facing at that PARTICULAR point in their lives.

    That is the direction I have since gone in my writing -- books that go in-depth to address specific issues and provide solutions. But, really, I have come to the opinion that what would benefit most people the most is a money coach.

    After all, coaches are proven to work in sports; who could envision a team without a coach? Anyone could read an instructional book about hitting a baseball but the greatest hitters all have batting coaches for their entire career!

  5. You point out a goal, that for me, is to also have the FI to persue many of my interests. I find many people work to gather "things". My purpose in working is gather money so someday I can stop working and pursue my adventures.

    As a child I was impressed with a comment the actor Jimmy Cagney said. Someone asked him why he was an actor. He replied it was the only place he knew where he could make large amounts of money so he could do the things he really wanted to do.

    This example has been with me all my life and is something I have been striving to do and someday be there.

    Your comment about a financial coach is interesting because it has tones of a continual relationship. I have been to a financial planner(Ameriprise) for only a few meeting and they set me up with a plan. But it's something I couldn't follow through with over the last few years, because of the downturn.

    The writing bug has always been in me to. It's something I would like to pursue, this blog is my meager amateur attempt as a start.

    I checked out your blog. Interesting topics, keep them coming. They hit home with me, the credit card offers, how to make soap, and bank offers type posts on some blogs are not for me.
    Thanks for the comment

  6. @DIY Investor, I like it. Retirement = 25 years unemployed. What a novel way at looking at it. Thanks for the comment.

  7. Hi Dave, One of my initial motivations for starting Barbara Friedberg Personal Finance was to increase financial literacy. It is a huge goal, kind of like Michelle Obama's goal to reduce obesity. I continue to promote and discuss and work to get personal finance info out to those who need it. Great article! Also, really like your bookshelf!

  8. Thanks for the nice comments. One of my pet peeves is with all this great financial advice out there why do people still fail so miserably with money? It's something I will continue to explore.

  9. Great article. Managing money is actually easy, but most people don't have the discipline or common sense to do so in a rational fashion.

  10. As previously indicated, the first person to trust with your finances if of course, yourself. This is true because you always do what is best for you. Do this by setting your own financial goals. For instance, I want to receive the highest return for this investment, what do I do? Make a plan as to how you will achieve this goal. Do this by checking financial institutions, stockholders, etc. to see what they are offering. Decide the risk that you can afford to take. You may even evaluate if you want to invest the money into a small business, real estate, etc. After you make your plan, proceed by working it.

  11. I often compare finance to diet: it's one thing to know what, in theory, you should do with your money. Reading one or two good personal-finance-basics books will teach you probably 80 percent of what you need to know -- at least, you'll know the biggest, most crucial lessons. Spending one hour per night, five nights a week, for one month reading personal finance blogs will put most people ahead of the game, at least in terms of knowledge.

    But unless you actually DO it, that knowledge goes nowhere.

    I KNOW that I should stop eating fried food (or at least cut back) ... but it's delicious!

    So many people feel the same way about reducing their spending.

    I think cultivating a sense of "immediate gratification" is important when you're first trying to save. If you get "immediate gratification" not from buying a new item, but instead from seeing your money-market account grow by $25, you'll be much more likely to keep saving.


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