Category: The Big Picture

Rich America

Mansion - William Helsen As I have pointed out too many times, in the good old days the focus of personal finance literature was more or less exclusively on how to become rich. For the past few years tips on how not to become poor have been at least as popular. But getting rich is still, and probably always will be, a fundamental goal.

Indeed, it does not take much imagination or rhetorical skill to make a convincing argument that a nearly universal desire to become rich is the driving force behind the economy. As Gordon Gecko tells us, “Greed is good.”

The cynical left-wing view (I am trying to keep from calling it socialist) is that this race to be rich is a fraud. It is the greyhounds chasing the mechanical rabbit. The rich get richer and the poor get poorer, even if the efforts of the would-be rich have productive effects for society as a whole.

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Why Money Advice is Bad

Bad Money Advice is about just how bad the money advice that consumers get is. From earnest but ill-informed newspaper reporters to pseudo-religious  gurus who preach about how US_Silvercert1to become rich by acting rich, the personal finance advice we get is just not what is should, or could, be.

But much as I enjoy ridiculing the purveyors of this advice, particularly those that make a good living at it, I do not, in the grand scheme of things, really blame them. Most are doing the best with what they have. Even the more villainous merchants of financial hokum are merely supplying the populace with what they are willing to pay to hear.

Mine is a sort of Newtonian view of economics. I believe that nothing happens in a vacuum, that for every ample supply of a thing there exists an equal and opposite demand for it, no matter how bad we may think it is. McDonalds does not sell super sized meals of grease and high fructose corn syrup because they have a pro-obesity agenda, any more than Detroit makes towering SUVs because they hate the environment. No, those things exist to satisfy a demand. We like eating Big Macs and driving Expeditions.

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Mythical Money Myths

Chicklet-currency My job as critic of personal finance advice is made a lot easier if other writers concisely summarize their points of view in easy to digest and refute bullet points. It gets even better if the other writer is argumentative, taking a neatly delineated position on a question which I can contradict.

So when I saw that Free Money Finance yesterday posted a list of Money Myths, my heart leapt. And I was not disappointed. There were eight myths listed, with bullet point explanations and links to fuller arguments from previous posts. What could be easier?

By my scoring, one of the myths really is untrue, two are so subjective that it could go either way based on interpretation, and five are not myths.

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Personal Financial Education is a Good Thing

One of the recurring themes of this blog, possibly the central theme, is that we Americans do not know what we need to know about personal finance. For this I blame everybody, the financial advice gurus, the media, the government, a cultural bias against things monetary, and, perhaps most of all, our own lazy Blackboard Lecturing Crop and childish selves.

If the problem is ignorance, then the obvious cure is education. Why not mandate a high school or college course on personal finance? This is a question I have discussed in passing a few times (e.g. here and here) mostly to point out that things are so bad I doubt we could find enough teachers.

Just to be clear, my only objections to teaching personal finance in schools are ones of practical implementation. In principle, more exposure to the issues of personal finance can only be a good thing. Even a disorganized course taught by a confused teacher could not make the situation worse. Or could it?

There is an outfit called the Jump$tart Coalition for Personal Financial Literacy which did a survey of college students in 2008. They found that students who had taken a personal finance course in high school scored lower on a test of financial literacy than those that hadn’t. Oops.

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Theme of the Year #3: We Are All Nuts

By far, the most read item this year on Bad Money Advice was Swoopo: Entertaining Yes, Shopping No. It’s the closest I’ve ever gotten to a post really going viral, accounting for about 4% of all page views on this site. No Thinking Chimp doubt it was the first thing many of you ever read here.

So I don’t need to recap what it says. But I will remind you all that I called Swoopo a sort of "commercial performance art in which it is demonstrated just how dumb we really are." But dumb isn’t quite the right word. Irrational is better.

And that is today’s year-in-review theme, that we are all nuts. Not that there is anything wrong with that. It’s just that we aren’t nearly as logical as we think we are.

Back in March I posted on a wonderful new concept discovered by two professors: saver’s remorse. The gist of it is that it is possible to regret saving instead of spending, just as you could regret the reverse. In a better world that would have been an absurdly mundane finding, but in our world it is pretty radical.

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