About a year ago I reviewed Suze Orman’s 2009 Action Plan. I felt certain that it would be the first in a series of annual paperbacks from Ms. Fabulous. Sadly and inexplicably, she seems to have passed on this particular opportunity.
But all is not lost. David Bach, of Latte Factor® fame, has stepped into the breach with Start Over, Finish Rich: 10 Steps to Get You Back on Track in 2010
. It works well as a sequel to Orman’s book. Aside from the similar title it shares the same peculiar 4 x 7 1/2 paperback format and a cover laden with gold leaf. (Of course, by law, all personal finance books have some gold leaf on the cover. But this one has an Orman amount.) And Bach cribbed Orman’s gimmick of giving away electronic copies of the book for a limited time to build sales momentum.
But while Orman’s 2009 book had the tone, if not the substance, of a collection of emergency maneuvers to help the reader deal with a calamity, Bach’s 2010 book is more of a pep talk to get the reader back on track now that the calamity is over. Indeed, it is endearingly old school. The goal is to get rich, not merely avoid becoming poor. And Bach generally resists what must have been a strong temptation to make his book seem more timely by claiming that his advice is specially tailored for times like these.
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The piece is entitled Believe It or Not, Existing-Home Sales Were Up in ’09. Why wouldn’t I believe it? Why wouldn’t anybody? We were supposed to have an opinion on this topic? And a wrong one?
I suppose that if you misunderstood what was meant by the term "existing-home sales," confusing it with the prices for houses, rather than simply the number of non-new houses that changed hands in 2009, you might be surprised. Through November ’09 the Case-Shiller 20 City was down a little less than 3% for the year. (December hasn’t been reported yet.) That’s a great improvement on the year before, ’08 was down more than 18%, but it’s still down. So, yes, if you thought "existing-home sales were up" meant that prices were up, your befuddlement might have caused a brief bit of erroneous optimism.
Alas, that’s not what it means. The count of houses sold is of great interest to real estate brokers, who make money on each transaction, and of almost no use to anybody else. True, there is a rough and unreliable relationship between sales volume and prices. (See chart here.) It is enough that if we had no price indexes we might use sales volume as one of our tea leaves to help us guess what was going on.
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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 
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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Imagine that you are in financial distress. You have a mortgage, a car loan, and credit cards, but cannot pay all three. Which gets paid and which gets stiffed?
Obviously, this is a lesser of evils situation, not an ideal one. Not paying any one of them will have negative consequences. Defaulting on the credit cards will likely result in not being able to use them to buy more stuff. And the other
two loans are secured, so not paying those bills could result in the loss of your wheels or roof over your head.
You might think that since shelter is so important, the mortgage would be the most likely bill to be paid. And since buying more stuff on the credit cards is less vital to a person in financial trouble, you might assume that credit cards would be the most likely to be defaulted on. Having your cards taken from you would suck, but not as much as having your car taken.
Not so. Last week Wallet Pop ran a post by Lita Epstein that looked at default data for these three types of loan. Credit cards do turn out to be more commonly defaulted on than car loans, but not by as much as you might have assumed. 1.1% of credit cards were 90 days delinquent in the third quarter. 0.81% of car loans were 60 days delinquent.
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Books, Gurus | Frank Curmudgeon | 
February 2, 2010 12:59 pm | 
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