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Ignore Your Personal Finance Guru

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This couple that I'm friends with related an interesting story to me the other day. They decided that their current bank no longer suited their needs and it was time to try a new bank. Sometimes, and this is one of those times, switching to a new bank isn't exactly easy. In the middle of this process, bills came due, so they use money from other other accounts to pay them. This created a little bit of chaos with their budget. One of them figured, "Well, we aren't spending money haphazardly, once the bank accounts get settled, we'll be able to transfer money to the right places and right the budget." The other one was a little more concerned about the budget. However, that argument started with, "Well, Suze Orman says..."

I can't remember if the ensuing argument made sense or not. I believe I was too busy actually putting my face in my palm, but the details are foggy. (The other half of my brain thought, "There's definitely a post to be written here.") Whenever I hear someone bring up a "[personal finance guru] says..." my soul starts to cry. I just gives me the feeling that they are memorizing some points and not really learning them, or thinking for themselves. That can be a dangerous thing because even personal finance gurus make mistakes.

Before I go any further, I want to make something clear. I'm not intending to put these gurus down to make me look better. Their personal finance knowledge far surpasses mine. Any regular reader knows that I do not claim to be an expert. If I tried for the next 80 years I couldn't be the experts the following people are. In short, they are awesome, and I am scum. :-)

I thought I'd take a few minutes and detail some of the issues that I have with personal finance gurus:

Suze Orman

Since she was the first person mentioned, I thought it would make since start with Ms. Orman. I have watched her syndicated show about a dozen times. Often she takes calls where people ask if they can afford to buy some luxury item. It's extremely rare for Suze to say, "Yeah, go ahead and get it." I'm waiting for the person who makes $3 million a year to ask to buy a gumball and get rejected as an outlandish request. I'm also fairly convinced that you could make Jack Bauer give up any and all secret information by putting him in a room with Suze Orman and Judge Judy. That is if they aren't actually the same person in a disguise. Come to think of it, I've never seen them in the same place at the same time, have you?

David Bach

I could write up a paragraph, but Kimberly Palmer of US News has done all the work for me. She makes a point that David Bach's famous (and copyrighted) Latte Factor... the faulty math and the psychology behind it.

Dave Ramsey

He's almost exclusively focused on getting out of debt. There's little for the person who wants to learn how to be wealthy. Also, ago 5 years ago, Five Cent Nickel pointed out that Dave Ramsey is bad at math. It's true... Dave Ramsey is more about the psychology of getting out of debt than the math about the best way to do it. To further complicate things, Dave Ramsey brings religion into personal finance, which doesn't necessarily lead to better financial management.

Jean Chatzky

No one can find a downside to Mrs. Chatzky. She's perfect in just about every way. Well, at least I thought that until I got email from her publicist that she wanted to promote her website. She was willing to answer 5 questions from Lazy Man and Money readers... except that when I presented the questions, the answers never came. I tried to repeated get in touch with her publicist to no available. The egg on my face matched my shirt quite nicely. And I'm not the least bit bitter :-).

There are probalby a few more personal finance gurus, I could throw under the bus, but I hope I conveyed the major point I was hoping to... No personal finance guru is perfect. There's enough gray area in math, psychology, and other factors that make all information open to some interpretation. They are great for learning the concepts of personal finance, but you should probably adapt them to your own situation.

In the case of the switching of the bank accounts, I went with the friend who said that the budget would be straightened out when the bank accounts are. They still have access to all the money, so I consider it a short hiccup in the personal finance of the couple. It happens... hug it out over a latte.

Posted on September 3, 2010.

This post deals with: ... and focuses on:

Finances

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17 Responses to “Ignore Your Personal Finance Guru”

  1. Moneymonk says:

    I remember the Jean Chatzky questions. When I realized You never gave the answers I just stopped reading your blog for a few days. Nice to know what happened. Thanks for being honest.

    I believe every guru says something that is not intended for everyone. Actually once you’re out of debt and have ample savings, the less you may depend on them.

  2. Aw, man – my personal finance guru is Lazy Man. See you around …

    :)

    There’s also this article about Dave Ramsey @ Bad Money Advice: http://badmoneyadvice.com/2009/05/ten-things-dave-ramsey-got-wrong.html

    I’ll occassionally listen to him just for the entertainment value. The strange thing is that the station that carries him here seems to cut out the Christian parts. I’m often flipping between him and something else, but I NEVER hear anything Christian. And this is an AM station in Iowa that had a fan base that woule be heavily Christian (although the station is not a Christian station).

    My favorite call was one from a guy whose wife had student loans in a European country (in that country’s currency). He was worried that fluctuations in the currency market would drive the balances much higher. He was pondering the options: move to Europe (and get a job that paid in the same currency), or try to get a loan in US dollars and pay off the foreign debt.

    Ramsey rightly suggested that he attempt to get a loan in US dollars (although that was going to difficult, given the circumstances) and dismissed the option of moving to Europe just because of the loans.

  3. Matt says:

    I remember when Suze Orman used to do commercials for Cadillac. She actively promoted leasing (not buying) a Caddy in these ads. Hilarious. The ultimate “guru” trying to convince me to acquire a depreciating piece of metal, via the worst means of procurement (leasing), from a company that eventually went bankrupt (Government Motors). The ironies were delicious.

    I’ve never taken Ms. Orman seriously since.

  4. Evan says:

    Those Gurus anger the hell out of me! They supply answers that are basic and usually irresponsible when considering they took all of 3.5 mins of fact finding.

  5. Robert Prather says:

    I couldn’t agree more, esp. on Dave Ramsey, who just seems mean-spirited and annoying. Though I do have to say I like Clark Howard (who isn’t mentioned). He’s not exactly a guru, though, and that’s probably good.

  6. You have to be your own financial guru…. after all you are the CEO of your life. All the people you list have flaws, and much of their advice is suspect.

  7. Kim Palmer says:

    Thanks for the shout-out and I agree with your other arguments too!

  8. MoneyMan says:

    I couldn’t agree more, especially about Dave Ramsey. I think this guy gives horrid advice. I mean come on, is cutting up and canceling your credit cards REALLY a good idea….of course not. They are a great tool for building your credit and are great when used correctly. Especially for young people who have no other way of building a credit history.

    -MoneyMan

  9. I also like Clark Howard. He does a great job answering calls; never making anyone feel small. Plus, he has a segment called Clark Stinks where he relays bad advice he’s given and negative comments he’s received.

  10. Jan says:

    Ever heard of Ray Lucia and buckets of money? My sister is hooked and is dragging my 80 year old mother in hook, line and sinker. Be afraid- be very afraid of anyone having that much power over your money!

  11. Lazy Man,

    You forgot to mention Robert Kiyosaki. Between all the purple books and the “workers are losers” seminars, you must have something clever to say about him.

    I liked David Bach’s book and his automated investing style. I’ve read two Kiyosaki books and found some bits of wisdom in them. I’m not a big Suze Orman fan. I don’t know if it’s her voice or her advice, but I can only listen to her for a couple of minutes.

  12. “Plus, he has a segment called Clark Stinks where he relays bad advice he’s given and negative comments he’s received.”

    I’m not familiar with Clark, but this fact gives him reputation a boost in my mind.

  13. Kirk Kinder says:

    Didn’t Bach come out with his “Millionaire Homeowner” book right as the housing market tanked. I guess if people took his advice on buying a big, fat house, they wouldn’t be able to afford a latte now anyway.

    I think there is something other than money in Ray Lucia’s buckets.

  14. Diane says:

    I love this post! I have been a frugal sort for all of my life, but when it comes to investments, I’m lost.
    After researching all of the above and more, I found “Ordinary People, Extraordinary Wealth” by Ric Edleman. Ironically, it was the same day I made my first (and subsequently last) mortgage prepayment.
    I’ve since read all his books and listen to his podcasts every week. (I can’t stand all the commercials on the weekly radio show.) I agree that no one is perfect, but if you’ve tried the others and haven’t found a good fit, you might like Ric, or as he calls his website: rice delman dot com.

  15. Andy says:

    Good article and great premise of using the “gurus” to educate yourself rather than blindly following their advice. I have the consensus opinion that Suze Ormand is not very credible. I listen to Dave and Clark regularly and cherry pick their recommendations. Dave gives great advice about getting out of debt but poor advice on investments and tithing while in debt. So far, I’m a new listener, I find Clark gives good advice about all kinds of topics. For investment advice I like Paul Merriman with his Sound Investing podcast, there are over 100 free podcasts available. I like John Bogle’s and William Bernstein’s books also on investment. I’ll have to research Jean Chatzky, never heard of her. God knows a lot of Americans, probably most, need help with their finances. Living below their means rather than above would be a smart move for all of us and then learning to put the excess to work productively with managed risk is a recipe for financial contentment.

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