I've never been a big fan of either Suze Orman or Dave Ramsey. They're both rather belligerent but their readers probably like that as they have both consistently maintained their best-selling status as some of the industry's top financial experts. I have read "Rich Dad, Poor Dad" and felt he was a lot more genuine, and offered some pretty solid advice. Of course, all these books have one big thing in common: the message is "Get a mentor, make a plan, be disciplined, be consistent;" and this is the kind of advice that no one can go wrong with. Hope everyone enjoyed this beautiful weekend. More rain's on the way.
Succinct Summation of Week’s Events 10.18.19
Succinct Summations for the week ending October 18th, 2019
Positives:
1. Housing market index rose 3 points in October from 68 to 71.
2. Jobless claims rose from 210k to 214k w/o/w, remaining at very low levels.
3. Home refinance apps rose for a second straight week at 4.0% w/o/w.
4. Philly Fed Business Outlook Survey came in at 5.6 this month, meeting expectations.
5. Empire State Mfg Survey came in at 4.0 for October, above the expected 0.8.
Negatives:
1. Retail sales fell 0.3% m/o/m, below the expected increase of 0.3%.
2. Index of leading economic indicators fell 0.1%, below the expected increase of 0.2%.
3. Same store sales rose 4.1% w/o/w, decelerating from the previous increase of 5.7%.
4. Home Mortgage Apps fell 4.0% w/o/w, below the previous decrease of 1.0%.
5. Industrial production fell 0.4% w/o/w, below the expected decrease of 0.2%.
Sun 10-20-19 Big Pic: Reconsidering the Advice in 3 Popular Personal Finance Books - The New York Times
Reconsidering the Advice in 3 Popular Personal Finance
Books
By Paul B. Brown
Oct. 11, 2019 -- New
York Times
In times of economic stress, it is good
to know the basics of personal finance.
Many people turn to books for help, so
we decided to go back and review three of the most popular finance books of the
last 15 years: Suze Orman’s “The Nine Steps to Financial Freedom” (Currency,
$16.99); Dave Ramsey’s “The Total Money Makeover” (Nelson Books, $26.99); and
Robert T. Kiyosaki’s “Rich Dad, Poor Dad” (Plata Publishing, $8.99).
They all have something worthwhile to
offer, but after rereading them, I found that all had a glaring omission: a
lack of substantive advice on investing. You will have to go elsewhere for an
in-depth discussion of how to set up a portfolio and choose among stocks,
bonds, exchange-traded funds or mutual funds.
What all three books do emphasize is
the need to buttress your finances by doing such things as reducing debt and
expenses. And they share a constant refrain: You are ultimately responsible for
your own financial success.
The
authors have different takes on how to succeed, though. Ms. Orman says trust
your instincts. Mr. Ramsey says relentlessly eliminate every last shred of
debt. And Mr. Kiyosaki says emulate the rich, who have figured out how to “have
money work for them.”
Oddly, for books centered on bolstering
wealth, all three advocate contributing to charity. They say this is the right
thing to do in itself, but they also say it’s worth doing on a spiritual level:
The more you share with the universe, they contend, the more the universe will
share with you.
Why have the books been so popular? The
spiritual content may account for some of it. But the powerful media presence
of all three authors has certainly helped.
Ms. Orman had a show on CNBC for more
than a decade and now makes corporate speeches on personal finance. Mr. Ramsey
has a syndicated radio show, and Mr. Kiyosaki appears frequently on television
and conducts seminars.
As for quality, Ms. Orman’s book is the
best of the three for standard financial issues, though each has an undeniable
appeal.
‘The
Nine Steps to Financial Freedom’
The
good things about Ms. Orman’s book start with her ability to reduce financial
planning to its basics, and with her sensible suggestions on how to reach your
personal goals.
“Unrealistic budget cuts, like
unrealistic diets, never work,” she writes. Pare back modestly here and there,
she says, rather than try to make big trims. And Ms. Orman emphasizes
often-overlooked aspects of adult life like writing a proper will and appointing
someone who will be able make health care decisions for you, in case, at some
point, you can’t.
While she doesn’t offer detailed
financial advice here, Ms. Orman, a former stockbroker, does recommend that you
own index funds and diversify your holdings.
Unfortunately, the book is a bit out of
date. It was first published in 1997, hasn’t been revised since 2012 and
contains references to events like the Dow closing at 11,000. That last
happened in 2010.
Her tone is supportive and intimate,
and it frequently veers into the ethereal.
Most unconventional idea: “Money is a
living entity and it responds to energy exactly the same way you do. It is drawn
to those who welcome it, those who respect it.”
Questionable advice: “Even if you
own just one mutual fund, your money is still quite diversified, because you
own a little of everything they’re invested in.”
That depends on the fund you own. If
your only holding is an actively managed small-cap mutual fund, all you own are
parts of small-cap companies preferred by that fund manager. You are far from
diversified.
Representative sentence: “When it comes to money, freedom
starts to happen when what you do, think and say are one.”
‘The
Total Money Makeover’
Mr. Ramsey has one major theme, which
he hammers home until you want to scream. “To the exclusion of virtually
everything,” he says, eliminate debt.
The only possible exception he allows
is a small mortgage that you can easily afford (even then he urges that you pay
that off quickly).
If you have any debt, even if your
employer will match the first 3 percent you put into your 401(k) annually, Mr.
Ramsey says, you should not take advantage of the match. He says it is better
to put that money toward what you owe.
Financially, that makes no sense,
unless you are paying interest charges of greater than 100 percent on what you
borrowed. If your employer is matching your retirement contribution, you are
getting a 100 percent return on what you put in. Yet Mr. Ramsey says that while
he understands the math, being debt-free is more important.
I don’t agree. Advising people to forgo
their company’s retirement match is one of the many things I didn’t like about
the book, which was originally published in 2003 and has been updated several
times since. The last revision was in 2013.
Mr. Ramsey seemed to have trouble
finding enough to say. On the bottom of every page you will find this line: “If
you live like no one else, later you can live like no one else.”
That
epigram would be just fine, if stated once. But the constant repetition seems
contrived to fill space, as does the unusually large type. (Yes, it was nice
that I did not have to use my reading glasses, but still.) Even with those
features, the book is barely over 200 pages, not counting 20 pages of
worksheets and an index.
His tone is consistently stern and
no-nonsense.
Most unconventional idea: Pay off your
smallest debt first, even if the other money you owe has a higher interest
rate. The “quick wins” will help you build momentum.
Questionable advice: You can withdraw
8 percent of your retirement savings annually and not outlive your money.
Most experts say a safe annual
withdrawal rate is much lower, no more than about 4 percent or, using careful rules, perhaps 5
percent.
Representative sentence: “I was given a
calling: to show people the truth about debt and money and to give them the
hope and tools necessary to set themselves free financially.”
“Rich
Dad, Poor Dad”
Mr. Kiyosaki reminds me of Ayn Rand. He
says you should focus relentlessly on achieving total independence from the
crowd — financial independence, in Mr. Kiyosaki’s case.
He presents his financial tenets in a
narrative structure that resembles a novel, contrasting what he learned from
his biological father (“get a secure job, work hard, play it safe”) and his
other “dad,” a rich entrepreneur who forged an independent financial path while
living below his means.
The
book was first published in 1997 and updated, most recently, in 2017. As it
unwinds, you see Mr. Kiyosaki, who served in the military, shift from a job as
a Xerox salesman to his vocation as an investor, ending up squarely on his
“rich dad’s” path. He soon buys real estate to minimize his dependence on a
paycheck and begins to shelter income and minimize taxes by setting up
corporations.
Own things that generate wealth, he
says. In addition to income-producing real estate, he says, that includes
stocks, bonds and royalty-generating intellectual property (inventions, books
and the like).
Despite the brisk narrative, the book
has a ponderous tone: It reads like a lecture from an economics professor.
Most unconventional idea: Don’t focus on
your job or career. Think primarily about building personal wealth.
Questionable advice: “With low interest
rates, and an uncertain stock market, the old adages of saving and investing
for the long term make no sense.”
Saving and investing for the long term
are exactly what most experts say you should do.
Representative sentence: “The main cause of
poverty or financial struggle is fear and ignorance, not the economy, the
government or the rich.”
How
Useful Are These Books?
While the lack of detail on investing
is disappointing and the perspective is often quirky and sometimes
questionable, all three books offer sprinklings of solid counsel: Eliminate
debt. Live below your means. Look for ways to supplement your income.
That’s always good advice.
As is this, which came from my
immigrant grandfather: Dig your well before you’re thirsty.
What he meant was prepare for the
inevitable while you have time.
These
books are flawed, but if they teach people that much, they have real value.
A version of this article appears in print on Oct. 13,
2019, Section BU, Page 21 of the New York edition with the
headline: A Second Look at Three Blasts From the Past. Order Reprints | Today’s Paper | Subscribe
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