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The truth about money advice

A while back I read Michelle Singletary’s review of the book Pound Foolish, Exposing the Dark Side of the Personal Finance Industry by Helaine Olen.   Intrigued, I checked it out from the library.  It was so good I stayed up late to finish it all in one day.

Olen’s point is that most of the so-called financial experts Americans listen to are saying a variation of the same thing: “When a middle class family gets into debt it’s because they made stupid financial decisions on big ticket items or little things like buying fancy coffee.  Rich people don’t make these bad decisions and that’s why they are rich.  If Americans listen to the experts and stop wasting money, everyone could be rich.”

Sound familiar?  We (the average American Joe) believe what the money gurus say because everyone knows at least one person who got into debt by making dumb decisions.

But Olen says that when you really look at the numbers and research why Americans fall into debt, it’s not because they were going to Starbucks or buying an RV.  It’s because instead of losing their job for three months, they were unemployed for two years.  Or maybe they were diagnosed with cancer and their health insurance was lousy.  Or maybe they didn’t have any insurance at all.  Or maybe their adult child became paralyzed and they had to provide care.  Or maybe they ended up having to raise their grandchildren. Or maybe their salary is actually lower than what it was ten years ago, but the cost of food gas and everything else is higher.  Or maybe they bought a house, the market tanked, they lost their job, but then they got a new job in another state, but now they have to be out-of-state landlords on a house that is losing money.  Or maybe…( you get the idea.)

All of that is a whole lot more complicated than the fanciful idea of Americans frittering money away on a daily cappuccino habit.

It’s also really sobering.

If the average uninsured American is just one medical diagnosis away from total economic disaster, that means that our entire economy is unstable.  If my neighbor gets sick I want them to receive medical attention because #1 it’s the right thing to do, and #2 if they lose their house due to medical bills, that will effect the worth of my house too.

This book really made me understand why universal health care is important to our economy.

Another thing I loved about Pound Foolish was the shout-out to one of my favorite blogs Bad Money Advice.  I’m so sad that former hedge fund manager Frank Curmudgeon has stopped blogging, but I am happy to think that he must now be employed again.

Finally, Helaine Olen’s book introduced me to the website Playspent.org.  It’s a free game that lets you figure out how you would survive as a single mother earning $9.  Like Olen, I’ve played this game over and over again and I still can’t make ends meet.  It is very heartbreaking.

I’m ending this post with a picture of the grocery sack my family is going to fill up for our local food bank this week, and a quote from John Wesley.

“Earn all you can, give all you can, save all you can.”  John Wesley

That’s the financial advice that I try to follow.


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