Nonfiction – Kindle edition. Portfolio, 2012. 304 pgs. Library copy.
Subtitled “Exposing the Dark Side of the Personal Finance Industry”, Olen covers how a financial illiterate populace is sold bad advice, bad get-quick-rich-schemes, and bad retirement strategies by an entire industry. Her book begins with a frank discussion of how America’s personal finance gurus – Suze Orman, Dave Ramsey, and the authors of The Millionaire Next Door, which I read earlier this year – and investing advocates such as Jim Cramer offer conflicting and self-serving advice.
Then, she moves on to how Americans have been told 401(k)s and financial literacy (sponsored by banks, of course) will help them solve their debt problems. But, as Olen points out, these problems are systemic due to declining wages, a widening income gap, a stock market whose gains cannot be counted on, and the erosion of our social safety net. No matter how much a person avoids buying Starbucks lattes, the extra $5 a week will not mitigate the massive decline in their home value and 401(k) following the 2008 crash. (Olen wrote her book in 2012.)
“Between 1979 and 2007, the average after-tax income for the top 1 percent of earners in the economy soared by 281 percent—and that number is adjusted for inflation. As for the rest of us? The top 20 percent would see their incomes increase by 95 percent. The middle fifth? A mere 25 percent.”
One particularly standout chapter in Olen’s book deals with the pervasive view that women are inherently bad with money. Olen met with a number of bank officials and financial planners who have launched programs to specifically target women and their perceived financial needs, and they all claim to have the figures to back up their assertions that women feel uncomfortable with money.
“Prudential’s surveyors found that 53 percent of women did not understand what an annuity was, with another 43 percent unable to identify a mutual fund, all of which, in her view, points to the fact that “they really needed help in understanding the vast array of financial products that are available to them.” The percentage of men? There’s no answer. No one thought to survey them.”
As Olen documents, the problem is that women are uncomfortable not with money but with the way the industry currently serves out financial advice and products. Above all else, women want the terms and conditions of the products they be sold to be clearly laid out. But to do so would reduce the chance that women – and men – would sign up for credit cards with high rates or investment strategies that support the bottom line of their sales people.
For the most part, though, I found Olen’s book to be heavy on criticism and short on action. She is absolutely right to argue that the emphasis on individual responsibility obscures systemic issues with our financial system, but her solutions rest either on certain advocates (such as Elizabeth Warren prior to her run for the U.S. Senate) upending the economic system or on individuals performing due diligence on any investing, debt-reducing, or money-making scheme.
Of course, the whole book undermines this individual-based advice because, as Olen exclaims, “when it comes to money, the vast majority of us are nuts. Bonkers. Batshit crazy. We are natural born fuckups. We engage in so many self-defeating behaviors it’s impossible to list them all.”
Thus, the book ends with a half-hearted shrug and the message that we’re all screwed no matter how much we try to get our financial house in order. Not exactly an enlightening message or one that readily lends itself to action in order to address how badly the personal finance industry is taking people for a ride.