Don’t let experts paint your future with a broad brush. Reach down to understand where you disagree, then latch on to the rest.
Early in my career I made a horrible mistake: I disagreed with Suze Orman’s advice in a discussion with a potential client. Guess what I found out? I don’t have a big enough megaphone to win that argument. The potential client went away. I learned not to fight with Suze, even if she isn’t in the room.
Now, however, as a slightly more mature (and infinitely more handsome) individual investor, I’ve learned that it’s okay to disagree. It takes an understanding of the guru’s overall approach to reaffirm the other 95% you agree with. I’ve realized that Suze Orman, as much as I dislike the finger pointing and incredibly ego-driven persona, is a credit to the financial community (did I just write that?). Experts like Suze and those below speak to a wide audience so they have to use broad terms.
Sometimes I just think the brush is a little too wide.
5 Topics Where “Experts” Get It Wrong
Liz should be writing “I’m a little off on the “Risk” chapter of this book.”
5) Liz Weston – Don’t Avoid Risk, Embrace It. While Liz Weston is far from controversial, I’m not a fan of the way she presents risk. She says that to be an investor, you can’t be afraid. You must have some risk in your portfolio to reach results.
In short, if you want it, you need to gamble a little.
Being afraid is a good thing. Fear motivates. What are you afraid of? Here’s what you should be afraid of
…that you won’t reach your goal
…that you’ll leave your family destitute
…that you’ll become disabled and be unable to care for yourself or anyone else.
This fear helps you look closely at all the risk, not just stock market volatility. Afraid of losing money? Try sticking it in a CD for 30 years and see what it buys. Afraid of flushing your money down the toilet? Pay off that loan at 3% (before the itemized tax deduction) instead of keeping up with inflation. While I understand the sentiment, you owe it to yourself to get ahead, not bust your ass paddling like a salmon against the current.
4) David Chilton – Budgets are a myth. I enjoy the book the Wealthy Barber, and love the message in Chilton’s smackdown on budgets: budgets create frustration, because it’s so difficult to adhere to one. The key instead, is to focus on saving money. If you have an emergency fund and know how you spend, you’re more likely to “win” with your financial picture.
While I can see Chilton’s point (probably more than any of the other four I’ve outlined here), there still is a place for budgets. By attempting to stick to a budget and knowing ahead of time that it won’t always work, you’re a step ahead of those who just don’t budget at all. You need to know where you spend your cash.
You don’t need an advisor! Just buy all forty of my books….
3) Suze Orman – You Don’t Need an Advisor. Suze’s main premise here is spot on: nobody knows your money like you do, and nobody will care as much as you do. That’s 100% true. I couldn’t care about my client’s money emotionally. In fact, my clients would have fired me if I’d been making emotional decisions with their cash.
Here’s the difference between Suze and I: I live in the real world.
I practiced financial planning for some of the brightest minds in the metro Detroit area. These people could financial plan their lives on their own. So, if I don’t care as much as they do, why did smart people hire me?
Simple. I disagreed with them and broadened their horizons.
How many CEOs don’t have advisors? How many heads of state don’t have advisors? If you’re looking to get ahead, decide when the right time is to add an advisor to your team, and then make sure you pick a good one. I think we spend too much time clustering the whole financial world into one big ball of money-grubbing rotten advisors. Keep that approach and you’ll find yourself starved for time and falling behind the people who decided to find top notch help.
2) Dave Ramsey – Debt Snowball. Okay….first, I know that Ramsey’s method was recently commended for working more often because people are emotional beings and pay down debt more quickly when they set smaller milestones. I get it.
What I don’t get is why people don’t ask themselves the question, “How do I do this faster?” What if you could have use the portion of the debt snowball plan that works–the psychological part–but combine it with a method that attacks interest payments most quickly (that’s how you’ll save the big bucks).
With options around like Ready For Zero, Payoff, and others, there is no reason to continue using the Debt Snowball method. You can psychologically attack your debt AND eat up those extra interest payments. You’ll laugh your way to the bank.
We discuss Dave Ramsey’s fight with the internet over 12% rates of return on our podcast: Two Guys and Your Money, Episode 35: Pat Flynn Lets Go.
1) David Bach – The Latte Factor. What idiotic, absolute drivel. I’ve never seen a person become wealthy by avoiding a latte. Sure, maybe there’s a bigger message here, because the poor person who’s drinking an overpriced Starbucks drink is the same person who’s also buying up clothing on credit at Nordstrom. They’re over their head.
Want to become rich? Stop thinking about $4 decisions with 95% of your brain and instead prioritize. If you could make a $150 decision while in a Starbucks, why wouldn’t you? Decide which action pays the highest, avoid complexity, and jump.
No latte or evaluate your insurance? – Evaluate insurance!
No latte or clip coupons? – Clip coupons!
No latte or restructure your portfolio? – Restructure your portfolio!
No latte or find money-saving vacation ideas? – Vacation ideas!
Read the “big” books by the financial gurus and understand the REAL message. Weston, Orman, Ramsey, Chilton and (sigh) even Bach all offer good advice…just avoid the bad stuff that sounds good. How do you know which is which? Think!
Photos: Liz Weston: marubozo; Suze Orman: David Shankbone; BucksFee: JellyDude
Where do you disagree with “the Experts” in your financial plan?
You’re not a fan of Suze, Joe?! 😉 I would agree that many do paint with a broad brush quite often and what is missed is many situations are unique. I agree with your point in regards to Suze & advisors. Sure, not everyone needs them, but the good ones can be an immense help to you & your overall portfolio.
Alert the media. I know I shocked everyone with that admission, John.
I feel like experts have to offer common advice and would do things differently given individual situations. When you address such a large audience you have to pick a path and go with it knowing it wont be right for everyone. Pick the best from each source and disregard what doesn’t work for you. There is more than one road to success.
Agreed. Sadly, some of the advisors “best advice” that people think of when they think of the guru (most people know who came up with the debt snowball and latte factor) are really, really bad pieces of advice.
I disagree most with the frugality experts who only focus on spending less. If you work an extra hour per day, you will be able to afford all those things and live just as well. Making more is much more powerful.
I agree, Pauline. There’s a difference between the Zen lifestyle of “less is more” and the duct-tape trash baggy feel of cutting corners just to save two dollars, too.
Love the post Joe. Although I wasn’t managing anyone’s money I’ve had friends and family ask me how I feel about certain advice from Suze Orman or Dave Ramsey on multiple occasions. When my advice differs from what they’ve read in books they immediately think I know nothing about finances. Those talking heads definitely use a large brush and that’s why I pound my fist on the table time and time again for people to educate themselves financially.
And btw my wife and I enjoy a latte every week plus a blueberry muffin, that comes to about $15/week…which is $780… if invested over 40 yrs with an annual rate of return of 10%…. ok I’ll stop, but I hope you got a laugh!
By my math, Marvin, you could be the world’s first billionaire by forgoing muffins.
I have to agree with Pauline – I really disagree with the frugality experts. Focusing on scarcity is bound to keep you there; clipping coupons and making your won shampoo doesn’t leave much energy for focusing on generating value and extending income. But if we are talking names, I have to say that David Bach is the one I find most disagreeable – what utter tosh this guy talks (though I am not great on lattes – milk wastes good coffee).
Ha! Maria, we have more in common every time we talk…I like a good latte, but milk in coffee? No thanks.
While I don’t mind most of David Bach’s stuff, I think the guy’s brilliant because he’s said the same three things a billion times and been able to repackage it into many different books…and people buy them all. After I read the third one I figured out that I could have stopped at book #1.
I pretty much read every financial advice book I can get my hands on…….cannnot stand Suze Orman…..never been able to finish one of her books.
Although I did use the debt snowball method when I paid off my credit card debt. The Total Money Makeover was the first financial book I had ever read so I just took his recommendations.
What are your thoughts on Robert Kiyosaki?
Thanks for stopping by, Alexa! I actually don’t mind Suze’s writing…it’s the live stuff that makes me want to choke someone…maybe myself.
The debt snowball method has been proven to work, and I’ve used it in my practice (back in “the day” when I was an advisor). However, now that technology can help people get ahead, it’s easy to go Ramsey + 1.
Kiyosaki is interesting. I was SO fired up when I read Rich Dad Poor Dad that I handed it to Cheryl to read…and she devoured it, too. I think small cap stocks and more dangerous than he explains, but I agree with his diatribe against the “my home is my investment” group.
What do you think of him?
I think that it’s important to have financial advisors, especially when going through life changes. For example, divorce, marriage, kids, job change, etc or if you come into a lot of money via inheritance, lottery, selling a big item, etc. The advisor can help you decide through practical and emotion spending.
Hey, Lacey! You rested up from the Florida trip?
For me, the key is to find the right one. I knew some “advisors” who really didn’t care about the life event as much as they cared about it being a great time to make a money grab because their client needs help. If you have the right help, I totally agree. In many of the instances you list, people aren’t thinking logically. It’s great to have a non-emotional person in your corner.
I’m a big fan of Liz Weston, but I’m not clear on what you’re saying her stance on risk is. I thought she said the standard put your money in stocks for long term investments like retirement (and keep it safe for short-term spending).
In her book, her stance on risk is that you have to take risks to get ahead. Then she goes on to discuss the financial markets and to temper the risk. The reason she’s #5 on my list and not #1 is because my disagreement is in her explanation: the risk is to NOT invest in equities for long term goals (equities meaning stocks or real estate…or better yet, both). There’s FAR more risk in using fixed investments than there is in putting money in an index fund. I think she’s flipped the argument.
Generally, I’m with you. Liz Weston and Jean Chatzky are two of my fav “talking heads.”
I kind of get the latte factor. Many people that I work with claim that they don’t make enough to save. However, the also gamble, drink and smoke. Heck, getting rid of one of those habits and saving the money would give them a leg up.
The others, I do agree with. In fact, the main premise of my site is pretty much what you’ve explained. We’re all different so our finances should reflect this point as well.
Here’s why I don’t get the latte factor, Justin. I don’t think those people would start saving if they stopped gambling, drinking or smoking. They don’t save because it doesn’t seem important. Showing them that if they saved the money they spent on cigarettes that they’d get ahead is like showing my cat how to change the furnace filter and explaining carefully the reasons why it’s important. It doesn’t move the needle. In all of my years practicing I’ve never met the latte millionaire (or anyone working on it).
I suppose you’re right. Many people would just take that money and use it for a different category of consumption.
“How many CEOs don’t have advisors? How many heads of state don’t have advisors?” This is a really good point. The CEO of our company has the people he taps for information, who have people they tap for information, etc. Granted we are one of the biggest companies in the United States, it can be applied everywhere. Would our CEO try to learn, on his own, all the ins and outs of medical expense? Absolutely not; he would ask the CFO for a high-level explanation of where we are at and whether it’s in-line with what we forecasted, etc. Doing everything yourself will at some point come back to bite you; you can be a jack of all trades, but you won’t be a master of anything. Long story short: a large majority of individuals, if not all, should have a financial adviser.
Amen, DC…and to be clear, in many cases it doesn’t have to be someone you pay. Ask a parent or responsible relative for advice. It’ll help you hold yourself accountable.
I tend to read and listen to everything and note the things I find worthwhile. Isn’t that what an intelligent human being supposed to do?
I think the key word, KC, is “intelligent.”
I have to admit that I do watch Suze almost every week. I don’t agree with a lot of what she says. Mainly, she thinks everyone needs to work until they are 70, and her Acura commercial really was a horrible sell out. I have to admit, the train wrecks that she yells at make me feel better about myself. If you want to buy Gucci socks and make minimum wage, why the hell are you calling Suze? It’s fun to watch though.
“(T)he train wrecks that she yells at make me feel better about myself.”
Comment of the day. Awesome.
I recently disagreed with Dave Ramsey and found out that he has supporters everywhere, despite my points being valid I still had to spend a bit of time justifying my position.
Sometimes it’s scary how much people believe a celebrity for no other reason than the fact that they’re a celebrity.
To a degree I can understand. Dave Ramsey didn’t get where he is without being right a large amount of the time. However, to think that anyone is completely infallible is a huge mistake (unless you’re talking about me, in which case you’re brilliant for recognizing my incredible intellectual prowess).
nice post, I think we never shouldn’t do something just because everyone does it. We need to have our own brain!
Agreed, Judson! Thanks for stopping by.
Ah, Suze Orman… I lost a lot of respect for her with that whole debit card debacle last year. And her screaming “DENIED!!!” just got to me after awhile 😉
I think each financial guru has something unique to offer us by way of “advice” but like one other fan mentioned it’s hard to cater to the world. They will never make everyone of us happy but they will have followers that do agree with their ideals on how we should manage our money. I’ve read both David’s books and although I agree with his savings strategy to a certain extent I will always budget. I want to know where my money is going.
God Suz Orman is like nails on a chalkboard. I’m not 100% up to speed on all of these “financial experts,” but like most advice, I take what is relative to my own situation and ignore the rest, so there is a little something you can take away from everyone (even if it’s what NOT to do). Like Pauline mentioned, I disagree with being so frugal you wash your sandwich bags over and over, but the “general” idea is to be mindful of both not wasting, and spending money without thought. Some people probably take what these experts say though at face value, and that could be dangerous. Doesn’t show much independent thinking.
When discussing Dave’s snowball, I’m sympathetic to those who suggest that there’s positive motivation from killing off the smaller cards first. What I take issue with is the closed-mindedness to any other approach. Letters to Dave asking about the “pay highest rate” first approach aren’t just warned that it might feel more painful (somehow) but they are rebuked, “no, it’s low balance first, that’s the only way!” as if the writer were questioning the divinity of Dave’s deities.
As a financial writer, I have to be open to others’ ideas, but as one who loves and respects numbers, I have to analyze the cost that comes with each method.
Liz Weston is right. When you invest, you take a big risk. However, everyone of us will definitely study our chances or prospects. We cannot throw away money just like that. Perhaps, it is a matter of the kind of investment and fallback plans in case things start to go wrong.
Thanks for the comment, David, but Liz Weston is wrong on this one (and I really like Liz, too). The real risk isn’t investing in the financial markets. The way you “throw money away” is by sticking it in a CD earning 1/2% when your goal demands 6%. You’re not just throwing money (purchasing power) away….you’re also throwing your dream away.
The gurus are a great place to start when you dont understand why you’re so bad with money. I actually got started with Dave Ramsey, even though on a professional level I had done all kinds of financial modeling for huge companies, on a personal level I couldn’t stop from overspending every month. After I paid off one debt that was my smallest, I switched to paying high interest debt first…because I knew I could handle it. But I am glad the gurus put me on the right path, I just wouldn’t listen to them once you get the basics down.
I love Dave Ramsey, too, ADP, and think he’s helped a TON of people is real ways. Like you did, people need to say thank you to Dave and then plug in exactly what works for them as step #2.
“How many CEOs don’t have advisors? How many heads of state don’t have advisors?” Thank you for saying it! I am a financial advisor, so I’m openly biased towards the benefit they can offer. Suze always gets me because she’s telling people they are stupid for paying for advice. Excuse me? Did I hear you right? People shouldn’t pay for advice? Oh Suze, honey! Are you working for free, honey? Because you’re giving advice – thousands and thousands of people take your words to heart and treat it as gospel. This mindset of her’s baffles me. A financial advisor is not the be all, end all, but another resource or tool to help you achieve your financial goals. Mini-rant over. 🙂
Great post Joe. You’re so right about Bach, I do like alot of his stuff, but it is amazing to me how he can write the same stuff in all of his books and they still all fly off the shelves. I have a bit of a warm spot for DR, simply b/c he was the first PF guy who got me thinking about actually changing my situation. We started out with the snowball, but by month 2, after I added up the interest we were paying, I was like “What they he__ are we doing, not paying off the highest interest stuff first????” We then switched to the other method, and I tell you, my emotions are doing just fine when I see how much free money we’re NOT giving certain credit card companies each month. 🙂
Awesome points in this article. You need to take everything with a grain of salt and then try to apply it to your own situation to determine what is best for you. I’ve always thought the debt snowball method was second best to the avalanche method, so I’m glad you pointed that out here.