Bad Advice? Here’s Some From Top Money Gurus
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
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.
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!
Where do you disagree with “the Experts” in your financial plan?