In "Pound Foolish: Exposing the Dark Side of the Personal Finance Industry," journalist Helaine Olen offers a feisty exposé of what she calls the "personal finance industrial complex" and the financial empires it has spawned for such gurus as Dave Ramsey, Suze Orman and David Bach. The book, published in January by Penguin, has received mostly rosy reviews from the Economist, the Washington Post, the New York Times and Reuters, among others.
No stranger to the industry herself, Olen penned a popular Money Makeover column for the L.A. Times in the 1990s, dispensing such columns as "Self-Taught Young Investors Are Well on Their Way to Achieving Their Goals," "For Prudent Spenders, a Shift in Strategies Should Do the Trick" and "Southern Californians Learning How to Succeed in Personal Finances."
Olen's freelance work has appeared in numerous publications, including BusinessWeek, Forbes, Salon, Slate and The New York Times. This interview has been edited and condensed.
In what ways do people get hurt by listening to these personal finance gurus?
Almost all of these people are massively conflicted and are selling you stuff. Dave Ramsey’s radio show is essentially a three-hour commercial for the Lampo Group (Ramsey's company).
Suze Orman was marketing her pre-approved debit card. She sells will kits, all sorts of stuff. One of her things is, very reasonably, “Don’t buy a new car.” Well, guess who appeared in a commercial for a $40,000 new Acura last fall?
There are huge conflicts here. You turn over a rock and 14 snakes come out.
If you could choose just a couple of data points from your book that would help the public, what would they be?
Almost none of us have more than $100,000 saved for retirement.
And the reason we have not been doing particularly well is not because we’re a bunch of financial ... slackers who won’t give up our lattes, but because these plans came of age in the 1980s.
There was an explosion in financial innovation and, at the same time, the income inequality gap started to open, even as the cost of education, health care and housing went up at rates well beyond that of inflation for several decades, making it almost impossible for anyone to keep up.
The savings rate in 1980 was 10 percent and it starts to fall right at that point. By the early 1990s, it’s already in the low single digits. You have to ask, “What went wrong? What happened?” People didn’t go on a collective bender.
To what extent do we consumers have to hold ourselves accountable? Can’t we benefit by listening to people who tell us to cut back our expenditures?
I would never argue that someone should live beyond their means. But I would point out it’s really hard to live within your means when you have a $300 a week unemployment check.
The point is there is this great myth out there that Americans went on a financial bender. The leading cause of bankruptcy is not buying lattes, it’s health care, followed by the usual fractured families, unemployment, sort of all of the plagues of the 21st century — economic plagues.
We kind of have this misnomer that people are spending their money. What is going up, again, at these crazy rates, are things like pharmaceutical goods.
To what extent are personal finance gurus responsible for that? It seems their focus is on what they believe they can teach or control.
It depends on if you think this is a self-help problem or a political problem. I believe it is a political and economic problem.