Friday, December 5, 2008

Beware of Financial Gurus

 Suze "Sooze" Orman on her new Yacht.  The financial advice business is working out well - for her.  How's it working out for you?

I have posted a number of things here in the hope that someone might find some good advice or at least an idea or two. I don't get paid for these postings and don't expect to get paid.

There are, unfortunately, a lot of financial "Gurus" out there who, while sometimes giving good advice, often have an agenda of their own - and often can be bought.

For example, Suze Orman is one such Guru. Initially, she made her fame and fortune dispensing some pretty basic common sense sound advice. Don't spend more than you make. Borrowing is never a good idea. Don't try to keep up with the Joneses. That sort of thing.

One piece of good advice she gave was that when it came to cars, you should buy a decent car and hang onto it forever. Leasing, she said, was never a good idea. She touted her old BMW 7-series that she bought a decade ago and now had over 100,000 miles on it. Sound advice.

But then... General Motors hired her as a spokesperson, and hey, waddya know? Check out those deals on new Buicks! She sold out to the man. See:

And of course today, she is now a spokesperson for Sea Ray boats.  Wonder where that is going to go...

Orman has also leveraged her "Common Sense" financial advice into a small industry of books, kits, seminars, radio and television shows. One person who has definitely benefited from Orman's financial advice is...Orman.

This is not to say she has nothing worthwhile to say. It is just, as I have said all along, you cannot SPEND YOUR WAY TO WEALTH. So when Orman or others suggest you BUY a book or kit or whatever from them to help you with your finances, you should think about the irony of that proposition. Check the book out from the library instead. It's free, there.

Besides, the advice in these books is pretty much common sense, as I have laid out here. There is no free lunch. You can't have it all and not be deeply in debt. You are better off living with less and living in peace than keeping up with your neighbors and living in debt. Basic stuff, really.

In the supermarket the other day, I saw a book entitled "Total Money Makeover" by Dave Ramsey. I thumbed through the book and thought a lot of what he had to say was good advice. Again, most of it is common sense.

I visited his website and like Orman, it is more of the same. Buy my book. Attend my seminar. Send me money, period. Giving financial self-help advice is a great way to help yourself to someone Else's finances.

One troubling aspect of the Ramsey website was its religious slant. I was a bit shocked at this at first. I have nothing against religion, which can be a healthy influence for some people. But for the financially strapped, this comment from his website gave me pause:

"As a Christian, you probably know that you’re called to tithe. That means one-tenth of your income – off the top and before anything else – should go to your church. Beyond that, anything you give is an offering, which is over and above the tithe."

If everyone in the world gave 10% to churches, the churches would be astoundingly wealthy. Provided the churches are doing good with this money (running a homeless shelter or soup kitchen) and not evil (buying pastor Smarmy a new Gulfstream Jet and Rolls Royce) there is nothing wrong with tithing per se.

Nevertheless, I believe that if you are severe financial difficulty, you should consider paying yourself first before you open your pocketbook to your church. And you should know where the money is being spend when you give it to them. Some churches are little more than scams to collect money tax-free.

(And if you think about it, shop around.  There are other religions that don't require tithing or ask for a lot less than 10%.  You shop for the lowest price on gas.  Why not on salvation?  Or just cut to the chase and realize that organized religion is a sham and that God hates it.)

Ramsey's books and seminars make sense in a way. Christian churches are probably suffering from lack of collections when their parishioners are strapped for cash. Better to pay 10% to the church than to pay 10% to Citibank.

There is also some criticism of Ramsey's financial advice as well.

See also:

All in all, I think these Gurus mean well, but they do manage to turn common-sense advice into a wildly profitable business.

Save your money on Guru books. Check them out at the library. Or just...use your common sense.