6 Unpleasant Truths About Personal Finance

Ready for some tough love about how to improve your financial situation? Jeffrey Strain, the man behind SavingAdvice.com, has put together a list of six “awful truths” about personal finance for TheStreet.com. The reason they’re “awful,” he writes, is that “these truths mean that the each person must take more responsibility and make hard decisions that they would rather leave to others.”

  1. You can’t have everything you want.
  2. Financial institutions are not your friends.
  3. Nobody is going to teach you personal finance.
  4. You are your own worst enemy.
  5. You need to stop watching TV.
  6. Personal finance is easy.

What? Personal finance is easy? Yep:

You already know what you need to be successful in personal finances. All you need to do to get your personal finances in order is spend less than you make. It’s a concept that even a child can comprehend. Unfortunately, knowing and implementing it are two separate issues.

Much like people wanting to lose weight know that that they need to consume less calories than they use, actually doing it is a lot harder than merely realizing it. Yes, implementing the knowledge is more difficult than simply having it and will require some effort on your part, but that’s not an excuse to claim that it’s too difficult because the reality is that it is not.

The interesting thing about #3—that nobody is going to teach you personal finance—is that in a related article Strain writes, “Don’t spend time learning how to invest.” He explains:

When you are first starting to improve your finances, don’t make learning how to invest a priority. Instead, put your investing on autopilot and follow the advice of Warren Buffett: “The best way to own common stocks is through an index fund.”

Once you’ve mastered your finances and have saved a nice nest egg, then you’ll have time to research individual stockts. Until then, your time will be much better spent on improving your finances through other means.

“Six Awful Truths About Personal Finance” [TheStreet.com]
“7 Counterintuitive Ways to Improve Finances” [TheStreet.com]
(Photo: Getty)

Comments

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  1. chrylis says:

    I believe that the author makes a common mistake in confusing “simple” with “easy”. The principles of personal finance aren’t complicated or hard to understand, but they require discipline and going without some of the nifty toys now to help provide a better life in the future.

  2. jamesdenver says:

    I believe personal finance should be tought in high school. If you have home ec, phys ed, and woodshop its ridiculous NOT to teach it.

    Especially when consumerism targets younger and younger kids, and after high school they’ll be bombarded with on campus credit cards.

  3. TouchMyMonkey says:

    University of South Carolina had a 3-credit course in personal finance. It was quite informative.

  4. GyroMight says:

    @chrylis I don’t know how many nifty toys people have that give them a better life in the future, maybe more pleasant.

    Don’t even get me started on the Stop Watching TV rule, I have this whole theory about the Baby Einsteins videos being a ploy by the government to get babies use to watching tv and starting the brain washing to make them consumers.

    But really how hard is the concept spend less than you make?

  5. gmoney says:

    “Financial institutions are not your friends.”

    No, Credit Unions, at least the best of them, are your friends.

  6. zeitguess says:

    Oddly, when we stopped watching tv and let our mags run out, our spending on superfluous junk went way down. Managing money is much easier if you don’t have a Sears Wishbook under your nose 24/7.

  7. gmoney says:

    “”7 Counterintuitive Ways to Improve Finances” [TheStreet.com]”

    The linked article is just complete garbage, BTW.

  8. Segador says:

    @FoxBearDog

    “But really how hard is the concept spend less than you make?”

    The concept is extremely easy, just like “Excercising 5 days a week and eating less will increase my fitness” is an easy concept to grasp. It’s the discipline to actually take action on the concept that’s the hard part. Same goes for 99% of life.

  9. oyanobaka says:

    I love how he writes about the 5th “truth”, how we should stop watching TV, but at the end of the article he advertises a report on stocks written by Dan Fitzpatrick, host of “3 Stocks I Saw on TV“.

  10. GyroMight says:

    @Segador

    I agree I guess I have been raised to be a tightwad, now if only I lived in Tightwad, Missouri.

  11. Shadowman615 says:

    They lost me at the TV thing. One author claims that I can’t resist advertising while the other says I spend too much on TV equipment and cable bills.

    But what if I want more money so I can watch more TV? Not acceptable? Am I just supposed to roll around in piles of cash once I have it? Or spend it all on health food? Really, aren’t these the same kind of guys who tell me I can earn an extra $900 a year by giving up donuts? Or $2500 if I cut out paper towels?

  12. anatak says:

    Personal Finance is easy, it’s the behavior that’s difficult.

    The list is spot on. Go, Jeff!

  13. shorty63136 says:

    @jamesdenver: I agree. My parents MADE me take 11th grade Personal Finance and then opened a checking account for me, deposited money, and made me buy groceries – thus forcing me to demonstrate the whole budgeting, list-making, checkbook balancing thing.

    I had to come home and show them what I learned. They made a lot of mistakes as a young couple and didn’t want me to make the same mistakes – although I still made them as a college grad even though I knew better.

    But – ya live and ya learn.

  14. ARP says:

    @Segador: Exactly- Same with personal finance. Spending less than you make, saving enough for a rainy day, having a diversified portfolio, etc. doesn’t take that much work, or even smarts. It’s all about discipline.

  15. Pennsylvanian123 says:

    I think that list is pretty good. The definition of wants and needs has been so blurred as to be nonexistent these days.

    When I see that add with people carrying around their “nest eggs” I always think that what they should have to be carrying around is anvils of a size representing their debt load. If people could really look into other people’s finances and see the real “price” they are paying to maintain their outward appearance of prosperity, they might feel much differently about “keeping up”.

  16. JayDeEm says:

    “Nobody is going to teach you personal finance.”

    And clearly, this is one of those things that we *really* need to be teaching people from a young age. A couple of mistakes in this area can haunt a person for such a long time, yet so many are left to figure it out on their own. I’ve made my share of mistakes, some of which I’m still paying for, but I have learned from those mistakes.

    I’m all for personal responsibility and all that, but without a good financial education or a little guidance things can still get out of control pretty quickly. I know from my own experience, that just having someone step in and say “don’t do this” once or twice might have prevented most of my problems.

  17. MercuryPDX says:

    1. You can’t have everything you want.

    But if you try sometimes, you just might find, you get what you need. :)

    From my personal experience, there’s nothing like 8 months of Unemployment hand-to-mouth living to put your priorities in line.

  18. Landru says:

    I love how the article end with a pitch to get you to give up even more of your money.

    “P.S. Savings you’d be nuts to refuse… so get ‘em while they last!”

  19. mac-phisto says:

    @Shadowman615: perfectly acceptable, but i think removing “brain drain” activities from your day to get something accomplished can have a significantly positive impact on your lifestyle as a whole.

    i don’t know about you, but i turn the tv on & get sucked right in – law & order marathon (i.e. 15 episodes i’ve seen a dozen times)? glued to the tube for the entire day. the internet isn’t much different – a simple google search for a brisket recipe can turn into a 3 hour surf-fest (& dinner from mcdonald’s b/c i didn’t get propane for the grill before the gas guy went home).

    if your end-goal is to watch “who’s the boss?” reruns for the rest of your life, then go for it. instead, i’ll use the money saved on 2 season tickets to the dodgers & the time saved writing snail-spam on flowery stationary to alyssa milano begging her to come to a game with me. =P

  20. But USAA is my friend…? What gives?

  21. springboks says:

    You need to stop watching TV. <– what does that have to do with personal finances?

  22. crashfrog says:

    they require discipline and going without some of the nifty toys now

    Nifty toys like health insurance and shelter, I suppose.

    The truth is that while “all it takes” is to spend less than you make, few people actually have all that much control over either. My boss isn’t going to pay me any more just because my rent goes up, and my landlord isn’t going to cut me a break because I didn’t get a raise. Neither one of them give a damn. And I could change jobs/apartments, but where is the money to move going to come from?

    Sure, I can make cuts here and there in discretionary spending, but eventually I’ve cut almost all of it, I’m going slowly crazy because I can’t afford to do anything enjoyable, and the difference between my wages and my non-discretionary spending still isn’t high enough to accrue significant savings or pay down debt.

    Americans aren’t in hock because they’re buying lattes with credit cards. They’re in hock because wage growth has lagged behind cost-of-living for the past 30 years.

  23. yagisencho says:

    Knowing is half the battle. The easy half.

    I love #5. That would make a fitting ‘thinking of you’ Hallmark card for my mom. On the cover, a bit frilly heart shape with ‘MOM’ in stencils. Inside, the message:

    You need to stop watching TV.

    The more you watch, the less you know. And she watches a LOT.

    (Love you Mom!)

  24. mythago says:

    @crashfrog: It is true that many people could cut discretionary spending, and see things as ‘necessary’ that they could happily do without. But I do agree with you that crap like “it just takes discipline” comes from what is essentially modern Calvinism; if you don’t have wealth you must have done something wrong to cause you to not deserve it (unlike us, the Elect).

    Being broke does teach you what your priorities are, but those priorities are less “I can make do with basic cable” and more “if that pain in my leg doesn’t get worse, I can probably pay the rent and put off going to the doctor for another couple of weeks”.

  25. @jamesdenver: “I believe personal finance should be tought in high school. If you have home ec, phys ed, and woodshop its ridiculous NOT to teach it.”

    You’re required to pass a test on personal finance and related consumer issues to graduate high school in Illinois; most students take a semester-long class.

    It has not resulted in a marked improvement in consumer literacy in IL.

  26. Javert says:

    The TV thing is stupid. Maybe it is what I watch but most of the time the commercials are for autos I would never buy or beer that tastes like metal. I am not sure what the author is getting at. Maybe it is more that you should not raise your kids on TV because they cannot differentiate what the want/need? The most irresponsible person I have ever met with money does not watch TV and the guy who buy the age of 18 had $40K in the bank watched a ton of TV and not intelligent TV. I just don’t see the correlation.

    I would agree with the fact that this should be madatory in high school. Why shop is in some places and personal finance is not is beyond me. It is nice that some Universitys offer this but not everyone goes to U and it seems that those who don’t may need the most help with their finanaces.

  27. katieoh says:

    @jamesdenver: they taught an economics class at my high school, which included lessons on how to balance a checkbook, use credit cards responsibly, etc.

    mind you, because my school was moronic, they made this class mandatory for FRESHMEN. aka, 14 year olds who couldn’t even get said financial shenanigans for another 4 years.

    hooray public school!

  28. kingmanic says:

    8- Gold is not magic. The price fluctuates like any commodity thus sinking fund into gold is no safer or riskier then most other semi-stable commodities.

  29. mythago says:

    14 years old is well overdue to learn about things like compound interest, how credit cards work, balancing checkbooks and the importance of not blowing everything you earn. Why do you think this is “moronic”? I’m genuinely not getting it.

  30. mac-phisto says:

    @mythago: i agree with katieoh. “moronic” may be a little much, but it’s certainly counterproductive. most kids don’t have a job at 14, & won’t be living on their own or really managing money for at least another 4 years. trying to instill money management well before they can apply the concepts doesn’t seem rational.

    i think it would make much more sense to create a curriculum aimed at juniors & seniors, since most people at that age are more apt to utilize the subject matter while it’s still fresh in their minds.

    i had a “life skills” class in 6th grade (age 12) that taught financial skills & while i excelled in the class, i certainly didn’t retain anything useful from it. my money management post-high school consisted of…well, let’s just say my pockets were always mostly empty, but my dorm micro-fridge was always mostly full of beer.

  31. mac-phisto says:

    @mac-phisto: another thing i’d suggest (in addition to training for juniors & seniors) – when i was in school, you had to get a “work pass” to have a job during school. i certainly think working students should have mandated “financial management” classes that go along with the work pass. that would allow real-world application to coincide with the curriculum.

    but then, it won’t help them pass a standardized test, so why bother?

  32. bwcbwc says:

    @Shadowman615: Watch videos. Skip the previews and commercials.

  33. thelushie says:

    @shorty63136: I had a family resource management class in college as an elective. It was amazing. It should be required of all college students to take some sort of personal finance class.

    I also had sewing as an elective in college. A skill I use on a regular basis (unlike Modern Art History).

  34. Marshfield says:

    The problem is we live in a culture and country that is built on ever-expanding consumer spending. “How is the auto industry doing?” they ask. Oh, we answer, horrible. We all decided to get a few more years out of the cars we own and be responsible with our money. Oh the horrors! Imagine if everyone who COULD simply didn’t buy that new car this year, or next.

    Like in Brave New World, the motto for our economy is “ending is better than mending.”

    And what’s the story around November/December? How much money will people spend this Holiday Season? Will Retailers make enough this year?

    A leading economic indicator is “Consumer confidentce” based on how much people are willing to SPEND.

    There’s not much incentive built into the national mindset to SAVE and shop at Value Village vs. Nordstrom. Until that changes, we can plan on seeing these articles regularly.

  35. no.no.notorious says:

    a friend of mine was without tv for a couple of months, and he said that he noticed a significant decrease in his spending because of it. i wasn’t surprised when he told me.

  36. @crashfrog: The truth is that while “all it takes” is to spend less than you make, few people actually have all that much control over either.

    I’m not sure I know a single person who doesn’t blow money in at least a few areas that could easily be improved. You may not have much control over your boss, but it is very easy to make some substantial lifestyle changes that can result in genuine prosperity. If you’re making minimum wage, that’s one thing-and it is time to get off the ass and get a real education-but if you’re making even a decent wage, you can survive even in the Bay Area by making the right sacrifices.

    Eating out, for example, is something that can be cut out almost completely.

  37. mythago says:

    @mac-phisto: Who said that they shouldn’t have additional classes in high school? It’s not like they only ever get one English class from K-12, why not age-appropriate classes on finance and money management? Even little kids have to deal with Tooth Fairy money. And it’s not a big secret that advertising is aimed at kids from the time they’re old enough to sit up; why not teach them about how to be careful consumers early?

  38. mac-phisto says:

    @mythago: i would support incorporating finance/money management into elementary & middle school math & social science classes, but i don’t know that we need to have classes specifically devoted to this subject at such a young age – it seems a bit superfluous.

    imo, elementary school is out completely – to use your example, if someone thinks money magically appears under their pillow, they’re probably not a good candidate for learning about finances. this is a time to build the foundation for later learning (reading, writing, arithmetic). you could probably start some finance training in middle school, but it would still be pretty abstract for most students. i would rather schools devote their time instilling logical thinking that can later be developed into applied learning principles like finances & money management.

    considering most finance principals have a basis in elementary algebra, i fail to see how anything aside from basic money fundamentals can even be taught before this subject matter is introduced (usually 7th or 8th grade).

  39. crashfrog says:

    Eating out, for example, is something that can be cut out almost completely.

    Only if you can cook, and have a kitchen, and pots and pans. And if you live anywhere urban, and you don’t have a car that can get you to the Pick’n’Save, then groceries cost just as much or more than eating out.

    It’s not as simple as saying “don’t eat out.” Not to mention, there’s the very real psychological stress of pinching every penny, living hand-to-mouth, and feeling like you’re about to spiral down a black hole of debt if, in a moment of weakness, you buy a donut – or have to replace a broken window, or some other unexpected but necessary expense.

  40. Rectilinear Propagation says:

    @crashfrog: That’s why I hate it when people insist that such-and-such a thing is easy. Like chrylis said just because something is simple to understand doesn’t mean it’s easy to do.

    “Spend less on groceries” is simple to understand but “take several hours and two buses to go to the cheaper grocery store and hope the cold stuff doesn’t melt in 100 degree weather because the bus is late again” is not easy.

    Frankly, I find that people insisting that something should be easy terribly discouraging. They’re basically telling you that if you find it at all difficult you’re doing it wrong. You end up changing strategies all the time because the ‘right’ way should be easy and nothing you’ve tried has been easy.

    Also, shouldn’t number 5 be “Stop letting ads tell you what to do”? Because last I checked there are ads in a lot more places than just on TV.

  41. jghitzert says:

    Index funds aye? Don’t put your money in anything without the help of an adviser. Watch the Frontline episode on 401ks if you think I am off the mark here. Put your money in a CD is much better advice. If you don’t know what you are doing. Then go on a search for a good financial adviser. Take your time though because most of them out there are likely to lose your money too. Go conservative. Even though it is cheaper to do no loads like index funds the lack of international exposure could screw you up. Also inflation hedges like exchange traded funds that buy gold or other commodities are also essential.

  42. jimbabwe says:

    It seems to me that DVR and Tivo have effectively rectified the problem of being affected by advertising. I can’t remember the last time i watched a commercial. I see more advertisements in the product placement in movie’s today, and I only see those a couple times a year.

  43. goodkitty says:

    For all those who say that HS classes are the answer… well in a way good show, but the fundamental truth of the matter is that *kids don’t care*. Seriously. 9 out of 10 seniors are either mindlessly coasting to freedom at the end of the year, or talking on their cell phone that daddy provided, or have a pre-paid college ticket already lined up. There is zero incentive to actually pay attention to anything, let alone money management, a topic which in all their lives has had zero meaning whatsoever, and for the foreseeable future will continue to have no meaning whatsoever.

    It’s up to the parents to provide this kind of input by having an actual monetary system in the house (e.g. an allowance and savings and such) instead of being so hand-to-mouth all the time. You must first create the *need* for money management (i.e. by not having money, or for poorer families, by having some kind of hope of having money that isn’t a handout) before the interest to learn about it comes about.