Pound Foolish by Helaine Olen

Read: 26 December, 2013

If you’ve been reading along for a while, you’ll know that I went through a spat of reading personal finance books in 2009 (and even read Kiyosaki’s Rich Dad, Poor Dad, which Olen specifically addresses in Pound Foolish). At the time, I had just started working after living on a single income for several years while a student. Our goal was to keep living on as close to a single income as possible, putting the second income away for rainy days. But, of course, we were young and didn’t quite know how to make that work, so I toured the personal finance section of my library.

I did learn quite a bit about how to make and maintain a budget, and I like the idea of the envelope system even if we’ve never found a way to make it work for us. But other than that, I didn’t see much value in the books I read. The advice often seemed to ride on things that just didn’t make much sense – like Kiyosaki’s advice to buy real estate (which read like comedy given that the real estate bubble had just burst), or the assumption of at least an 8-12% rate of return on investments (I have never in my adult life seen a consistent return higher than 2% and even that much is rare), or the requirement that housing take up no more than 30% of your household income (puh-lease, a cardboard box would cost me more than that around here!), the books just seemed to make an awful lot of assumptions that simply would not apply to what I would imagine are the vast majority of their audience.

What’s left, the good advice like “spend less than you earn!”, is common sense. People who are reading personal finance books (and therefore care about personal finance) are already trying to do just that. What they want to know is not the goal, which they already have, but the steps for achieving it despite having unexpected expenses like medical bills, or despite the loss of income due to a crappy economy. And for that, personal finance offers no solutions. What stabilized my household’s livelihood was not my budgeting, but rather the recent Canadian minimum wage increase.

And that is essentially Olen’s thesis. The personal finance gurus (nearly all of whom make their money by selling their advice, not following it) shift the burden of managing on the individual, when many (of not most) of the difficulty the individual is having comes, ultimately, from social issues – such as the state of the economy, lack of regulation in the financial sector, lack of social support after a job loss, or medical expenses.

Olen’s book is damning, and depressing. There’s no uplifting message, no sign that things are changing. It just goes on and on pointing out how various ways that predators have found to feed off the public. It’s a hard book to read, and it had me taking a good second look at how I’ve allowed my finances to be managed (though, silver linings, it has prompted me to make some significant changes in that area that I’m hoping will at least minimize risk).

It’s also a call to action. Instead of talking about personal finance, we need to talk about social finance. We need to talk about regulation.

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