Talking Personal Finance with Helaine Olen: Parts 1 and 2

Here are the first two segments of my interview with Helaine Olen regarding her book, Pound Foolish. You can see a more extensive interview with Olen, with arguably better production values, on Frontline’s the retirement gamble this week. RBC readers are familiar with my obsessions with personal finance, e.g. with this post.

In Part 1, we discuss how she got into this game, what it was like to do the Money Makeover feature for the Los Angeles Times. As I nod to project the wisdom of a sage and swig some diet soda, we discuss what I regard as the financial industry’s most basic dilemma: The best advice fits on a 3×5 index card and is available for free at the library.

We also discuss why divorce is bad for your financial health, and why trusting financial advisors is generally a bad idea, even if one assumes that this person is above ethical reproach. We note the false hopes placed in personal financial skills to offset stagnant wages for millions of Americans. Finally, we observe that Suze Orman isn’t one of the world’s greatest financial advisors, but she has found one of the world’s greatest sales gigs. At least Orman is less predatory than many of the other finance gurus.

In Part II, we start to get into the meat of things. We start by discussing the dinners for senior citizens, at which entrepreneurs sell rip-off variable annuities to seniors desperately (often fairly realistically) afraid that they will outlive their savings. As a warm-up, these salespeople predictably trash Social Security—the one solid source of annuitized wealth Americans can turn to in their retirement years.

I’m cross-posting this with the Incidental Economist. I’m doing so to compare the comment threads on the two sites.

Author: Harold Pollack

Harold Pollack is Helen Ross Professor of Social Service Administration at the University of Chicago. He has served on three expert committees of the National Academies of Science. His recent research appears in such journals as Addiction, Journal of the American Medical Association, and American Journal of Public Health. He writes regularly on HIV prevention, crime and drug policy, health reform, and disability policy for American Prospect, tnr.com, and other news outlets. His essay, "Lessons from an Emergency Room Nightmare" was selected for the collection The Best American Medical Writing, 2009. He recently participated, with zero critical acclaim, in the University of Chicago's annual Latke-Hamentaschen debate.

17 thoughts on “Talking Personal Finance with Helaine Olen: Parts 1 and 2”

  1. A quick question for those twenty-somethings of us just starting out and unsure of the right way to do things: What *is* this simple free best personal finance advice that fits on a 3×5 card? It’s kind of a tease to say it’s so easy and then not go ahead and spell it out in twenty seconds.

  2. Here is my list of honest financial products:
    1. A checking account.
    2. Index funds.
    3. Term life, if you have kids. Whole life and any annuity (except #6 below) are ripoffs.
    4. P&C insurance: home, auto, and an umbrella that is at least $500K over your net wealth. Why $500K? Two reasons. First, plaintiffs’ lawyers view underinsured defendants are irresponsible jerks who deserve to have their assets attached. If you are adequately insured, they are less likely to go for blood in the settlement process. Second, the higher the umbrella, the better-aligned your insurer’s incentives are with yours. Umbrellas are cheap, because big-money lawsuits against individuals are rare.
    5. Prime amortizing mortgages. With current low interest rates, any term could make sense.
    6. (Upon retirement): Immediate annuities, if you want a reasonably guaranteed stream of income.
    7. Auto loans, although you should pay cash if you can afford to do so.
    8. Student loans. Here, the financial product is not so much the problem as the product that the hucksters are trying to finance. The only for-profit schools that are not complete ripoffs are a few established vocational schools.

    There is one horribly dishonest financial product that makes sense for many: credit cards. If you have good financial hygiene and PAY OFF YOUR BILL IN FULL EVERY MONTH, you and your bank are cooperating to rip off merchants and people who pay by other means. Your bank gives you some of the vig in the form of points, and keeps the rest. Credit cards, of course, are also useful to anybody who likes to shop on the Internet or rent cars or hotel rooms and the like.

  3. Very respectable, and respect-worthy, Howard, and thank you.

    Another tidbit: never enter into a contract that bills you repeatedly, as on a monthly basis. Gym memebrships, furniture, phones and their add-on charges for “features”, movie/TV access, etc. — Instead, pay in cash up front when you use or purchase the thing, and never again.

  4. Great posts Harold! It is funny though how policy analysts know the risks of divorce but fail to suggest the obvious solution-mandatory, comprehensive prenuptial agreements?..

  5. I received an early lesson about the financial industry. I was in my early 20's, I am 71 now, and I was looking for a way to make some extra money. I went down to a place to see about selling their mutual funds. The commissions I would make if I sold something were, to me, huge in relation to the total amount of money that the client would of paid in. They had high commissions.
    I mentioned to my crew chief that I had talked to the company. Maynard said I have been putting money into one of their funds every week for several years. I went over to his home after dinner. The stock market, about the time he had started investing in the fund took a pretty good drop. Maynard did not look at the financial news or anything. He just always made a weekly payment. The only person I knew that continued to put money into a dropping stock market. The stock market had made a come back. The person I would of been working for if I started selling their funds said, he really made some good money. He is really smart, ect.
    I knew how to read the financial pages in the newspaper.
    I made a mental note of how much Maynard paid in every week and how many weeks. I made a mental note of how many shares he owned of which fund. I multiplied the number of weeks he paid in by the amount of money he paid in. I multiplied the number of shares he had by the amount he would of received for each share, if he had sold all of the shares he owned.
    I realized that if Maynard had put a cardboard box in the back of his closet, and then put the money he paid every week into the mutual fund, into that cardboard box instead, he would of had more money.
    I thought about what the manager said about how Maynard had really made good money. He is really smart and so on.
    The amount I would of made in comparison to the amount paid in,
    The fact after paying in between 2 and 3 years, Maynard had less money than what he had paid in.
    I made the decision that I was not going to have anything to do with it. I was not going to try selling anything like that to my friends and family. I was not going to do anything like that to them, PERIOD.
    Over the years, from time to time, I have taken a hard look at the financial industry. Nothing has changed.
    Frank

  6. It was nice to explore two segments of your interview Olen regarding Helaine Olen’s book, Pound Foolish that exposing the dark side of the personal finance industry. And good to refer related to finance problems and issues.

    Jack,
    Quality Dissertation

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