Yes, the Personal Finance Industry Is a Scam

Yes, the Personal Finance Industry Is a Scam

I’m bouncing off of Kashana Cauley’s mini-rant in GQ about Suze Orman and the personal finance “industry” in general. The key paragraph here:

This past weekend, CNBC reminded us of Orman’s distaste for coffee: “If you waste money on coffee, it’s like ‘peeing one million down the drain.’” Man, personal finance experts do love shaming people for buying coffee. And avocado toast. If only we’d just stop paying for haircuts—as USA Today recently recommended—the dollars we’d save would also destroy our crushing student debt and sink the effects of years of wage stagnation, income inequality, and de-unionization with it, allowing us to buy those houses we’re too broke to buy right now five minutes before we kick the bucket. And we’d also end up with completely professional, hacked-off-ourselves hair.

GQ leans a bit left so I will ignore the unionization comment. But these are legitimate points. Personal finance experts often like to preach austerity. It is a little disingenuous for a rich person to preach austerity—even if that person legitimately got rich through austerity. Cutting back on coffee, food, and haircuts is ludicrous.

And it is also true that the economy has changed—stuff costs more (even if it doesn’t show up in the inflation statistics) and wages have pretty much stayed put. The student loan problem is intractable, and health care expenses can easily bankrupt you. Asking people to give up coffee is dumb.

I have some answers.

Not everyone can be rich. The popular finance literature seems to imply that everyone can be a millionaire if you’re enough of a CF. This approach makes people have an unhealthy relationship with money. Under this framework, money is to be hoarded, and not shared or enjoyed. Not good.

A better goal is to be free from financial stress. That will involve some austerity, for sure, but you don’t need to give up coffee.

I’m not saying you can have it all—because you can’t. There are tradeoffs. You can have coffee, toast, and haircuts, but with a slightly smaller retirement. And if that’s what makes you happy, then great.

There is a lot of focus on becoming a millionaire. Being a millionaire will not solve all your problems. It didn’t solve mine. Some people become millionaires and still aren’t happy. So the goal isn’t to be a millionaire—the goal is to be happy.

Are you happy?

Take a Quiz

Let’s do a quick 10-question quiz to see if you are happy with your financial situation and whether you have a healthy relationship with money.

  1. Do I have enough cash on hand to cover any emergencies?
  1. Do I have enough for a reasonable standard of living in retirement?
  1. Can I easily afford small luxuries?
  1. Can I give 2% of my income to charity (excluding church) without trepidation?
  1. Is my marriage free from fights over money?
  1. Do my friends think I am a generous person?
  1. Do I wear clothes I want to wear?
  1. Do I derive pleasure from using the money I earn to buy material things?
  1. Am I debt-free, or close to it?
  1. Do I invest in tax-advantaged retirement accounts to the best of my ability?

I could actually go on, but you get the picture. If you can answer “yes” to most or all of these questions, then money is your friend. It works for you—you don’t work for money.

This is a much better yardstick of success than being a millionaire.

The correlation between money and happiness is weaker than you might assume. More money generally makes people happy. The research shows that for most people, happiness tapers off once people start making “enough” money. I have known some unhappy rich people. I have known some deliriously happy poor people.

I can tell you what makes people miserable: debt.

And this is where the personal finance experts like me come into play. When people get themselves in trouble, it is always with debt. Walking into a car dealership is one of the most dangerous things you can do. Unless you understand how debt works, and are assertive enough to say no, you are going to walk out of there with more car than you need, and lots and lots of crippling debt. Car salesmen are responsible for spreading a lot of misery in this world.

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The bank does it, too—even after the financial crisis. If you go to a bank to get pre-approved for a loan, they calculate the size of the loan based on the payment being 40% of your income. And then you go house-shopping from there, for the biggest house you can afford.

THIS is the key to personal finance. Not skipping coffee and toast, but smaller houses and cheaper cars.

As I said last week, people have a tough time giving up small luxuries, but can easily give up big luxuries. Not really sure why that is, but it’s human nature.

Instead of talking about the million dollars you’ll save by not drinking coffee, let’s talk about the million dollars you’ll save by getting a $10,000 car instead of a $40,000 car, and a $200,000 house instead of a $300,000 house. Those interest payments add up.

At least if you are drinking coffee, you are enjoying it. Nobody derives any enjoyment out of paying interest. It is completely unproductive.

Yes, the personal finance industry is a scam, because it misunderstands human nature. Sure, money makes people happy—but mostly because it eliminates stress. All people want is not to worry about it. THAT is something personal finance folks can help with.

One last thing—there were some folks who came out to the party two weeks ago, which was awesome. For those of you who couldn’t make it, here’s a recording of my set. Enjoy!

And Final Call for…

Robert Ross’s “Any-Weather Income Strategy Summit,” which takes place Monday June 24, at 2 pm EDT. If you haven’t reserved your seat yet, you’re running out of time.

The clue is in the title, but Robert is going to be talking about recession-proofing your portfolio, as well as sharing a high-yield stock pick he likes in all kinds of economic weather.

And it’s free, so it’s a no-brainer. Click here to save your seat.

Jared Dillian


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Liz deForest
July 11, 2019, 8:56 a.m.

I am a diehard CF.  I did all of the things young, small house, cheap car, no eating out, mending clothes, cutting my husband’s hair and not cutting mine.  Now I for the most part can buy whatever I want and live in a very nice house.  My husband is retroactively very grateful because we are in so much better a financial position that other people our age.  The reality is being cheap on all fronts when we are young pays off when we are older.  As a housewife I was able to be a total CF and by not working keep our taxes and expenses low.  I also had time to read about investing and make halfway decent investment decisions.  My husband is still working because he likes it, but we have FU money.  I am considering going back to work as well.  Having enough envestment income from the years of CFery gives us more options later.  Also in my experience nearly no one is in the middle ground and being a CF is way better than spending and diving deep into debt.
I was such a CF that I read “Millionaire Next Door” and started spending more.  The best to get me to spend more was “Your Money or Your Life”

Ron Kirby
June 20, 2019, 3:31 p.m.

Good points, Jared. But an important factor is WHERE you enjoy your coffee, food, etc. You can buy real quality coffee and food and prepare them at home for a 10th to a quarter of what you pay at a coffee bar, deli, or restaurant. Not that you never go out to eat or have coffee with friends, but if your everyday habit is eating out (and drinking out), then yes—you are wasting a lot of money without improving your life very much. In fact, you are probably decreasing your fun in life by never doing any food or drink prep, because cooking can be fun. Anyway, maybe that’s the real point that advisors are trying to make.
June 20, 2019, 2:08 p.m.

I completely agree with all you say here, Jared. I very fine synopsis of what I’ve been trying to tell my kids for years. I think it’s beginning to take a hold. I’ll share this with them.

About being a millionaire. I think it’s just something the financial hawks like to promote, in order to sell their products to help you become a millionaire. Only people getting “rich” off this are those selling the products. You can learn everything you need online or in the public library for free. I retired in July 2018, with enough income to have a nice retirement. We have taken three trips this year already, and have rented a condo on Lake Michigan for October, all paid in cash. I spent the last 25 years toward this goal. I do not have a million in assets, but enough to prevent bankruptcy in case of medical issues. Medicare isn’t enough. I could answer all 10 of your questions with a yes, except a maybe (or hopefully) on number 6. If you want to be a millionaire, if that is your desire, then the first step is to get out of debt and control your own behavior.

I’ve always said that success is your own mindset, set against your own goals. It’s amazing how many people don’t have written goals; I still do at my age of 66, and I do a monthly budget and net worth statement. The goal with net worth is so that it grows to outpace inflation. Good habit that will last a lifetime.

Don’t worry about what anyone else says or thinks. I am debt free, except for my mortgage, which is no more than what I’d pay in rent. No problem. Rents may go up, my mortgage will not. It will be paid off early. I really do enjoy my coffee, too, and am not afraid to buy that freshly baked $10 peach pie from the bakery. Enjoy!
June 20, 2019, 11:29 a.m.


Please stop trashing car sales. I know that we are an easy target, but just because our product is expensive doesn’t make the dealer the root of the public’s misery. You are promoting a stereotype that may have existed in the past, but isn’t really true any more. I’ll agree that there are still bad apples out there but that is true of any industry.

The real advice you should be giving your readers about buying a car is to do their homework. Car buyers need to determine their needs, passengers, cargo, fuel economy, comfort luxury, and status. Then they need to determine the model that best suits those needs and wants. The next step is to locate those models online and compare like units, down to color and equipment. Then they will be able to see which dealer offers the best value on the exact unit that meets their needs before even setting foot in a dealership. This method will save thousands and provide better result every time.

OR, you can go to a trusted dealer and get help from a professional sales person whose job it is to do all the homework for you. That’s what they get paid for. Somewhere along the way to the Amazon economy we forgot what service is. In our case all the labor of providing the opportunity to buy a car is baked into the price and you don’t see what your paying for like a plumber or tailor. We don’t expect anyone to work for free so why should a car salesman.   

Also The $10,000 car your suggesting is as much of a myth as the cup of coffee saving your way to a million dollars.  You recommend enjoying the cup of coffee. The same is as true for your car. At current car prices a $10,000 car comes with hassles and headaches that a lot of people would gladly pay to avoid like unexpected repair bills. It still costs to drive even if you start at $10,000, but, I’m not recommending a loaded $80,000 car either.

What I would recommend instead is a new or newer car that meets your needs that you plan to own for at least 7 years. If you can handle the occasional repair than skip the warranty. If you don’t like unexpected costs get the warranty for the duration of the loan.

I’ve been selling cars for 25 years (buying actually, I’m the used car buyer for a Chrysler dealer in Michigan ) and I have never been responsible for anyone’s misery.
June 20, 2019, 11:14 a.m.

100% agree with your take on the personal finance industry. After you have learned that large decisions have a huge effect on your future wealth, the small purchases can be considered with one question: Is it worth it ? 

Side note: I am a part time classical musician (oboe). I listened to your June 6 mix on a pair of high quality headphones. Awesome and hypnotic ! Great to get into the “work zone”.

I am a LT Value Investor - primarily individual stocks, occasional options, working to add ST trades to skill set <<< (one reason I am a Freak subscriber) 

Thanks Jared !

Street Freak and ETF 20/20 subscriber

Don Braswell
June 20, 2019, 10:33 a.m.

Dillan, Good article.  I disagree with your thoughts on becoming a millionaire.  I think every single American, whether leaving home / college SHOULD become at least millionaire.  And they should have the mindset of becoming a millionaire.  And their elders (that’s you and me) should cultivate that mindset.  It makes them better citizens. 
How?  You put 10% (before taxes) into the bank / S&P500;.  Period.  When you save your first $10,000, then you buy ETF20/20, and voila! A household that makes the median income of about $50,000 for 40 odd years, saving 10% per year should have about $1,000,000.  These wonderful folks will likely retire as a millionaires. 
That’s not being a CF, that’s being prudent.  IF you can afford the cup of coffee after that, then great.  But the savings comes first.  “But I have debt.”  Then you (like me) may always have some debt on your CC (less than $5000), BUT you still need to save the first 10% of your paycheck.  I believe the phrase is “pay yourself first.” 
Why is this worth a reply to your article?  Because of mindset.  If you don’t set your mind to a numerical goal, and especially if you think “I’ll never have a million”.  Then. You. Won’t.  Orzman’s coffee cup is the moral equivalent to your car philosophy.  For myself, I’ve set my mind to having $3 million, or retirement benefit equivalents.  That way, a 4% draw should last the next 30 years.  So, can’t I drive my 1999 Honda Accord, drink my Costco Kirkland coffee, save 15% (i started late), live in a house that’s 23% of my income and NOT be a CF?  I can still enjoy a nice date with my wife.  In other words, I live better than the Kings of old…

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