The Trouble With Financial Advice

I’ve got three articles full of financial advice to share with you today — and although they’re all offering good, solid advice, I feel like something’s missing.

First, Business Insider asks eight people to share the best financial advice they’ve ever received, and all of them give the kind of advice you might find in Personal Finance 101: track every penny, don’t spend more than you earn, don’t increase your spending after you get a raise, know the difference between “needs” and “wants.” There’s nothing about investing or passive income or setting up both emergency funds and “life happens” accounts. Just track your money, don’t spend more than you earn, and… well, you won’t get yourself into debt, but you won’t necessarily set yourself up to achieve any long-term financial goals. (Even if you do put the amount of your raise into an investment account, as Business Insider suggests, that might only be 2 percent of your income per year — and what are you going to do when the cost of living goes up?)

The Atlantic, meanwhile, has an essay by Joe Pinsker about the “one simple financial change” that helped him cut his spending:

The rule is simple: After I buy something, I log the transaction on my phone, recording the price and what I bought. The idea is to increase the pain of paying, especially with a credit card, by forcing myself to take note of what I’m spending.

This is essentially the “track every penny” advice, which is good advice, but it isn’t going to help you save for a down payment or build a $300,000 portfolio. Pinsker quotes behavioral economist Dan Ariely, who suggests telling yourself that if you cut back on your spending now, you can use that money to buy a nice dinner at the end of the week. That’s how much you can expect to save with this “one simple financial change.”

If you do manage to set aside more money than the cost of a nice dinner, Marketwatch suggests that you follow Boglehead Taylor Larimore’s investing advice:

The 94-year-old admits he made plenty of mistakes as an investor over the decades: He tried stock-picking, then following newsletters, then picking top-ranked mutual funds. None could beat the market. Finally, he settled on the three-fund approach — a total-market U.S. stock-index fund VTSMX, +0.24% a total-market U.S bond-index fund VBTLX, +0.00% and a total-market international-stocks index fund VGTSX, +0.00% Simple, he notes in his latest book, “The Bogleheads’ Guide to the Three-Fund Portfolio,” doesn’t mean simplistic.

Except Larimore also tells Marketwatch that many people won’t be able to take this advice, because 401(k) programs don’t always let you invest in total-market index funds. (He suggests substituting 500 index funds instead.)

So. We’ve got these three financial advice articles, two of which won’t give you the tools you need to apply the third, and one of which might not be applicable to many employees. I’m not denigrating the “track every penny” and “spend less than you earn” advice, because learning those skills can change your financial life (or at least it did for me), but I’m frustrated that we’re still only getting the advice to cut a few dollars out of our weekly spending habits.

Which means I’m going to ask, even though it isn’t Question Wednesday: what advice would you add to the list? I’d add “figure out how to increase your income” (which is often the only way to save more than a few dollars every week) and “pay your savings/retirement/debt repayment/investing accounts first.”

Also, I’m always looking for questions to run in The Billfold’s new advice column.

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