As someone who has covered the personal finance industry for years, I like to say there are three schools of personal finance and investment writing. The first suggests that if we spend our money responsibly, we can slowly and surely grow our security and nest eggs. The second argues that our problem isn’t that we are irresponsible; it’s that we don’t have enough money to spend, a situation that can be remedied not by watching our budgets but by speculatively investing in stocks and/or real estate. The third school is much less common: It suggests that while we are not powerless, the problem is less irresponsible spending and/or failure to invest aggressively, and more outside of ourselves, from our society. We need to arm ourselves with personal finance guidance so we can best protect ourselves in a predatory economy.
President Trump, a serial grifter and promoter of such wealth scams as Trump University, is straight out of the second tradition. Will our next president come from the third?
Friday marks the fourteenth anniversary of the publication of “All Your Worth: The Ultimate Lifetime Money Plan,” a personal finance advice book co-written by now-Sen. Elizabeth Warren (D-Mass.) with her daughter, Amelia Warren Tyagi. Its roots lie in the duo’s previous book, “The Two-Income Trap: Why Middle-Class Parents Are (Still) Going Broke,” which outlined a then-controversial but now-commonplace critique of American society: Increasing numbers of people are finding themselves in financial hot water not because they are living large but because the cost of housing, health care, education, and child care is increasing faster than their salaries. “The Two-Income Trap” concluded not just with policy recommendations but also with suggestions for protecting oneself from these forces. While politicians noted the political critique — raising Warren’s profile in Washington — in popular culture Warren began to get notice for those financial tips. Daytime television personality Phil McGraw, a.k.a. Dr. Phil, repeatedly invited Warren on his popular show to counsel financially troubled families a la Suze Orman. A newly minted personal finance star needs a book. “All Your Worth” was the result.
Like all personal finance books, “All Your Worth” has a hook, one that offers “a lifetime of riches,” in this case an approach that tells readers to put “your money in balance,” by dividing it into three buckets: needs, wants and savings. While acknowledging that “you can’t count on good old-fashioned hard work the way your parents did,” it also tells them “you have to learn the new rules” of money. “This book could show you how to cover your bills, without worry or fear,” the authors write, as long as “you are ready to take charge of your money.” As for the vaunted balance? “If we can reach that magic zone," the two women declare, “you have designed your finances so that you always have enough to cover your needs.”
Does Warren still believe this stuff? I had to ask. “Do I think the advice is still good advice? Yes, I think the advice in ‘All Your Worth’ is still the best advice for a family trying to hold it together in an increasingly difficult economy. But I’m less confident about how these families can actually do that in a world where incomes have stayed flat and costs have continued to go through the roof,” Warren told me in an interview this week. “All the structural forces that I talk about in ’The Two-Income Trap,’ the ones that bear down on hard-working middle-class families, have all gotten worse.”
Take child care, for instance. A recent Warren initiative would cap that cost at 7 percent of a family’s income. In “All Your Worth,“ Warren and Tyagi helpfully suggest parents should “Reshop the Child Care,” adding, “You don’t have to spend a lot of money to be a good parent.” Even then this was Pollyanna-ish advice. Child care is also about reliability, and Warren recently discussed how her own child-care woes were solved only when a family member offered to take them on. In a majority of states, child care is now more expensive than sending that child to a public college. “Think of all the people who give up because of child care,” Warren told me.
On some other issues, Warren was prescient. Wells Fargo? She was already flagging it for absurdly overcharging unwitting consumers seeking to refinance their mortgages. At a time when respected personal finance gurus and publications would tell people it was okay to buy homes with little or no money down, she cautioned that the home foreclosure rate had tripled over the past 25 years and “it is happening today in your town.”
That said, the book’s discussion of student loans is so perfunctory, Warren tells me, that if she were to issue a new edition of the book, she would devote much more attention to the issue. She should. In 2005, there was $363 billion in outstanding student loan debt. That increased to a staggering $1.5 trillion in 2018.
“All Your Worth” should confound people who view Warren as a moralizing scold. It’s one of the least judgmental books of personal finance advice I’ve ever read. I’m hardly alone in that belief. “Warren has a level of understanding and empathy with average people’s struggles that’s missing from too many personal finance books. She acknowledges how profoundly the deck can be stacked against people, but armors them with the tools they need to get ahead anyway,” NerdWallet personal finance columnist Liz Weston told me. Warren puts herself firmly on the side of the person “who works hard and plays by the rules” but still wants to enjoy the occasional luxury. Chapter 4 is titled “If You Can’t Afford Fun, You Can’t Afford Your Life.” She’s a cheerleader, urging people on, but not delusional. An expert on bankruptcy, she calls filing for it an exercise in “hope for the future” because “bankruptcy is designed to give you a fresh start.” Her fury, then like now, is reserved for the forces aligned against struggling Americans, not the doing-their-best individuals themselves.
“All Your Worth” is also a book that reminds readers that Warren, who was a registered Republican till the mid-1990s, once held crossover political appeal. In “The Two Income-Trap,” she took on Joe Biden, then a bank-friendly senator from Delaware, pulverizing him for his support for bankruptcy reform legislation (subsequently enacted) that, she said, would worsen the plight of American families. Among those who embraced “All Your Worth” was born-again, right-wing personal finance pundit Dave Ramsey, who invited Warren on his hugely popular radio show, and, as I put it in my book “Pound Foolish,” could “sound like a breathless teenager in love” when he discussed Warren’s war on the abusive practices of the predatory credit industry.
Yet for all its worthiness, Warren understood “All Your Worth” would never be enough. Warren says she wrote “All Your Worth“ as an acknowledgment that “help is not coming from the government, so here’s the best you can do to protect yourself.” Two years after the book’s publication, she outlined what would become the Consumer Financial Protection Bureau in an article for the journal Democracy. Her last appearance on “Dr. Phil” was in 2008. The problem was ultimately less personal than political. “These books show why you need the systemic changes I’m proposing as a candidate for president. Universal child care and early learning. Housing reform. Wealth tax. All of these proposals are working to solve the problems that I wrote about,” Warren told me. “The structure works great today for the wealthy. It’s not working for anyone else.”
Warren understands something almost intuitive about American society that seems to give most other people trouble. Most of us don’t want to think about our finances as often as we are forced to. “All Your Worth” is designed to get us to that place. In fact, it’s damning — of American society, of the age of inequality — that so many people can try to follow its advice and still find themselves in financial trouble. As I reread this charming and still useful book, it occurred to me that we could say, to borrow the book’s phrasing, the United States is profoundly politically and economically out of balance. Warren is running for president to fix that.