No doubt you’ve seen them on television, heard them on the radio, or maybe even come across them in your church. Names like Suze Orman, Dave Ramsey and Ed Slott are, among others, the financial personalities of the 21st century. They seem to have your best interest in mind. And the people in the audience look and sound just like you. And in the case of Dave Ramsey, they may even use bible verses to support their advice. So, should you be listening to them?
Most of the time, yes. I’ll admit that when I come across the Suze Orman show on Saturday morning TV, I stop and listen to what she’s saying- measuring it against my own well-founded knowledge. And, to be sure, most of her advice is spot on. Same thing with Dave Ramsey– I’ve sat in on multiple Financial Peace University classes and most, especially the early ones, are very good.
The problem comes, however, when things get specific. Or time-sensitive. For instance, Dave recommends using money market funds for your cash savings. And time used to be that you could get a guaranteed 2-3% return per year on this type of investment. Nowadays, 0.05%. Remember a few years back when the government was offering an $8000 tax credit to first-time home buyers? This tax credit wildly tipped the scales in favor of first-time home buyers accelerating their timetable for buying their first home. But if you blindly listened to Dave’s advice of always needing 20% down before you purchase, you missed out on a great opportunity. Same thing with cash value life insurance. Both Suze and Dave typically make blanket statements that say all cash value life insurance is a bad investment (“buy term and invest the difference,” right?) And, 95% of the time, I agree. But, 5% of the time I don’t. And considering Dave Ramsey’s personal wealth is valued at $55 million and Suze Orman’s comes in at $35 million I would save that if Suze and Dave aren’t using cash value life insurance in their own financial plans, they are complete fools. For one excellent use of cash value life insurance is as an estate planning and wealth transfer tool for ultra high net worth individuals like celebrities and sports stars. They can avoid paying millions in estate taxes with the right policies.
Keep in mind too that at their core, these personalities are out making a buck, just like everyone else. Similar to Dr. Oz or Tony Robbins, they make millions selling you their books, DVDs and seminar tickets. Add millions more on for the referral fees Dave gets from his so-called “Endorsed Local Providers” or ELPs. These ELPs pay Dave a fee to have your name and contact information sent to them. It’s what’s called “paid lead generation.” Most have never met Dave Ramsey. Some that I’ve personally spoken with agreed that they outright disagreed with Ramsey’s advice on certain topics, finding it “dated” or “just not true anymore.”
In the end, realize that when a financial personality is speaking on TV- their audience is tens of millions of people. Books are published and kept in print for decades. And while some knowledge is, as they say, “timeless,” other knowledge is not. Tax law changes. Fiscal policy (set by our government) expires. Monetary policy (set by the U.S. Federal Reserve) is fluid. And that’s why we’re here- to keep you abreast of today’s financial landscape and help you make the best possible choices for your unique situation.
Earnings will continue to trickle in the first few weeks of May and then things should slow down as the summer season will begin to set in. Keep an eye on Greece as they continue to jockey with their creditors including the IMF and EU. May 11th is an important date there. In an April move the Greek government issued a decree requiring all local governments must keep their reserves with the Bank of Greece, not a sign of fiscal health. Otherwise, stocks are finding it difficult to sustain any lasting downward move and corporate bond issuance continue to be strong.
Credit Tip of the Month
You can often negotiate with your credit card issuer. On items ranging from your interest rate, to billing cycle dates, to waiving a late fee once or twice, credit card issuers will negotiate just about anything with you; particularly if you have good credit. Keep in mind though if you’re hoping to negotiate a lower payoff on a large credit card debt the negotiations often won’t take place until you’ve missed multiple payments (not usually a good idea) and sometimes negotiating for something better now may hurt you later vis-a-vis a lower credit score or closed out account.
Spring is here and that means Yardbusters! Join us if you can Saturday, May 16th, for the first Yardbusters of the season. For those unfamiliar with the program, Yardbusters is a group of volunteers organized through Boulder County Care Connect that help the elderly and disabled of Boulder county take care of their yards. Please join me that morning as we take care of some general yard maintenance like mowing, raking, weeding and/or trimming. Free lunch provided. E-mail me if you’re interested in joining us.
Apples ripen after being picked, oranges don’t.
Have a great May,
Steve Zakelj, CFP®