STANFORD UNIVERSITY – Eric Tyson, best-selling author of Personal Finance for Dummies and Investing for Dummies, who earned his MBA at Stanford Graduate School of Business in 1989, recently talked with the Stanford University Be Well program about personal finance. After spending years consulting Fortune 500 companies, he now focuses on helping “everyday people” needing commonsense advice on money matters.
Why do some people stick their head in the sand when it comes to personal finance?
People often feel uncomfortable with the topic of finance. In many households, money is a taboo topic of discussion and often a source of marital conflict. Personal finance and investing are fields filled with jargon (and analysis) which can intimidate and make many people uncomfortable. Conflicting opinions in the mass media and the web also add to the confusion and discomfort.
Financial education is often a neglected part of the curriculum in schools. Why is that problematic?
We are missing an opportunity to teach an important life skill at those ages when it could be more easily acquired. Otherwise dull school subjects could come to life with the practical application that finance education represents. Plus, the younger you are when learning how best to manage your personal finances, the greater the long-term value.
“Wall Street” has given us reason to be skeptical. Can you give us reason for optimism?
Every industry has firms and employees that don’t live up to a high enough standard and who sometimes break the law. The good news is that America is a leader in the financial services field, providing millions of well-paying jobs and benefiting our overall economy. While some people feel that the deck is stacked against the small-time investor, now more than ever, people with modest sums to invest have access to top money managers and strategies via mutual funds and exchange-traded funds (ETFs).
How can we find objective, honest sources of information?
It begins with getting educated on the topic yourself. How can you possibly evaluate someone’s expertise and competence if you yourself know nothing about the subject area? You must also do your homework on information sources and supposed experts/gurus. It amazes me how quickly some folks will follow the predictions of a guru interviewed in the mass media without conducting due diligence on this supposed expert’s background, training and track record. Also, be aware of what someone is selling and the conflicts of interest that can result.
In your opinion, what would you say is the easiest problem for Americans to address?
Honestly, for most people it’s the ability to save money. To accomplish this, most folks must work harder at managing their expenses. Never use consumer debt, such as through credit cards and auto loans, to purchase items. Also, if you are having trouble saving money, you should examine what you’ve been spending your money on over the past 6 to 12 months.
Any final words of wisdom?
You owe it to yourself and your loved ones to make the most of the money that passes through your hands. Get smarter about managing your personal finances and begin working through a “to do” list of important financial steps. Be patient: don’t expect to accomplish everything in a week or a month.
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