Thursday, March 8, 2012

Book Review--Going Broke: Why Americans Can't Hold on to Their Money

I read a lot.  Before the financial crisis hit, I read a lot of books on economics as well as voluntary simplicity, frugality, and consumerism.  One of the most useful books was Going Broke: Why Americans Can't Hold on to Their Money by Stuart Vyse.  (Really, this is a problem that affects people internationally, not just in the US.)

I thought this book was great.  Vyse, a psychology professor at Connecticut College, focuses on the (often unwise) financial habits and decisions many people make, and what fuels them.  It's fascinating and all too familiar.  He talks about the what (debt and bankruptcy), the why (why do we act this way) and the how (how can we help ourselves).

He is upfront about his own financial skeletons, and he interviews people who have been through bankruptcies.  However, he intersperses this with information about behavioral economics and the effect of technology on our spending and saving patterns.  What do people do and why do they do it? 

The savings rate in the U.S.--and in many other nations--has plummeted.  However, it is not because people of yesteryear were The Greatest Generation who were moral and upright and disciplined while we are all lazy, feckless sloths who are going to hell, HELL I TELL YOU.  It wasn't as easy to buy things.  Credit wasn't something everyone had access to--credit cards were a rarity (and studies have shown that using plastic--even a debit card--will increase one's spending than if plain old cash is used).  You couldn't just buy things online like you can now.  There was no Home Shopping Network.  Things that are necessary now (such as computers) were either not necessary or not even invented yet and other things that aren't needed are either seen as needs or are expected (try and get a car without air conditioning--it never used to be standard, but now it is and it adds to the cost).  And frankly, you didn't even have the proliferation of stores that you have now. 

We have more opportunities to spend than ever before.  It's easy and it takes little thought.  And there has been compelling research (which he delves into) that shows we are not rational beings when it comes to money.  You're not a bad person if you don't have perfect self-control, you're just human.  So we need to recognize this and strategize for it.

What I liked about this book is that Vyse recognized the larger forces at play without being bombastic.  He was compassionate towards everyone he interviewed and he didn't patronize them.  And he writes in a very engaging style--I actually could not put it down.  Okay, I am a dork, but it was very readable.

What I also liked about this book is that while Vyse recognized the larger forces at play, he also gave some very sensible and realistic advice for people who want to protect themselves now.  Advice that is far more useful than STICK IT TO THE MAN (though I can feel people on that sometimes, certainly) or MOVE TO A COMMUNE AND WEAR RECYCLED VEGAN CLOTHING.  Stuff like: making automatic deposits into a savings account, making it more difficult for you to buy things (try the place your credit cards into a container of water and put that in the freezer trick) and reducing the opportunities to spend money.

Get to the library and check this book out.  It's well worth the time you'd take to read it.


  1. Sounds really interesting. I want to read some personal finance type books so this might be a good place to start!

    Just to let you know, the link in your article is broken. It starts with a address.

  2. Thank you for the head's up, Bryallen. I fixed the link--I hope--it seems to be working now.

    If you're looking for good PF books, I liked Your Money or Your Life. I'll be reviewing it later this month.