Last week, I had doubts about the advice provided by a so-called financial expert on the local prime-time network news program. Offering advice in public is a difficult task to do well. You have to appeal to your audience by suggesting solutions appropriate for the bulk of the listeners, a group that can vary in terms of intelligence, experience, and education.

In many cases, what ends up happening is that the advice is geared to the “lowest common denominator” (in the non-mathematical sense) and those in need of personalized financial advice end up feeling dangerously fulfilled by platitudes, rules of thumb, and averages. But aside from financial guru superstars like Suze Orman, Dave Ramsey, and Robert Kiyosaki, how do producers of local news programs find the experts they use for their economic/human interest pieces?

According to “the Mole,” my favorite undercover financial adviser, radio and television stations contact financial professionals in the community. The stations approach financial advisers to invite them to present “expert opinion.” There is a catch, however. The financial adviser must pay the station to appear.

Previously, I assumed two things. First, if you are interviewed on a television or radio show, you are not paid for your appearance, nor do you have to pay the broadcaster. I’ve been interviewed several times for print and radio, and never once have I been paid nor have I received an invoice. Second, if you are a station or program’s “official financial expert” or “resident financial adviser,” you are paid for your affiliation. The station should be lucky to have an expert like you on “staff.”

This is not the way media works. Radio and television considers your appearances as advertisements for your financial advisory business. Accordingly, you must pay in order to appear. While I have no evidence if that was the case with the financial adviser on the ABC news program I happened to catch, if the Mole is correct (and I generally trust what he has to say), it’s likely she paid ABC in order to be their resident expert and have her name and phone number flash across the screen.

It makes sense from a business standpoint as well. Presumably, the news audience will believe that this financial adviser is reputable for her to be “awarded” the post of resident expert. In turn, some of the audience may become clients. This may make the adviser’s fee worth the price of admission.

As consumers, it’s more evidence that we can’t simply trust appearances.

Taking financial advice from radio gurus, the Mole, Money Magazine, October 1, 2008

I’ve done a good job of sharing my disdain for Dave Ramsey’s popularization of a method of getting out of debt that caters to unmotivated individuals, the “Debt Snowball” method. That doesn’t mean I don’t agree with his principles or his intentions. I just think he, as one of the most popular “gurus” in personal finance, has to cater to the masses. It makes sense for him to profess a methodology that is simple reaches people on an emotional level. Real financial planners who work one-on-one with individuals to get out of debt and formulate a lifetime financial plan would be able to supply better options.

Dave Ramsey does offer something I like, his “Baby Steps.” These are seven suggestions that, when followed sequentially, will do wonders for helping people struggling with their finances to take ownership of the money in their life and start moving towards a more prosperous future.

Here are Dave’s suggestions, verbatim:

• $1,000 to start an emergency fund
• Pay off all debt using the Debt Snowball
• 3 to 6 months of expenses in savings
• Invest 15% of household income in Roth IRAs and pre-tax retirement
• College funding for children
• Pay off home early
• Build wealth and give!

In general, I like this plan of action. These “baby steps” help someone ease into a pattern of new, financially responsible behavior, with small mini-goals which when taken in full view go a long way to help ensure financial stability.

These “baby steps” are designed to appeal to a large mass of people. This is not advice based on any one individual’s real situation, so it’s fair to apply some customization and perhaps even improvements. Here are a few small criticisms.

Is $1,000 enough or too much for an emergency fund base? Dave Ramsey suggests shoring up a $1,000 cash cushion before beginning to pay off debt. Although $1,000 is a finite number of dollars, its value has a different meaning to different people or to different families. A family with an income of $250,000 a year and $1,000,000 in debt may not consider $1,000 to be much of anything, while a family earning $20,000 per year and $100,000 in debt might find the saving of $1,000 to be a struggle. So what’s a better option? I would suggest that this base savings, what is needed to lay the groundwork before embarking on the great debt reduction journey, should be one months’ expenses, whatever they happen to be. That sets a high enough starting goal.

The “Debt Snowball” method is not so great. Despite its popularity and proven track record with a million dollar business marketing this method, I’d like to see more people give a real try to the Debt Avalanche. They’ll save money and time in the long run if they are intrinsically motivated. I’ve discussed this at length before.

Is it too soon to worry about college funding for children? I’ve heard experts suggest that parents should make sure their retirement is fully funded before worrying about funding education for their children. I don’t think saving 15% of household income, unless begun at a young age, will get most parents to a secure retirement, but that depends on the family’s needs at that later date. There are too many variables to predict that with any accuracy. The reason most experts suggest this is because you can borrow money for college, but you can’t borrow money (as easily or inexpensively) for retirement.

I strongly believe that parents have a responsibility to ensure that the best educational opportunities are available to their children, but with the prices of tuition increasingly well beyond the rate of inflation, I’m not sure how well that philosophy will work in the future.

Why pay off the mortgage early? Dave Ramsey is strongly against holding all forms of debt. Mostly, I agree. If the mortgage rate is low enough, and you have the fortitude, risk tolerance, and availability to invest the funds you would otherwise use to accelerate your mortgage payment in an asset allocation designed with a long-term time horizon, it may make more sense to pay just your minimum to the mortgage. But I won’t stop anyone who wants to pay off their mortgage early, even if they might end up with a lower net worth than if they had invested. The market is unreliable, but when paying off a mortgage early, you’re guaranteed to “earn” the rate of interest you’re being charged. It’s not a precise way of figuring the math, but knowing that you don’t have to pay interest that was originally included in your amortization is good.

Thanks go to Dave Ramsey for popularizing good general advice.