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Personal Finance Blogs (PF Blogs)


One of the categories of blogs that has become popular over the last few years has been the personal finance blogs, sometimes referred to as "PF Blogs". Bloggers offer advice on various financial issues, such as: credit, savings, budgeting, and other financial topics. These sites are helpful to financially illiterate people who are looking to make reading personal finance a part of their daily routine.

The problems with these blogs

These blogs have a few weaknesses. First, these blogs position personal finance as an area which requires constant updating, which it doesn't. Personal finance isn't like technology - other than yearly tax law changes and an occasional new investment vehicles, personal finance isn't an area where you need to constantly stay on top of things. Budgeting will always be budgeting. After you build your financial IQ then you shouldn't be reading PF blogs every day. These sites are the kind of sites you need to eventually outgrow. If you spend your time constantly reading about the newest credit cards offers or changes in bank fees, then you aren't spending your time wisely. Instead, you should be doing something more meaningful like monitoring the financial markets (if you are a semi-active investor), or reading books about business or marketing (if you are an entrepreneur). The reason why these blogs publish so often is that their business model dictates that the more they publish, the better they do. But, as a reader who only has a finite amount of time, this principal works against you.

Another problem is that some personal finance blogs tend to be too micro-oriented and concentrate too much on minutia (although not all PF blogs are like this). This is fine if you are just now learning basic concepts for the first time ("Your FICO score is important", budgeting software, "Bouncing checks is expensive", etc) but these topics become repetitive and have a diminishing marginal utility. The blogs that focus too much on detail need to spend more time on principles. Instead of teaching someone how to micro-manage their FICO score, it is more important to teach someone that if they are generally financially responsible that a good FICO score will follow.

Another problem I have with personal finance blogs is that they sometimes overstep their boundaries and pretend to be experts in related financial areas where they aren't experts. I am mostly talking about investing. For example, most personal financial bloggers generally advise readers to not bother trying to beat the markets. They tend to promote buying index funds and recommend books by John Bogle, founder of Vanguard (marketer of the most popular index fund). I have no problem with this advice since I advocate for indexing myself. But I disagree when PF blogs cross the line and talk about how markets can't possibly be beaten and point to academics as experts on markets.

Another thing that may be a problem (in theory anyway) is that most PF bloggers seem risk-averse. One of the most important factors in wealth-building is having a decent tolerance for risk. But from what I've read, most of the personal finance bloggers seem to be conservative when it comes to risk. Although this is a refreshing change from the many entrepreneurial blogs that teach you that you can make a huge passive income with virtually no effort, this is still a bias that can work against people. People need to realize that there are tons of different ways to get rich. There are workers who make $90,000 a year at their job, save half of their after-tax income, and stick it in CD's at 5% -- and then there are entrepreneurs who are risk-takers who make tons of money by getting huge rates of return on their invested capital of their own companies. I get the feeling most PF bloggers are intellgent people, but they lack the "break the rules" mentality needed to build true wealth. Fortunately, this bias towards low risk-taking turns out to be a large (if accidental) benefit to financially illiterate readers of PF blogs, since one of the defining characteristics of financially illiterate people is that they have a habit of taking large risks at the very worst times. The dot-com bubble and the real estate bubble are the two biggest examples of this.

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