In my line of work as a business editor, I see a lot of personal finance books. I’m looking at some right now — they’re stacked on a table that’s designated for review copies of books never to be reviewed ― or read. Similar piles of diet books have grown to great heights on the other side of the newsroom.
At ground level, the concepts that most finance and nutrition books are built on sound simplistic: To accumulate wealth, you have to take in more cash than you spend; to lose weight, you need to burn more calories than you consume. But whether the subject is currency or cuisine, most people ultimately abandon even the soundest of advice if it requires too much effort. Chapter one is a breeze. By chapter three, it’s “I wonder what’s new on Netflix?”
Personal finance writing is particularly off-putting, often littered with turgid terminology such as “credit utilization rates” and “expense ratios.” It plods through well-worn territory with uninspiring views (how to make the best use of your tax refund). It resorts to outright finance shaming (do you really need that latte?).
With her recent book “Napkin Finance” — it was released before the coronavirus pandemic ravaged financial markets and caused massive job layoffs ― Tina Hay takes a decidedly more lively and lighthearted approach to this serious subject. A New York Times reviewer called it “the best personal finance primer I have read in years.”
It is indeed good, but “Napkin Finance” works as much because of its visuals as the words. Each browsable chapter is fronted by simple, whimsical sketches — the kind someone might draw on a napkin during an endless Zoom meeting. The drawings make complicated subjects such as asset allocation, estate planning, and IPOs less imposing.
There’s also an element rarely found in the finance genre: humor. And could we ever use some of that now. “IRAs and 401(k)s can make you rich enough that your grandchildren will want to stay in touch with you,” Hay writes. And, “When you’re starting a start-up, you’ll sleep like a baby. You’ll wake up every two hours and cry a lot.”
Hay says she realized the need for a different approach when she was working on her MBA at Harvard Business School, from 2000 to 2002, dazed and confused by the dense language of money matters. She spoke from her home in Los Angeles.
With the spectacular collapse of the economy, many people are just trying to cope with the day-to-day. But should those with a retirement or savings portfolio be doing anything differently today than they were a few months ago?
What people should not be doing is trying to time the market by guessing when to buy or sell or taking action when the market is headed down. What you can do is focus on the factors under your control. This includes reviewing your portfolio and asset allocation and making sure your investments are diversified to enable you to weather the storm and remain invested for the subsequent recovery.
Tell me more about the idea behind the book’s format.
I use images and sketches to understand topics, as many people do. Visual learning has been used by da Vinci, Mozart, Freud, and many others to solve problems. It’s more digestible, fun, and engaging than traditional financial content.
It sounds like Harvard Business School came as a shock.
I’d never taken a finance course or an economics class. I went in very intimidated, especially since I was sitting next to bankers and consultants. I found that visual learning and images were more comprehensible than anything else I was learning. Not just in money and finance, but in so many aspects of our lives, we feel overwhelmed when it’s just text.
Most people don’t consider finances amusing, but you rely on humor to get your points across.
The power of comedy to help people relate to a topic; it’s worked in politics — this is kind of like the Jon Stewart of that. Comedy can make everything more friendly and approachable.
A lot of this comes down to debt. Dave Ramsey (the radio show host whose 2003 book “The Total Money Makeover” serves as a roadmap for his many) preaches that the only acceptable debt is a home mortgage. Is that kind of tough-love approach realistic?
I’m a big fan of Dave Ramsey. What he’s done for so many people is amazing. But to say that you should avoid any kind of debt does not apply to every person. The general way to think about it is that good debt is anything that helps you increase your net worth. That can be your education, that can be investing in different assets. Bad debt is money borrowed to buy anything that loses value. Even a home equity loan can be looked at as good debt in some cases because usually the interest rates are lower than other types of debt. On the other hand, you have things like credit card debt and car loans.
Is borrowing money to buy stuff endemic to US consumers?
Americans now have more consumer debt (almost $14 trillion) than they did even at the peak of the  financial crisis, which is so mind-blowing, but it’s not just an American issue. Taking on too much credit card debt and not being able to pay it back can negatively affect your financial well-being in so many ways. Most people approach debt without a plan and what’s really important is to take small steps. to manage it — like starting with your smaller balances and tackling those first.
It’s easier than ever to spend. Alexa tells me it’s time to reorder dog treats and all I have to do is say yes. There used to be more of a connection to spending.
Right. You knew how much money you had in your wallet, for example. It’s also a budgeting issue. Many people don’t have a budget in place. That’s key to understanding how your money’s getting spent, and how you can save. It’s understanding where your money is coming from, where it’s going, and balancing those two.
Let’s talk about one of the worst investments: a new car. I see a lot of expensive SUVs in front of modest homes.
There is an auto loan crisis. There have been more delinquent car loans over the last 10 years or so. It’s definitely not the best investment, or debt to carry. But for some reason, a lot of people are deciding to put money into cars they can’t afford.
What’s the most common mistake people make with their finances?
One of the most important ones is not having an emergency fund. Forty percent of Americans couldn’t pay an unexpected $400 expense. An emergency fund is really the basis of having financial security. Starting one can be automated like any other financial goal, and the key is to have three to six months of living expenses saved up.
What’s the dumbest thing you’ve done financially?
My biggest mistake was not investing earlier. Most women are not investing their money, or they’re passing [that job] along to someone else to help them out. If I had taken advantage of the opportunity to grow my money, I would have seen significant changes in my financial portfolio now. You can invest with a dollar a day. It’s that simple, to get in the habit of saving.
Most of us don’t talk openly about money.
It can be a source of shame for many people. You see a lot of families where parents have never talked about money with their kids. It is common to have secrecy, for people to hide their financial situation.
Does money really change everything?
It buys you peace of mind, and it can buy you access. It can be a virtuous cycle or a vicious cycle. People can grow their money or they can be stuck in student-loan debt early on and have that as a burden that they take with them throughout their career and their lifetime. It really impacts every aspect of your life, from your health to where you live and how you live, to how you spend your time. Having money means [being able to] give back through philanthropy. There are a lot of opportunities that money can buy.
This interview was edited for clarity and length.