'The Big Short' and Other Great Money Movies

Eight movies are vying for Best Picture at the 88th annual Academy Awards presentation on February 28th. One of them, The Big Short, provides a great service to moviegoers. It explains how unchecked fraud by Wall Street and big mortgage lenders created the economic collapse of 2008.

The Big Short tells the true tale of hedge fund manager Michael Burry (Christian Bale), who was one of the first to discover, in 2005, that Wall Street investment banks were selling AAA-rated bonds comprised of lots of subprime mortgage loans. But this is no eye-glazing film. Director Adam McKay shows how Burry made $800 million in profits by figuring out how to beat the investment banks at their own game.

The film explained that even our most trusted bedrock financial institutions can defraud you and that smart investors should never blindly follow the crowd of experts. Instead, they must protect themselves by conducting their own due diligence and independent research. Borrowers, the movie advises, should never get in over their heads with too-easy credit, because, ultimately, borrowers are the ones on the hook for repaying their loans.

Hollywood movies may not be the first place you look to for personal financial advice. But the silver screen has long offered financial wisdom. So we put together a list of movies that we think provide valuable financial lessons over the last 70 years of filmmaking.

Moneyball

Billy Beane (Brad Pitt), general manager of the Oakland Athletics baseball team, overcomes his club's low-budget league disadvantage by revolutionizing the method of finding great players at a bargain salary. Beane and statistical wiz Peter Brand (Jonah Hill) use "sabermetric" computer analysis of ballplayer data to find undervalued talent, in place of the instincts and expertise of human baseball scouts.

Financial lesson: This 2011 Best-Picture Oscar nominee offers contrarian investing advice. It suggests that small investors should root out under-appreciated stocks and other assets that the professionals don't yet recognize. It also explains that to do this, investors need to study the fundamentals of stocks carefully before buying shares and not simply make investments based on wisdom gleaned from newspaper articles.

The Pursuit of Happyness

Chris Gardner (Will Smith) is a great salesman who made a poor investment in tough-to-sell medical scanning devices, and ends up homeless. Dogged by parking tickets and the Internal Revenue Service, Gardner determines not to give up. He lives in a homeless shelter, sells his blood, and works hard in a six-month unpaid internship to earn a full-time job as a stockbroker. This 2006 film, with its intentionally misspelled title, is a cautionary tale about how a reversal of fortune can put you in really bad financial stead. But it also inspires by demonstrating how hard work, persistence, and a positive attitude can pay off.

Financial lesson: Before betting the farm—and the security of your family—on a business plan designed to make you rich, make sure you have a fallback financial strategy in case things don't work out.

Slumdog Millionaire

In this 2006 Best Picture Oscar-winning film, Jamal (Dev Patel), a contestant on India's version of the "Who Wants to be a Millionaire" game show, is one question away from the 20 million rupee top prize when he is falsely accused of cheating. In explaining his innocence to police, Jamal recounts his upright life, including justified childhood thievery as an orphan in the slums of Mumbai, his honest work as an adult in an international customer service call center, and his quest to rescue his childhood love, Latika (Freida Pinto), from prostitution at the hands of a gangster.

Financial lesson: Money doesn't necessarily buy happiness; it can also lead to evil. And while essential for survival, money is not as important as other things in life, such as true love.

Maxed Out

Producer-director James Scurlock walks us through everything consumers need to know about the big business of lending, from credit scoring and penalty fees to foreclosure and bankruptcy. This 2006 documentary could have been as deadly as the required disclosure on the back of a credit card statement, but Maxed Out uses wit and entertainment to expose how Washington politicians weakened bankruptcy protections to help creditors take fullest advantage of consumers by lending them more than they should and punishing them when they failed. Senator Elizabeth Warren, then a Harvard Law professor, shines by revealing that credit card companies love borrowers who went through bankruptcy, because they can't file for bankruptcy again and they're willing to make minimum monthly payments forever.

Financial lesson: Don't borrow more than you really need.

Wall Street

Directed by Oliver Stone, Wall Street epitomizes the excesses of the economically booming 1980s in the characters of Gordon Gekko (Michael Douglas) and protege Bud Fox (Charlie Sheen) who profit lustily from illegally trading stocks based on inside information. After The Big Short, this 1987 film seems almost quaint, since the bad guys actually get caught and appear to be headed to jail.

Financial lesson: Ordinary investors should forswear the fantasy of making a killing on Wall Street, which is typically reserved for wealthy and well-connected players.

It's a Wonderful Life

In director Frank Capra's 1946 masterpiece, an angel shows George Bailey (Jimmy Stewart), a responsible building and loan president, how the world would not be better if he got his irrational wish to have never been born. This Twentieth Century version of A Christmas Carol illustrates the benefits of almost every aspect of responsible money management, from hard work, thrift, and family budgeting, to homeownership, ground-floor investing, and charity. Mortgages are underwritten by assessing honesty, income, and the character and creditworthiness of the borrowers. A Best Picture Oscar nominee in 1946.

Financial lesson: There are many financial lessons in this movie, but one stands out. While George Bailey was careful about his spending, he was never able to create an emergency fund. As a result, when he ended up with a financial shortfall, he had almost no spare cash set aside to protect his job and his family.

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