Tag Archives: personal finance

Personal Finance for the Forgotten

credit: freedigitalphotos by Winnond

credit: freedigitalphotos by Winnond

Tomorrow, after a divisive and contentious election, a new president will be sworn in. A thin-skinned, vengeful, inexperienced braggadocio and bully. That was just an undeniable assessment of the character of the man based solely on his conduct, actions, and words. This is not a political blog nor am I a very political person so I’m going to leave it at that.

Xenophobia and racism played a part in the outcome. Having an opponent who was strongly disliked with flaws of her own also played a role. Some just held their nose and voted for the least of two poor candidates. Others voted for a third-party candidate who had no chance of winning. However, there was a strong segment of the population who felt ignored by the political establishment, on both sides. Their economic concerns and values were not addressed and Mr. Trump was able to tap into that anger and turn it into a victory for himself. The forgotten man and woman are angry for being ignored, and rightfully so.

Sometimes I wonder if there is a segment of the population who feel like they are the forgotten when it comes to receiving personal finance information. In a Yahoo finance article listing various ways to spend less and save more, it offered the usual generic tips most personal finance bloggers often tout. One reader commented, “Each time I read about educational and personal finance tips here, I can’t avoid feeling that they were written by privileged folks with textbooks solutions to real life problems.” I’ve also read comments in similar articles where people seem to shake their head and say, “I already do this, but I am still struggling!”

The feeling that perhaps personal finance bloggers or gurus are perhaps out of touch with reality made me think of a Saturday Night Live skit where Kristen Wiig parodies Suze Orman. Josh Brolin plays Dick Dunkendirk, a caller to the Suze Orman show who is in dire economic straits. He tells Orman that he “took a sponge bath this morning in a TJ Maxx bathroom” and slept on “four opened pizza boxes lined with Pampers.” Orman responds by telling him to tap into his emergency savings account and to immediately put his money into a Roth IRA.

Helaine Olen, a journalist and writer, criticizes personal finance gurus for blaming financial victims for not getting ahead when it is a political and economic problem. She says that “there is this great myth out there that Americans went on a financial bender. The leading cause of bankruptcy is not buying lattes, it’s health care, followed by the usual fractured families, unemployment, sort of all of the plagues of the 21st century — economic plagues.” She continues by saying that it “depends on if you think this is a self-help problem or a political problem. I believe it is a political and economic problem.” She also says that those in the personal finance space are basically saying, “‘Yeah, the economy (is poor), but you’re in it on your own, and therefore you should be able to solve this on your own.’ Realistically, that’s just not true for most people.”

I think Mrs. Olen’s comments are troubling. She is correct that a lot of those financial struggles are a result of the economy and that a large part of it is a political problem. But by saying that personal finance advice is unrealistic and unhelpful is a disservice to her readers. Actually, not only is it a disservice, it is unproductive and perhaps dangerous. She is allowing the forgotten and ignored to abdicate responsibility and play the victim. Yes, for some of those struggling, they may be blameless and perhaps they may be unable to pull themselves out of poverty. But you can only control what you can control. Sure, it would be great if our politicians could offer a solution, but I’m not holding my breath on that happening. It is much more productive to try and find a solution on your own, rather than waiting for a savior. Nobody cares more about you and yourself. Your choices in life has a huge effect on your destiny. So rather than accept financial struggle as a foregone conclusion, take action to improve your lot in life. Even with all the issues we have in this country, I still think this is the land of opportunity.

If you are unemployed or underemployed, you’ve got to learn skills which will enable you to get a better paying job. If you live in a depressed area with no jobs, maybe you will have to move. I do not mean to make it seem like these solutions are easy. They are absolutely not easy. However, what choice do you have if you are stuck in that predicament. And while Mrs. Olen has done much more research and has more access to data than I do, my anecdotal experience is that while there are many struggling due to things beyond their control, many are also struggling because they lack financial literacy and live beyond their means. I see all too often that a family is living paycheck to paycheck, yet they have cable television, an expensive car, more house than they need, and the latest tech gadgets. However, I would also like to caution many who rush to judge others financial predicament without knowing the full story. Often times when I read an article about someone struggling financially and the comments will lay complete blame on that person for their actions. More empathy, compassion, and understanding can never hurt.

As I was writing about the forgotten people out there struggling financially, I read that Jay from Budgets are Sexy has created the Rockstar Community Fund where $20 gift cards are given out to better someone’s life. Another initiative is Debt Drop where $50 is given to someone struggling with debt to give them a little hope for the day and remind them that they are not alone. This initiative was inspired by Melanie Lockert of Dear Debt who was doing that on her own blog. Finally, a third initiative is a general fund, which has recently helped a fellow blogger who is struggling with health issues. Some may say that $20 or $50 is a drop in the bucket, but big things often have small beginnings!

I’d also like to mention that Brian from Debt Discipline has spoken at his local library about dealing with debt and about budgeting. He has also championed financial literacy education at his children’s high school.

I am inspired by my fellow bloggers who are taking action to address the needs of the forgotten. What else can we do? What else can those struggling financially do?

Who’s Worse with Their Finances: Gen X or Millennials?

This is a guest post from Anum Yoon who blogs at Current on Currency.

millennials

It’s no secret most Americans need to be better at handling their finances, as many people are living in debt with little savings. Being older in age, as it turns out, has little to do with how a person handles their finances. A study revealed Millennials (those under 33) are actually better equipped to make financial decisions than Gen Xers (34-54 years old), but both demographics face different challenges.

Here are some of the most telling findings from the Financial Finesse’s 2014 generational research report.

Millennials Have Their Finances in Order

During the Great Recession, Millennials were the most psychologically impacted. Many of them were searching for jobs or were recent hires when the economy began to crash. Despite coping with that massive downturn, Millennials handle their day-to-day finances better than older Gen Xers. Millennials are more likely to pay off credit cards in full, pay all their bills on time, and spend less than they make. They’re also more likely to check their credit scores on an annual basis. Their knowledge of financial aid for colleges is also impeccable.

How did Millennials, who have less financial planning experience, become so adept at this? As traumatizing as the Great Recession may have been, it forced this generation to take ownership of their finances. They had no other choice but to learn.

A Lack of Money

Although Millennials have sounder financial plans, it’s no surprise they have a lower median income than Gen Xers. Millennials are tight on cash, so retirement accounts are neglected. Sky-high student debt is part of the reason retirement isn’t a priority. Not to mention, the rate of homeownership for people under the age of 35 is at an all-time low. Managing cash flow and getting out of debt are much higher priorities.

Millennials are also the least likely to participate in an employee retirement plan out of any generation, but that could partly be attributed to not having any access to such a plan due to slashed benefits. The silver lining is Millennials are the most likely to create a DIY retirement account, such as a Roth IRA, due to their fear of Social Security and Medicare shortfalls.

Thinking Ahead

Although Millennials don’t prioritize retirement due to more pressing economic concerns, they’re still thinking long-term about maximizing their earnings potential. Ninety-one percent of the young people surveyed by Financial Finesse say they plan to leave their current job within three years. This isn’t because of a lack of loyalty. It’s because they aim high and want to earn more money.

Generation X at Risk

Although Gen Xers are better off financially than their younger counterparts, their responsibilities mean they’re more at risk of losing financial security. Gen Xers are also less savvy at making day-to-day financial decisions. This is mainly due to other commitments, as most Gen Xers are married with children. This generation is likely to make financial sacrifices for their children’s future. As expensive as colleges are now, they’re going to be even more expensive by the time their children are old enough to enroll.

Getting Better All the Time

In the past three years the survey has been conducted, Gen Xers continue to improve across the board when it comes to financial health. Since 2010, this generation is less likely to withdraw money with a penalty from their retirement accounts.

They’re more likely to have an emergency fund, and that’s what sets Gen Xers apart from Millennials. Fifty percent of Gen Xers have saved enough to cover unexpected emergencies, the survey finds. In the past several years, fewer Millennials report having an emergency fund.

Future Challenges

Signs point to the economy continuing to improve in the years after the Great Recession, but nothing is certain. Millennials have become savvier and more financially minded due to those down years, yet despite their intuition, challenges remain.

As smart as the younger generation is, they’re still making less money, more likely to be unemployed, and dealing with unprecedented levels of college debt. With the Millennials’ knowledge, they might be equipped well enough to tackle these challenges and improve their finances in the future.

Anum Yoon is personal finance blogger who started and maintains Current on Currency. You can catch her on Twitter to follow her updates.

Are Personal Finance Bloggers “Pound Foolish”?

credit: freedigitalphotos by Winnond

credit: freedigitalphotos by Winnond

A few weeks ago, in Ryan’s blog, Impersonal Finance, he asked in his post You vs. The Economy, “At what point do we place blame on the person, and not “the economy? If the economy is down, it’s you vs. the economy, right?” He asked this question after listening to an NPR segment where they interviewed a lady who was unemployed and struggling to live on just her husband’s income. I’ve also had these same exact thoughts when I’ve heard or read stories about those struggling to make ends meet. No, no we’re not heartless people who are missing a sympathy gene (I stole that phrase from Ryan). Well, at least I’d like to think we aren’t.

I was reading a few articles on Yahoo Finance recently, and I came across one where the people they interviewed were struggling with making ends meet They decided to take on student loans to pay for rent, groceries, and their daily living expenses. “NO!!!!” What are they doing? I yelled. Another article spoke about a lady in her 50s who was laid off from her job as a legal secretary who decided to take on a 6 figure student loan debt to go back to school for Social Work. These articles seem to be written to elicit sympathy to those who are stuck in a bad predicament, but all I could think was that they made horrible decisions.

It’s kind of unfair to judge someone’s predicament based on the small amount of information the media stories provide us. It seems that many times when we read about the average person struggling with money, many personal finance bloggers, myself included, will suggest the following: cut the cable, brown bag your lunch, stop going out to eat, stop shopping, cut up your credit cards.

“Each time I read about educational and personal finance tips here, I can’t avoid feeling that they were written by privileged folks with textbooks solutions to real life problems” – Yahoo commenter

In an article entitled 35 Things You Can Do Right Away To Start Spending Less Money which was reposted in Yahoo Finance, the list of things include the generic tips most personal finance bloggers often tout. But in the comments section (I know I really shouldn’t read the comments section in Yahoo, but I can’t help it), a commenter wrote: “Each time I read about educational and personal finance tips here, I can’t avoid feeling that they were written by privileged folks with textbooks solutions to real life problems.” I’ve also read comments in similar articles where people seem to shake their head and say, “I already do this, but I am still struggling!”

Pound Foolish: Exposing the Dark Side of the Personal Finance Industry

In Helaine Olen’s book Pound Foolish: Exposing the Dark Side of the Personal Finance Industry, she criticizes personal finance gurus like Dave Ramsey, Suze Orman, Robert Kiyosaki and David Bach. While I’m not a big fan of some of these personal finance gurus, I do probably agree with a lot of things they say. As for Bach, his book The Automatic Millionaire was the first personal finance book I read, and I like his advice.

Here are a few excerpts of what Olen had to say about the advice given by personal finance gurus in an interview on Deseret News:

The point is there is this great myth out there that Americans went on a financial bender. The leading cause of bankruptcy is not buying lattes, it’s health care, followed by the usual fractured families, unemployment, sort of all of the plagues of the 21st century — economic plagues.

It depends on if you think this is a self-help problem or a political problem. I believe it is a political and economic problem.

Self-help gurus are basically saying, “Yeah, the economy (is poor), but you’re in it on your own, and therefore you should be able to solve this on your own.” Realistically, that’s just not true for most people.

Dave Ramsey tells people, “You can choose not to participate in a recession.” That’s not possible.

And here are few more excerpts from The American Prospect:

We idealize the myth of Horatio Alger in this country. Anyone can make it. Anyone. But we forget that Horatio Alger was a writer of fiction. In our nonfiction lives, we are suffering from some of the worst income inequality in our nation’s history, our salaries are stagnant and falling, and our class mobility is significantly worse than supposedly class-bound Europe. Yet, to talk about our financial setbacks and inability to get ahead is to challenge the heart of the American dream. We believe we are failures and, as a result, there is deep shame involved.

It’s almost as if we are living through economic Hurricane Sandy, and they are telling us that if we put up a few sandbags and umbrellas (that they might well be selling us, by the way) we’ll be fine. This stuff starts veering toward blaming the financial victim for greater economic problems.

Olen makes some valid points about some of the advice given by personal finance gurus. There may be circumstances which make it difficult to overcome their financial obstacles. It’s possible the person may be dealing with physical or mental disabilities, he or she may be caring for someone with those conditions, or they may have no access to the opportunities that we may have. You have to walk a mile in the shoes of someone else before you can judge them. No, cutting cable television may not be a panacea for all financial problems. But we have to start somewhere. I understand that there are economic conditions that make it tough, and we cannot attribute the blame solely on the individual. But there is just so much we can do to change political and economic conditions, maybe vote for politicians who’s policies we support or write to our local politicians. While we don’t have much control of economic conditions we live in, we do have control over our spending habits and our ability to acquire skills to get jobs. So for most people, the advice given by personal finance bloggers are indeed valid. While Olen believes that class mobility is just a myth, I’d like to think moving up an economic rung is still possible through hard-work and sacrifice. It’s not easy, but attainable for most.

If you have a minute, check out this Saturday Night Live skit where Kristen Wiig parodies Suze Orman. It’s hilarious. I couldn’t find a link to the video, but here’s the transcript. Josh Brolin plays Dick Dunkendirk, a caller to the Suze Orman show who is in dire economic straits. He tells Orman that he “took a sponge bath this morning in a TJ Maxx bathroom” and slept on “four opened pizza boxes lined with Pampers.” Wiig, playing Orman responds by telling him to tap into his emergency savings account, and to immediately put his money into a Roth IRA.

Do you think personal finance gurus and bloggers give valid advice? Do we sometimes give advice thinking it applies to everyone, no matter their circumstances?

I’d like to thanks J$ for featuring my post Are We Overworked? on Rockstar Finance, and mentioning it on his blog.

Thank you to Jacob from Cash Cow Couple for letting me guest post on his blog. If you haven’t read it, check it out: Don’t Act Rich. Be Rich

And last, but not least, thank you to Kendal from Hassle Free Savings for mentioning Are We Overworked over at her blog.