And guess what -- this is the same old tired story we've been reading our entire lives because human nature and the consumerist culture are nothing new:
"Not that Americans—or at least those born after World War II—had ever been especially thrifty. The personal savings rate peaked at 13.3 percent in 1971 before falling to 2.6 percent in 2005. As of last year, the figure stood at 5.1 percent, and according to McClary, nearly 30 percent of American adults don’t save any of their income for retirement. When you combine high debt with low savings, what you get is a large swath of the population that can’t afford a financial emergency.
So who is at fault? Some economists say that although banks may have been pushing credit, people nonetheless chose to run up debt; to save too little; to leave no cushion for emergencies, much less retirement. “If you want to have financial security,” says Brad Klontz, “it is 100 percent on you.” One thing economists adduce to lessen this responsibility is that credit represents a sea change from the old economic system, when financial decisions were much more constrained, limiting the sort of trouble that people could get themselves into—a sea change for which most people were ill-prepared."
Here's the rub from the article, but far from being "ironic" I would call it "expected" given the so-called "paradox of choice" that we now know about:
"It is ironic that as financial products have become increasingly sophisticated, theoretically giving individuals more options to smooth out the bumps in their lives, something like the opposite seems to have happened, at least for many. Indeed, Annamaria Lusardi and her colleagues found that, in general, the more sophisticated a country’s credit and financial markets, the worse the problem of financial insecurity for its citizens. Why? Lusardi argues that as the financial world has grown more complex, our knowledge of finances has not kept pace. Basically, a good many Americans are “financially illiterate,” and this illiteracy correlates highly with financial distress. A 2011 study she and a colleague conducted measuring knowledge of fundamental financial principles (compound interest, risk diversification, and the effects of inflation) found that 65 percent of Americans ages 25 to 65 were financial illiterates."
This passage is interesting because while the author admits to the problem, he falls back on the crutch of "self-authenticity" -- part of that "follow your passion" nonsense, when he should have chosen to be "another person" with less contradictory priorities:
"Take me. I plead guilty. I am a financial illiterate, or worse—an ignoramus. I don’t offer that as an excuse, just as a fact. I made choices without thinking through the financial implications—in part because I didn’t know about those implications, and in part because I assumed I would always overcome any adversity, should it arrive. I chose to become a writer, which is a financially perilous profession, rather than do something more lucrative. I chose to live in New York rather than in a place with a lower cost of living. I chose to have two children. I chose to write long books that required years of work, even though my advances would be stretched to the breaking point and, it turned out, beyond. We all make those sorts of choices, and they obviously affect, even determine, our bottom line. But, without getting too metaphysical about it, these are the choices that define who we are. We don’t make them with our financial well-being in mind, though maybe we should. We make them with our lives in mind. The alternative is to be another person."
And it only took a lifetime and the withdrawal of certain choices for the author to do what he should have been doing in the first place if he didn't value his consumption so much:
"In my house, we have learned to live a no-frills existence. We halved our mortgage payments through a loan-modification program. We drive a 1997 Toyota Avalon with 160,000 miles that I got from my father when he died. We haven’t taken a vacation in 10 years. We have no credit cards, only a debit card. We have no retirement savings, because we emptied a small 401(k) to pay for our younger daughter’s wedding. We eat out maybe once every two or three months. Though I was a film critic for many years, I seldom go to the movies now. We shop sales. We forgo house and car repairs until they are absolutely necessary. We count pennies."
As annoying as the inevitable "maybe its not my fault" "out" comes after each admission, at least he makes them:
"I don’t ask for or expect any sympathy. I am responsible for my quagmire—no one else. I didn’t get gulled into overextending myself by unscrupulous credit merchants. Basically, I screwed up, royally. I lived beyond my means, primarily because my means kept dwindling. I didn’t take the actions I should have taken, like selling my house and downsizing, though selling might not have covered what I owed on my mortgage. And let me be clear that I am not crying over my plight. I have it a lot better than many, probably most, Americans—which is my point. Maybe we all screwed up. Maybe the 47 percent of American adults who would have trouble with a $400 emergency should have done things differently and more rationally."
Yes, and maybe we should start telling people that earlier and more often instead of filling them with bullshit lies about doing "whatever feels good" and not worrying about the consequences.
OK, that's enough for one morning.
