Monday, May 4, 2009

An Interlude: Playing For Change

This is a very cool concept campaign.

The whole video is worth the watch.

The Myth of Personal Finance

Slate has a great article up about the cult of personal finance that has grown in the past two decades, and its failure in the face of the current crisis. Of course, getting people who prospered and evangelized about personal finance trends to admit that those trends are not sufficient for people to prosper is a different story.
That our personal finances weren't fully ours to seize didn't seem to occur to many of us until recently, when the stock market plunged almost 40 percent in a mere year, housing went into free fall, and the unemployment rate began to climb perilously toward double digits. All these facts suddenly left the personal finance industry facing a conundrum of its own making. The backbone of the self-help complex is the idea that you can do it. You. Singular. But what happens when you lose your job and can't find a new one before your six months of recommended emergency savings runs out? Or a good chunk of your retirement income is in the form of a pension from your former employer—and that employer is named Chrysler? What then?
Sounds harsh, but if you are laid off and at the end of your resources, what other message can you take away from people like mega-personal finance guru Suze Orman, who continues to argue that people's main problem with money is ... emotional. (Orman also urges people to invest for retirement in the stock market, while admitting the bulk of her savings is in municipal bonds.) Or Jean Chatzky of everywhere from NBC's Today show to Oprah's couch, who helpfully tells people in her latest book, The Difference: How Anyone Can Prosper in Even the Toughest Times, "Overspending is the key reason that people slip from a position of financial security into a paycheck-to-paycheck existence." (Note: Italics original to Chatzky.) Chatzky forgets to mention that studies have demonstrated the problem most likely to land one in bankruptcy court isn't an addiction to designer clothes but, instead, overwhelming health care expenses. - The Big Money, from Slate
It is remarkable the way in which the core problems we now face are all fundamentally intermixed. Our auto companies are having difficulties competing in the global economy, and at least part of that can be traced to the fact that these companies have to carry retiree health care costs that companies in other countries to not have to carry. Similarly, the single biggest source of personal bankruptcy is an unexpected health care expense. A good solution to the healthcare cost crisis will go a long way towards solving both of these problems. And yet, we still have people in Congress who stand in the way of real solutions. Stunning.

The fact is that no matter how well you plan, how much you save, how efficient you are with your money, there are circumstances that can completely overwhelm almost any individual's finances. And that is when we rely on each other, through our government, to help prevent our crises become our neighborhood's catastrophe. That is what is at stake. A personal, family crisis has the strong potential to effect more than just that family. A health care bankruptcy for a family can lead to a foreclosure of that home, which causes local housing prices to fall, which causes more stress on the finances of neighbors, which strains the public services and tax base of that community. We are all economically interconnected, and all have an interest in making sure that unexpected expense does not spiral into a declining neighborhood.

Of course there's also the "it's the right thing to do" reason, but I know that pitching to personal interest carries more weight in some circles.

Which brings us back to personal finance.
What's next for personal finance? The past two years have demonstrated over and over again that bad things can happen to good savers and investors. Very few of us have the wherewithal to fund both retirement savings and a large enough emergency fund to sustain us through a bout of unemployment lasting, say, more than a year. No one, it turns out, really knows what an individual stock, mutual fund, or commodity like oil or precious resource like gold will be worth in six months, never mind six years.

Nonetheless, personal finance is unlikely to crawl away and die anytime soon for a simple reason: We think we need it. "We're kind of screwed but we don't have a choice but to take care of ourselves because no one else is helping," admits MSN's personal finance columnist, Liz Weston. - The Big Money
Some food for thought on a rainy Monday morning. We cannot all go it alone, because that route leaves us all lost.

(With a tip-o-the-hat to my college friend Stephen for the link!)