The evolution of personal finance advice in the United States in the past 20 years has been nothing short of remarkable.
The late nineties, although often noted as the era of the dot com bubble, was also known for an effort to get Americans to set more money aside for retirement. Pensions had been on a steady decline since the mid-seventies, and the generation stuck in the middle of that debacle wasn’t pleased with the retirement income projections they were being offered. Therefore, financial education revolved around finding ways for people to save more money. The common exchange heard in 401(k) meetings held in break rooms across America was:
Financial guy: You need to save more for retirement.
Worker: I can’t afford to.
Financial guy: You can’t afford not to.
(End scene.)”
While that approach wasn’t wholly successful, it did finally reset the onus of retirement from the employer to the employee, although this is a realization that many people still struggle with yet today.
The turn of the millennium gave way to credit card debt and the households it mangled. Americans enjoyed the loose lending standards of credit-card companies and lenders, only to later realize that loan approval wasn’t the affordability blessing they once thought it to be.
Oddly, or maybe not so oddly once you realized who was behind the campaigns, a “homeownership is for everyone” movement overtook our universal sensibility. These predilections for borrowing, and willingness to navigate our lives with selective math, soon coaxed millions of unqualified buyers into the ranks of homeownership. Not only did Americans drink the homeownership-or-die Kool-aid, but they achieved their wildest dreams with nauseating loan structures and a willingness to use their paltry amounts of home equity as seemingly bottomless piggy banks.
Shockingly, our entire financial system collapsed.
The Great Recession ushered in the era of fundamentals, and financial educators rejoiced. The fresh start was stoked by a shell-shocked population’s fearful and shaken new reality — shrunken retirement accounts and an unstable job market. In essence, people cared about stability again. Correction: People cared about stability again for a few years. Then like a not-very-lost dog that knows its way home, we rediscovered our desire to value stuff over stability. Our good behaviors waned.
The personal finance industry didn’t know what to do. It appeared as though Americans had turned a corner, but in truth, we hadn’t. We quickly readopted the “if they let me borrow, then I can afford to borrow” mentality, of course incited by the reappearance of sub-prime lending. And for the last handful of years, personal finance experts have been trying like mad to get consumers to change their behaviors. For those people who have sought out behavior modification, this prescription has worked very well. But the fact remains, supported by a bevy of consumer debt statistics, retirement readiness statistics, and the personal savings rate, there’s a tremendously large portion of our population that simply doesn’t care. Please understand, I’m not talking about people who care but can’t do anything about it because of low wages. I’m talking about millions of people financially afflicted by their own apathy.
This brings us to today.
The current mission of the personal finance industry is to get people to care. When a person is presented with facts about their financial life and likely financial future, they must turn to action. Caring, followed by action, is what’s absent. Personally, I’ve embraced my role in the behavior-change movement, but it only serves those who haven’t been become disenfranchised by their own ignorance of reality. I’m not casting stones at these folks, because there are areas of my life in which I’ve adopted the same modus operandi.
How do you get someone to care? It’s an age-old question and an an age-old problem. How do you get someone to accept reality, care, then act?
This should be obvious to you, but I don’t yet have a good answer to that question. Why does a teenager finally start caring about their grades? Why does a middle aged woman decide to lose 60 lbs? Why does anyone, who hasn’t cared in some time, finally decide to care?
For those Americans that have the incomes to support stability, our modern problem is convincing those people to care.
