No one thought the poor more undeserving than the poor themselves.
–Matthew Desmond, Evicted: Poverty and Profit in the American City
Frugaling is fast approaching its third anniversary. Three years of articles, debates, conversations, comments, and millions of visitors. It’s been a humbling journey, but I’ve struggled with a concept at the center of my writing: “personal finance.”
The term grew in popularity in the early 1900s. It was primarily deployed and embraced by the middle classes of America. To scrimp and save was seen as virtuous. You could take nicer vacations, save for retirement, or give more to charity by budgeting better. Undoubtedly, all good things.
“Personal finance” has allowed many to live a fuller life, but also placed much of the burden and responsibility on individuals. Unfortunately, little has changed in nearly 100 years of regular use. Amidst record breaking income and wealth inequality, we seem frozen in time — continuing the use of this term without reservation or thought.
We must ask ourselves some questions about financial education and planning: Are people able to scrimp and save like years prior? Does personal finance capture the economic hardship many face? Is this the best advice we can offer after 100+ years of collective financial experience?
The answer is no, no, and no.
When I break from the 100-year-old script of personal finance and call out the tragedy of income and wealth disparities, people tend to invoke the personal responsibility argument. In response, I receive comments and emails from devout readers who balk at my hesitation to call out financial errs and place more emphasis on society. They tend to ask, What’s the point of saving and making more money if people aren’t personally responsible? They suggest that finances are personal and failure is on the individual.
Over time, I’ve grown increasingly more resistant to the term. For the oppressed, try as they might, their budgets do not add up. They must seek social assistance or face dire consequences (i.e., hunger, eviction, and homelessness).
Whether we know it, prefer it, or like it, personal finance alludes to personal responsibility for errors and successes.
Fail? It’s your fault.
Succeed? It’s your smarts.
Can’t we do better than these oversimplified, overused assumptions? Fortunately, we have an opportunity to approach finance in a new way. It starts with a reinvention of terms. As inequality has worsened, the term has become antiquated and inaccurate. We need to shift to something more appropriate, which captures the diversity of responsibility.
Today I propose we seek a new term and call it: “social finance.” Whereas personal finance places the burden solely on the individual, social finance highlights the environmental, societal, and governmental consequences to an individual.
With social finance, we understand that budgeting will be more difficult for African American men than White guys like me. Why? Because I was afforded great privilege. For instance, one-third of African American men will go to prison in their lifetime. Word to the wise: it’s not because black men are more predisposed to crime than white men.
With social finance, we understand that making money will be more difficult for women than White guys like me. Why? Because I continually earn more than women; not because I work harder, but because society pays women 64% of what I make as a man.
With social finance, we understand that intellectual and physical disabilities affect earning potential — not temporarily-abled White guys like me. Why? Because persons with disabilities are prejudicially fired, refused work opportunities, and the first to lose their jobs to automation and outsourcing.
Personal finance fits well within Western culture. We value hard work, ethic, and personal responsibility above all else. The idea of social finance will be challenging for many, but I believe we can do it. What do you think?
I’m not sure I understand your point. Personal finance is “personal,” in that it’s about what you do with the money you have control over. If your point is that we all have different amounts of money, for a variety of reasons, some of which are unjust…I agree!
Hi Bette! Thanks for your comment. You’re right! Personal finance is “personal.” Unfortunately, and to the point of the article today, I find little talk about social finance. I think we need to get better at acknowledging both roles. Within a stratified society of deep class differences, perhaps we ought to talk more about social responsibility. Thanks for continuing to follow along all these years!
Sam, I always appreciate your point of view and this post is no different. We certainly should be talking more about social finance, but I like to think there is a balance between the personal and social, that there are factors of both that influence our success or failure. I think we are really just entering the time of social finance being addressed (perhaps not solved, but at least becoming a mainstream topic), so personal finance has had a big head start.
to remind of a Thatcher’s quote, there’s no such thing as a society. there are only individuals. everyone is born and dies alone on his own. it’s a good thing to help a person in need, or many persons. but if you spread responsibility over multiple individuals, no one is really responsible for anything. we had that in Russia for a hundred years. the result is not so brilliant.
and feeling sorry for being smart – that’s where de-evolution starts. it’s as if homo sapiens felt bad for his relative neanderthal and knocked himself on the head until he’s not so privileged.
I think you’re just trying to make the point that we don’t have a level playing field, some people start off in life better than others. And frankly, its then no surprise that some people end up with better jobs and better bank balances. Yes, I do think hard work and personal choice plays a part in your outcomes but so too does being in the right place at the right time, having parents who know the right people or can pay for you to go to the right university/college and not being the person permanently disabled in that car accident. Life deals our random events over which no-one person has control over. We all like to think we are masters of our own universe, until we’re the ones who can’t walk anymore or lose their home in the GFC.
All too often we don’t acknowledge the good hand of luck or opportunity that ‘God’ or ‘life’ or ‘the Universe’ has dealt us. If we work from a position of gratefulness for the ‘lucky’ attributes that we have – what ever that is – then surely the next logical step is to accept responsibility – as a society – for those to whom life has dealt has not been so kind. Life is random. It could be you next who needs some kindness and a helping hand.
By the way, Russia didn’t do that from 1917 to 1991 under communism. They had an industrial model trying to achieve exactly the same goals as capitalism – economic growth. They just had different people in charge the ‘proletariat’ or ‘working class’ rather than the middle class and nobility. Though it could be argued that the ‘working class’ quickly came to look just like the people they’d replaced.
While I wholeheartedly agree with the idea of social finance, it still stems from individuals. I think if we are to enact any change and call to light some of the issues out there, people need to be willing to step up and tell their stories, as well as act.
Given that, we all have a responsibility to help equal the playing field. But there are those who are unfortunately doing so without putting work into it. And lots of people who blame and play victim.
I get that I come from a privileged position, but I know of countless individuals who aren’t, and managed to achieve financial independence. It comes from using the resources we have, and hopefully social finance is about that, and not people thinking they can just get handouts.
Anytime you insert the word “social” into anything people lose their minds. One reason Bernie Sanders is having a hard time against Hillary. But I agree some people really have the deck stacked against them when it comes to finances. Inequality among racial and gender lines does indeed exist. I was slightly shocked when I happened to find out one of my colleagues who has worked in the industry about the same amount of time as me is making 30K less. Not sure why but thats how it is.
Bringing these differences to light can only lead to good things in the end. Bravo!
I tend to agree with Ms. Cain about the need for balance in social and personal finance.
Although helping young people go to college, get jobs, etc. is a noble aim at what point does one finally say: Ok, now you are on your own?
As long as the human race is the way it is, there will never be a totally level playing field: some people are smarter; others are like me, smart but not terribly ambitious and sometimes confused by too many interests and abilities. Still others are ambitious but not terribly smart and some are neither/nor. I don’t happen to believe, that given my drive, that I deserve the financial rewards of a genius entrepreneur or a professional with umpteen degrees. However, given my skill set and tenacity, I do believe I deserve better financial compensation than a fast food worker or janitor or that of a person unwilling to work and/or pursue bettering their skills and education.
I also am so over Euro Caucasian guilt, if I ever had it to begin with. If one thinks white skin affords instant privilege, please visit economically devastated and ignored pockets of Appalachia. They should also go see the Res in the west. Those people are ignored in favor of the inner city because they are not minorities and people mistakenly believe all poverty and lack of opportunity is in the inner city ghettos. That ‘poor black’ mentality not only excludes poor whites and others; it is an insult to blacks thrown at them by limousine liberals by insinuating blacks can only succeed (or not) at the behest of whitey.
Lest you think I am a raging conservative – I voted for Bernie in the primary! Feel the Bern!
I was also a 60’s political activist.
Thank you for this post! I think that until every job pays a living wage, we cannot expect people to claim full personal responsibility for health care, retirement, etc. Not everyone can have a good job in this country and people forget that…if everyone attempted to “educate” themselves out of low wages, who would check people out in the grocery line or assist people at the big box retailer so they can buy things they don’t need with their disposable income? College-educated low wage earners with student debt, that’s who. Personal finance is for people who have money to work with.