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?