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Stop Calling It “Personal Finance”

By Frugaling 9 Comments

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Personal finance change

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?

Filed Under: Social Justice Tagged With: Capital, Capitalism, Eviction, Finances, Income, inequality, Personal Finance, Social Finances, Social Responsibility, socialism, Wealth

Always Start With Frugality

By Frugaling 6 Comments

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Photograph 022 by Katie Purnell

Recovering from financial calamity is fraught with con men, pyramid schemes, get-rich-quick guides, and work-from-home advice. Each of these examples provides a “solution” to debt. With their help, they suggest you can recover and live a better future.

When I was in debt, I wanted a quick fix. Unlike consumption, where it was effortless to swipe a credit card, recovering from debt meant putting the breaks on everything. All the momentum – from advertisements to cultural upbringing to environmental expectations to relationships – was moving me in one direction. I needed to stop, and didn’t know how or who to turn to.

Unfortunately, many of these methods fail to help people in need. They miss the mark, take advantage of those with less, and tend to only work for a small portion of the population.

A couple years ago, I remember wading through my Gmail spam folder, wishing that loan payment and relief emails were true. They marketed special exemptions and “secret” deals to wipe the slate. These clear scams seemed like magical oases of monetary support. Wouldn’t it be wonderful if I could click three times and my debt would wash away?

The reality is we share two equations for our financial lives:

Income – Expenses = Net Income/Loss

Free Time – Work = Net Free Time

We all know it, but how we approach these solutions varies greatly. We can add to our income through wealth, jobs, or advocating for pay raises. Similarly, we can reduce our expenses by cutting cell phone bills, reducing energy expenditures, or selling a car. What remains is our net (total) positive or negative number. If we are all constrained by these equations, creativity must occur on both ends – with income and expenses.

Today, I advocate for people to reduce expenditures before adding on more income opportunities. Frugality helps people minimize spending and prevent spending – thus heightening net income. By removing expenses, we tend to simplify our lives and work less. Hence, those who pursue frugality first are able to free up time.

While I realize the necessity of work, we live in an overworked and underpaid society. If we can manage to spend less, our lives can be fuller – across economic strata. Free time is a dying quotient across age groups. Even children have less time for recess! Fun, free play is at the heart of creative discovery. When we’re overworked, stress levels spike and life becomes a dull day of shower, eat, wash, repeat.

Before pursuing scams and “special offers” that tack on more qualifiers and hoops, consider reducing your workload by removing anything extraneous. Subtraction is easier and safer than working longer hours, picking up a second job, or working on side jobs. Likewise, it helps you stay psychologically and medically well – not overworked and near the brink.

Start with frugality. Remove all the superfluous from your budgets and lifestyle. Likely, there’s room for less.

If that’s not enough, then start hustling.

Filed Under: Save Money Tagged With: Budget, expenditures, free time, Frugal, frugality, Income, spending, time, Wealth

Who’s Responsible For Poverty?

By Frugaling 12 Comments

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Banksy I Hate Mondays Art
Art: Banksy

Picture this: a dirtied, scraped up, penniless homeless man holds up a cardboard sign pleading for pocket change. Perhaps he wrote well wishes and a message of gratitude for giving what you can. Most people who pass him don’t know where he’s from, his name, or how he came to be homeless.

As humans, we tend to fill in the blanks. Unless you’re chauffeured from a gated community to a private jet, and refuse to look out the window in daily travels, it’s nearly impossible to miss these questions of responsibility. We tend to explain the inexplicable with simplifications. People deserve what they deserve.

These mental shortcuts enable us to quickly pass through our day and “understand” the world around us. It’s complicated out there, and we have limited brain power. We can’t worry about everything, can we? Dwelling on uncertain ideas of responsibility might result in something scary: feeling lost, stupid, or flirting with pointlessness.

When we think of the causes of poverty, it can be natural to blame individuals. For instance, that the person asking for change on the street corner is too lazy to work, wants to feed their alcohol addiction, and/or doesn’t care to shape up. If only they would take responsibility for their actions, then they wouldn’t be homeless, right?

That’s the simple conclusion — and it’s possible — but today I want to encourage us to take a step back. Let’s think about some alternative conclusions. Those alternative conclusions harbor a truth that’s larger than one simplistic answer. It encapsulates the range of possibilities and diversity of lives.

Capitalism tends to encourage individual responsibility for actions. We have a penal system that punishes individuals’ actions as if they are divorced from difficult upbringings and environments — separate and isolated incidents. We have enormous financial markets, which encourage individual college students to major in business, computer science, and engineering. We congratulate and honor people for “their” work and individual contributions to science, politics, and bravery. When we seek answers for homelessness, poverty, and even wealth, the scripts have been built for us. As I’m a visual person, I’ve created a pie chart to explain responsibility in capitalism.

Pie chart 1

In this first chart, capitalist ideals suggest that individuals bear the responsibility. Pretty simple, right? When I was younger, I enjoyed the efficiency of more libertarian — individual responsibility — principles. If you work harder, you’re rewarded. The world is yours, if you earn it.

Those capitalism-infused libertarian values of responsibility eventually shifted. The best explanation was an active decision to expose myself to diverse reading material and cultures. Suddenly, the responsibility for homelessness, poverty, and wealth became complicated ideas. I needed to wrap my head around the chicken or the egg — what came first — of finance. Did the poverty cause lethargy or did laziness cause poverty?

Pie chart 2

Obviously, these pie charts aren’t scientifically exact. They’re meant to be illustrations of my thought process, as I consider where to assign blame and responsibility when I see poverty and wealth. The more I thought about what might influence and shape an individual, the more complicated it became. Certainly, it would save me time to write off the impoverished and say they are welfare grubbing lifesucks, but I choose to represent a different point of view. We are each born into this world with different characteristics — monetary, racial, SES, etc.

Pie chart 3

If we reexamine the aforementioned homeless man, responsibility becomes murkier with new variables. Suddenly, we see the man beyond the exterior and our previous assumptions. Perhaps the reality is that he was born to a single-parent household in a disenfranchised neighborhood. Perhaps he was a Vietnam War veteran who suffered from the losses of fellow soldiers and improperly/untreated posttraumatic stress disorder.

Or, perhaps we are all incredibly complex, diverse beings. We’re born with unique genes, environmental upbringings, educational opportunities, and parents. Heck, those listed here are but a small fraction of all the variables we could include.

If we quickly judge that someone bears the responsibility for being destitute, we are the lazy ones. We are the ones we often hate, despise, and discount. Carefully examining responsibility is challenging and not without errors, but we avoid incorrectly concluding that someone failed and deserves the punishment of poverty.

Filed Under: Social Justice Tagged With: blame, Class, Finance, impoverished, Income, poverty, responsibility, ses, status, Wealth

Was Albert Einstein A Minimalist?

By Frugaling 10 Comments

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Albert Einstein Laughing

Let me preface this essay by saying I’m not a “genius,” “theoretical physicist,” or “great thinker,” but I decided to pick up Einstein’s biography to learn about someone who’s been called all three. In 2008, the famed biographer and writer, Walter Isaacson, published Einstein’s story in a whole new light. His book catalogues the many triumphs, tribulations, and everyday struggles of the man who has become so revered.

As I read this 704-page tome, the very essence of Einstein came alive. Isaacson is a skilled writer, but he was homing in on something unique about his main character. Einstein extolled and lived for a simple life.

Albert Einstein is remembered for his brilliant discoveries in the field of physics. Without going too far into the weeds, he theorized about relativity and gravity. He felt they overlapped and coalesced. For instance, that light would bend in travel because of the sun’s gravitational pull. At the time, these were maddeningly complex ideas with little experimental support. Despite the novelty and unknowns, he stuck his neck out — time and time again. He didn’t bend or sway to convention, and it ultimately made him famous around the world.

Throughout the book, Einstein is heralded for derision of power, authority, and status quo. Even greater, he seemed to attack the fundamental strictures and culture of materialism. It’s clear that his simple living values made him a better, more unique thinker. Without a doubt, Einstein was an early pioneer for minimalism in the face of excess. And here are 5 reasons how he was a minimalist:

1. He idealized simple lifestyles

Einstein was fascinated with bohemian living. Even in early letters to his first wife, he professed that they shouldn’t ever be trapped by society’s expectations. He seemed to love the idea of eschewing what so many wanted. Einstein loved bohemianism, as he found creativity and passion in literature, music, and science. He commingled the three and crafted magical mental imagery of difficult physical constructions. Self-described bohemians were countercultural, just like the beatniks, hippies, and hipsters of generations to come.

2. He disliked bourgeois pursuits

He consciously avoided upper class trappings. This is captured perfectly by a quote in the book. When traveling to another city, he stayed on an office couch instead of a hotel. His friend said, “This was probably not good enough for such a famous man, but it suited his liking for simple living habits and situations that contravened social conventions.” Fame didn’t mean he would suddenly change his way of living. The rebel inside him allowed for success.

3. He gave away much of his wealth

He feared that fame and wealth might affect and degrade people’s ability to live creatively. Einstein gave generously and even dedicated all the Nobel Prize winnings to his first wife. He didn’t crave wealth, nor did he live by its swings. Einstein enjoyed good coffee, cigars, and conversation. Money allowed for those staples, but otherwise was relatively unnecessary. The power of wealth could’ve purchased many conveniences and statuses, and yet he downplayed its ability. Take this passage from the book: “From Prague, Einstein took the train to Vienna, where three thousand scientists and excited onlookers were waiting to hear him speak. At the station, his host waited for him to disembark from the first-class car but didn’t find him. He looked on to second-class car down the platform, and could not find him there either. Finally, strolling from the third-class car at the far end of the platform was Einstein, carrying his violin case like an itinerant musician.”

4. He ignored conventions

Much like the Mark Zuckerbergs of today, Einstein didn’t follow social norms for dress. Comfort was the more important factor. His hair grew unruly in later life. It was iconic for him, as he was this renowned genius, but I believe that this was a subtle rejection of cultural mores. Einstein wanted to show he was unique in both thought and modest dress.

5. He took time for independent thought

Above all, Einstein’s genius was in his ability to isolate and focus. For days and weeks at a time, he could hole up in his study and work. He didn’t eat regularly, nor did he pay attention to much around him, but in that solitude, he solved some of the greatest questions of all mankind. His habits often made him cold and cantankerous, but it also cultivated a lifelong independence. Simple time alone was vital to discovery.

I’m nearly finished with the book, but these discoveries were too hard to hold back. I figured I’d share them with you as soon as I could. Within these passages, quotes, and stories, I see a man that feared the trappings of privilege. He was a social advocate, scholar, and seeker.

In a way, I wonder if I share something with Einstein: a fear of ever having more than enough. I fear what money can do, and how some people embrace elite statuses at the cost of others. If Einstein were alive today, I’d ask whether he feared he might lose his creativity if he lived more lavishly. My guess is that he would say “yes.”

Oh, one more thing, read his biography: Einstein: His Life and Universe.

Filed Under: Minimalism Tagged With: Albert Einstein, counterculture, Frugal, Income, Life, minimal, Minimalism, money, Physics, Simple Living, Universe, Wealth

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