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I can’t take credit for the headline here. Actually Jonathan wrote it for my section of My Money Journey. I like it so much I use it on my blog too.
It articulates one word to me – responsibility, in this case financial and related matters.
We talk a lot about financial literacy and the lack thereof, but I don’t see even that as preventing basic prudent decisions about, saving, spending.
My grandson came home from high school yesterday and told his father the teacher in his financial management class told them to always spend on themselves first. At first my son was shocked until he realized my grandson was being funny.
The real message from the teacher was always save first before you spend your money. It’s a good habit I have followed all my life even when the saving part was only the change in my pocket at the end of the day.
I maintain that all but the truly poor at the economic bottom can follow this strategy relative to their income. The idea is to get into the habit and grow it as income grows. When I was working and received a raise I increased savings a bit each time. It may have been in the 401k or the amount for savings bonds or stock purchase plan by $5.00 a pay day, but always something.
Many mutual funds don’t require a minimum purchase so there is plenty of opportunity.
There are many things we can’t control, but if we are prudent with the things we can, life today and tomorrow will be better.
I agree I shouldn’t judge. But I also have zero patience for people in self-created situations that complain and blame the world: the boss, the “boomers” who had it way better (ha!); the other side of the political aisle and everyone else except the guy/gal in the mirror. Nothing is ever their fault.
The taxpayers who didn’t go to college or who worked to paid off their own loans should pay theirs. They should be able to skip exercise and overindulge on bad foods, while enjoying unlimited free health insurance that also includes generous copays and benefits. They dismiss 401ks and planning for the future while filling social feeds with trips and shiny things, then are angry that social security isn’t enough to live on.
There’s a HUGE sense of entitlement that we must stop indulging. I promise not to judge others’ poor habits if they promise to stop blaming the rest of the world as their default reflex.
I agree that we shouldn’t judge or impose our thinking on others, and that this concept of saving for retirement is relatively new to the history of man. I’ve read this post several times and I’m not getting the vibe that people are being judged.
My experience with this issue comes with time spent as a union rep and a driver-salesman working on a beer truck. Prior to 1988 we had a 401k that had no employer contribution, and a separate defined contribution pension funded with about $1 per hour.
I was passionate about negotiating a company match to the 401k. Delivering beer is a brutal job, it’s common for physical maladies to force early and unwanted retirements. I argued that it was in everyone’s interest to increase savings so that drivers could retire before becoming disabled and becoming a workers compensation liability for the company.
The companies wholeheartedly agreed and gave us a 50% match up to $2k per year. Drivers were earning between $60 and $90k at the time, good money in a low cost of living city. It was common for guys to have nice homes, nice cars, boats, snowmobiles, and etc.
I did my best to educate people. I’d even do the math so their % got them at least the maximum contribution from the company.
Often times my efforts were in vain, and I suspect that Quinn’s experience as an HR guy was similar.
You are absolutely right. Nobody is being judged, just relating the reality of peoples irresponsible behaviors. People can be influenced by their environment, but we grow up and exercising personal responsibility is required – except for the few, no excuses.
My experience over decades is as you describe but worse because it included 401k, pensions and health benefits.
Not everyone has bad genes as an excuse and it was easy to become frustrated with the lack of responsibility in their own interest after time and effort to educate, advise over and over.
We offered training, financial advice and planning – all types of services free. We tried to include spouses and yet very few workers wanted to take the time for their own benefit.
idk about other professions, but Spouse was in the field a lot with their job when these kinds of meetings were going on. Almost every year. Had to learn on our own. In more recent years they got smart and recorded the meetings. I can see where you would be frustrated being in HR that the company wouldn’t make the time for everyone to be in the office for the meetings. Chris
We held many meetings in the evenings and weekends to encourage spouse to attend. A few union guys complained the company expected them to use THEIR OWN TIME
yup to learn about things only for their benefit.
LOL Richard, I can imagine a few of my union bros saying the same thing. But as I once told our company VP when he complained about one of my guys; “ya know Gregg, I don’t get to choose my members, I’m stuck with the guys you hire”. He never brought it up again.
Our union leaders were just as frustrated as I was.
While we may consider ourselves to be responsible citizens, we can’t impose our standards on other folks. Consciously, or not, by doing so, we are putting ourselves above others. We are all far from perfect.
There is a lot of evidence to suggest that everything we can do, and how we do at doing it, is the result of a blend of genetics and environmental factors. All of us are better at some things than at others. I wonder if your thrift was really a matter of choices you made or choices your DNA made. What if you were programed to be thrifty while others didn’t receive that genetic package?
Part of the American view of reality delivers a deterministic philosophy of life; that we can control what happens to us. At the same time there are many areas of the world where fatalism has a larger impact. Unless we want to live in Fantasyland, we all know that there are many things we cannot control, just as there are things that we can.
If you received the thrifty genetic package, and were raised in a home where mom and dad were thrifty and taught you that by their example, then your behavior around spending and saving may not demonstrate choice. Likewise those who didn’t grow up in that environment or get those genes aren’t “bad” because they didn’t make the same choices that you have.
Despite the “programming”, or lack thereof, people can learn to work against their “nature”…..the thrifty can learn to spend and enjoy it. And, the spendy folks can learn to save….. But it can be hard to overcome the programming, both from genetics and from what we were taught.
After reading this I did some digging. What study I found said genetics seem to control 25 to 30% of the desire to save apparently linked to risk aversion. The family environment was also important which I can understand.
So the challenge is to ramp up the education carried into families so the prudent financial environment is created and sets the example.
While DNA may be a factor, it is not negative in many people or apparently even dominant for others. I still think responsibility is the key along with education from a very young age.
The generally poor saving rate in the US can’t be all based on our genes. People in other countries have the genes too.
A recent (2019) meta-analysis of the heritability of self-control in 17 studies with a combined sample size >30,000 (mean age = 13) revealed an overall monozygotic twin correlation of 0.58, and an overall dizygotic twin correlation of 0.28, resulting in a heritability estimate of 60%. Given the additional impact of parenting, peers and other environmental factors on self-control, it seems clear that heredity and environment have a very strong influence on our self-control. This argues against taking an approach that does nothing more than criticizing and blaming those who show poor self-control for their irresponsiblity. Instead, as difficult as it may be, we should be focusing on ways to help those who find it difficult to be financially responsible.
https://www.sciencedirect.com/science/article/pii/S0149763418307905
Instead, as difficult as it may be, we should be focusing on ways to help those who find it difficult to be financially responsible.
Yes, I agree. This is the reason some employers have come to use automatic contribution arrangements, (ACA). That’s obviously not a cure all solution, but maybe it’s a step
in the right direction.
For the most part, throughout my childhood, college years, and then into adulthood with a nice, living wage career, I always spent virtually all my money and never accumulated any appreciable savings until I was 25 YOA. My parents always lived within their modest means, but had fun, and I spent my means. And then, for some reason, my income began to exceed my lifestyle and I began a lifetime of saving. Much like my Dad, I think I reached a threshold of contentment, and kept saving the rest. As my income went up over time, I would save more and more while modestly increasing my standard of living. Now, I must fight the thrifty gene, and it’s a nasty one. 🙂
With regard to lower income people, the use of the term investment may not be practical. Savings should be what you choose to keep in your left pocket as you pay for other expenses from your right pocket. Keep stashing some into the left pocket because you never really know what’s ahead. Then you’re merging funds for the unexpected expenses rather than paying wasteful “warranty” costs or “insurance” on car repairs, electronics that will wear out anyway or additional phone damage fees. That’s one way to take control.
After reading the headline, I’m not sure it’s necessary to read the post. 🥴
As I posted on another thread recently: Before criticizing others, go read Barbara Ehrenreich’s “Nickel and Dimed”.
I read this when it was first published. It was eye opening and I recommend it to everyone.
Dick: Your post leaves me torn. On the one hand, I agree. Good savings habits are crucial to personal financial success, and folks do need to take responsibility for their own financial future. On the other hand, these things are easy to say, but much harder for many folks to do. For most of human history, saving for the future wasn’t a skill required for survival, so it doesn’t come naturally to most people. In fact, the key to survival for our nomadic ancestors was to consume as much as they could whenever they could.
Can we learn to delay gratification? For some — like your typical HumbleDollar reader — it comes easily. For many folks, it’s a struggle. Yes, folks should save for the future. But we should also exercise when the scale says we’re a few pounds overweight, and we should avoid French fries when our cholesterol level is high, and yet many of us regularly fail to do what’s right. We are human, and restraining our damaging impulses is a lifelong struggle.
The bottomline: I’m not inclined to be too critical of those who don’t save for the future, just as I’m not inclined to be too critical of folks who eat more than they should or fail to exercise. This is how we flawed human beings behave. I’m among the sinners — I’m thinking of treating myself to a sandwich with French fries for lunch — so I’m not inclined to cast aspersions on the behavior of others.
Thanks, Jonathan for replying with the thoughts that I could never formulate into coherent sentences. I know that many people from the community my church serves are barely able to scrape by, or as you imply, survive. I often marvel and/or comment on my incredible luck to be where I am – but I know it is not true for all.
Your point is valid. Some things are not easy, but I look at it another way also.
In a large society we are all dependent on each other in one way or the other. Unless a person is 100% self- sufficient throughout their life – virtually impossible, they have an obligation to act responsibly because when they don’t others in society must provide relief and support. That can take from their ability to care for themselves.
For example, calls to improve Social Security because it is inadequate as sole retirement income for those without other resources means higher taxes on others thus limiting their ability to save.
We are all connected and in the end are responsible for those who are not.
We all fail at times, but irresponsible behavior affects us all in one way or another.
I had a client who absolutely hated Obama Care and refused to buy insurance. I explained why I disagreed giving the example of an uninsured person having a heart attack and receiving lifesaving care, then being unable to pay the bill. The hospital writes off the debt, which then becomes part of the overhead, which is passed on to everyone else. He sat in silence for a while pondering my statement. The next week he returned to my office, with his wife, to pick up their taxes. In conversation his spouse mentioned that he had recently gone to the emergency room with chest pains, and thankfully the hospital wrote off the charges. Go figure.
Those write offs lead to higher health insurance rates for everyone else, as the hospital has to have the income to pay their bills. The bill just gets shifted onto others I think is Dick’s point.
It’s a similar situation when it comes to people asking the government to write off their school loans. The result is an increase in the debt which shifts the burden onto future generations.
Yes, irresponsible behavior can generate social costs. But the same could be said for those who fail to take care of themselves physically. If my neighbors didn’t smoke, or drink, or fail to exercise, or eat fatty foods, my health insurance wouldn’t cost so much. There are also social costs generated by those who drive aggressively, or have private planes, or fail to recycle…. The list goes on and on. I’d love to see folks adopt better financial habits. But I’m not sure any of us should get into the business of criticizing the behavior of our fellow citizens unless it’s causing immediate and direct harm to others.
Jonathan this is a great analogy and I’m glad you made it.
The analogy with health practices is an eye opener. I wonder how many of us smoke or drink to excess or eat unhealthy diets or fail to exercise, even though we know our lifestyle is unhealthy.
It makes sense that the population on this forum will focus on financial practices that to most of us here are second nature. Somewhere there’s a forum of fitness enthusiasts who can’t understand why overweight people don’t make simple lifestyle changes that would likely add to their lifespan as well as improve their quality of life, not to mention that their poor practices cost society as a whole.
I’d love to see folks adopt better health and fitness habits. And better financial habits. And recycling. But to the extent I worry myself over the behavior of others, my energy is probably better spent in increasing awareness of how and why to do better than in criticizing what in my opinion is poor performance.
Michael – great follow-up. Thanks.
I think these are two sides of the same coin. What’s missing here is having the knowledge and wherewithal to know that one can, indeed, get going saving and investing even with minimal income. People are emotional beings. They spend on themselves and enjoy comfort food because it makes them feel better, regardless of income. During those times they feel lonely or distress, probably even more so, would be my guess. I certainly have. But my point is that once I crossed that threshold of knowledge about saving and investing, and more importantly believed in it, there was no turning back. But it can be hard. Add to that that the retail financial industry does not make it easy on a new investor – this is by design, I believe, to get people to invest in sub optimal products.