Why isn’t personal finance questioning the status quo more?

I went to Las Vegas for the first time last December, and on a blue-skied day, I decided to walk off the new Strip towards the old one, in Fremont. The best descriptor for that part of Nevada, and of the desert in general, is that it looks like Mars — no obvious signs of life, mysteriously cratered, like it could kill you — but also like Earth on its last legs. As if to reinforce this second impression, stretched along the road to Fremont was a bizarre array of businesses, surreal and depressing enough to locate the scene at the world’s end: wedding chapel, wedding chapel, wedding chapel; bail bonds, bail bonds, wedding chapel.

Being in Vegas, the abundance of wedding chapels didn’t faze me. The bail bonds businesses, on the other hand, put up a red flag. Bail bonds aren’t something that most Canadians are familiar with, because in Canada — as is the case globally, with the exception of the U.S. and the Philippines — they’re illegal. If you’ve been arrested and thrown in jail in the U.S., you have the option of “posting bail,” meaning you can give the courts cash or ownership rights to a piece of property in exchange for your release. That payment, or “bail” is returned to you when you show up to court on the agreed-upon date; otherwise, you forfeit it. Because bail is very expensive — rates can range from several hundred to tens of thousands of dollars, depending on your age, criminal history and the alleged infraction — and has to be paid in cash, few people can afford a bail deposit out of pocket. That’s where bail bonds businesses come in. 

Bail bonds are essentially loans that you can take out for the purpose of posting bail. And because the businesses that offer them know that their clients are anxious to get their loved ones out of jail, their interest rates are much higher than most other types of loans. Much higher.

The bail bonds industry might be unique to our southern neighbours, but predatory financial services exist here in Canada, too. Often, these services are woven so seamlessly into the fabric of everyday life as to seem not only normal, but unremarkable. Growing up, the route from my parents’ house to the closest Skytrain station in Surrey, B.C., was flanked by stores offering payday loans, with innocuous names like “CashMart” or “Moneytree”. Today, the number of lenders handing out subprime mortgages in Canada’s most expensive housing markets is actually growing, 10 years after they helped set a financial crisis in motion. And the premise of our entire credit system, which bars people from accessing basic resources like a place to live or sometimes even a job unless they’ve taken on debt, is ethically fraught, to say the least.

Predatory financial services... are woven so seamlessly into the fabric of everyday life as to seem not only normal, but unremarkable 

As someone who writes about personal finance for a living, it’s hard not to take pause whenever I discover yet another predatory financial service designed to effectively punish and exploit the most vulnerable people. People who are low-income and forced to rely on bad deals to make it through another day; people of colour who are more likely to be targeted and arrested by the police; people who aren’t fluent in English or the conventions of the local financial system, many of which defy intuition and straightforward logic. It’s clear that financial exploitation is not rare, but rather something that happens all around us every day. Still, personal finance, as a concept, assumes that every person is capable of controlling their own money and therefore their own fate. For some people, that assumption is true: good finances, for them, is merely a matter of organizing and distributing their money more efficiently. But for others, especially those who are already overlooked and underserved by social infrastructure and the culture-at-large, better money management can only help so much. In a society that privileges certain groups of people over others, and that enshrines barriers that make it hard for so many others to stay financially afloat, much less build wealth or stability, how helpful can standard personal finance advice be when it assumes that the person on the receiving end of it has a reliable income and faces little to no discrimination? And if you’re the person who’s professionally giving out that advice, it’s worth considering: how ethical is it to perpetuate the myth that our financial fate is always within our control?

Months after my walk to Fremont, the mainstream personal finance community seemed to be grappling with some of these long overdue questions, too — questions that have often been left to those on the outside looking in.

In June, for instance, the New York Times published a story about women who were part of — and fed up with  — the FIRE (financial independence, retire early) movement. The FIRE community, which advocates extreme frugality for the purpose of achieving early retirement, is not exactly a stranger to criticism, but that criticism has generally come from outsiders — not the movement’s active participants. In the Times story, FIRE members expressed frustration with how the movement seemed to be tailored towards participants who were “white, male and based in Silicon Valley” — people, in other words, who could afford to practice extreme frugality because their quality of life is already guaranteed by a culture that, for example, still lays the burden of care for children and seniors on women, and sets a lower bar of personal hygiene and maintenance for cis white men than it does for just about everybody else. “They have these lean plans that are like, ‘Oh, we live on Soylent and frozen burritos, and that’s how we’re able to save 50 percent of our income,’” Kiersten Saunders, co-founder of the personal finance blog Rich & Regular, told the Times. “And it’s like, ‘O.K., but what about the other things that life sometimes requires? Where’s the budget for taking care of your mother-in-law?’ … what’s essential to a white male is very different from what’s essential to me.”

How ethical is it to perpetuate the myth that our financial fate is always within our control?

The Times story was published on a Friday, but over the course of that weekend, personal finance became a target of bonafide outrage. For that we can thank personal finance expert Suze Orman, a boomer whose financial advice is so good at shaming millennials for the wrong things that it renders her — generationally speaking — canonical. This time around, Orman was talking about coffee with business TV channel CNBC. “You spend $1 to $3 on a cup of coffee, which is approximately $100 a month… $100 a month in a Roth IRA over 40 years is $1 million,” she told the channel. “So you need to think about it as you are peeing $1 million down the drain after you are drinking that coffee.” Although CNBC aired the clip back in March, it wasn’t until June, when the clip was posted on Twitter, that people began to take notice. Responses to Orman, which totalled more than 2,600 on Twitter alone, were predictably sarcastic. “I started making my coffee at home but I still have $78,000 in student debt. Any ideas how to fix this?” tweeted one user. Others were angrier. “Yes, let's shift our focus from policies that enable and encourage the hoarding of wealth to the detriment of the nation to *checks notes* your Dunkin Donuts order,” read another tweet. “That'll work!” 

The consensus among Orman’s critics was clear: she had misplaced the blame for the real financial struggles of so many Americans, shifting it from the system to the individual (and their daily coffee habit). Prompted by Orman’s tone-deaf advice, writer Kashana Cauley penned a piece in GQ against the personal finance industry as a whole, which — although not always as explicit as Orman — operates on the assumption that just about any financial problem can be fixed by stalwart determination and smart saving. “It’s not that saving money is bad; it’s that, for some reason, we have an entire field of experts who are supposed to be taken seriously when they claim that every single American can get rich,” Cauley writes. “Personal finance is the prosperity gospel of cable news, happy to claim that you’ll end up with all the money if you listen to its experts, take their advice, buy their book.” The title of Cauley’s essay? “The Personal Finance Industry is a Scam.”

I started making my coffee at home but I still have $78,000 in student debt. Any ideas how to fix this?

Cauley’s sentiment is not new, predating even the Orman debacle. In April, Nick Maggiulli, a blogger at a New York-based wealth management firm and founder of personal finance blog Of Dollars And Data, wrote his own post on the shortcomings of personal finance advice. So much of personal finance, Maggiulli writes, is geared towards teaching people how to become wealthy, but “unfortunately, the sad truth is that most Americans will NEVER be able to do this. They will never earn enough money to invest and get rich. Remember that 54% of U.S. households don’t own any stocks and 69% of working Americans save 10% of their income or less (with 21% of working Americans saving nothing at all).”

“This is why the personal finance industry loves the ‘cut your lattes and get rich’ style of advice,” he adds. “They love it because it opens a new door in a world where the other door (high income) is closed for most people. It makes the dream seem attainable. But it’s all bullshit.”

Personal finance, in other words, is often just a weird flex: people who are wealthy due to a combination of privilege, access and hard work acting as if they succeeded only because of this last thing, and telling you that you can you also get rich even if you don’t have the first two. If personal finance is not actually all that personal after all, and your financial circumstances have just as much to do with institutional forces outside of your control as it has to do with personal agency, where does that leave the personal finance industry? Is it still possible to give personal finance advice in good conscience?

A response to the Times’ FIRE story by Chelsea Fagan, co-founder of The Financial Diet, offers one possible answer. After lauding the Times for showcasing the diversity of personal finance communities like FIRE, which is often overlooked, Fagan tweeted that she was still concerned “about missing the larger elephant in the room when it comes to these kind of movements.”

Personal finance, in other words, is often just a weird flex: people who are wealthy due to a combination of privilege, access and hard work acting as if they succeeded only because of this last thing, and telling you that you can you also get rich even if you don’t have the first two

“Ultimately,” she wrote, “The reason why the personal finance resources out there are increasingly tilted towards 'hacking' your way to things like a dignified retirement, a strong work/life balance, a comprehensive maternity leave, etc, is because Americans are denied those things… There is a fine line between making the best of your individual circumstances and realizing that one person being able to game the system is not in any way a scalable or meaningful solution.”

Fagan is writing from an American perspective, but as the cost of living in Canada’s major cities becomes increasingly untenable and the party running the country’s largest province continues to cut or withhold funding from government services and programs — healthcare included — her observation holds water here, too. The reminder that we need to acknowledge that the system is broken even while attending to our own needs is intriguing because it suggests that there is room for everyone to do both.

Personal finance wisdom is still necessary for the time being, but we might need to expand our definition of what, exactly, it involves. Continue to budget, pay down your debt and save for retirement to make your own life tenable, sure. But do things to fix the system, too. Voting for politicians that prioritize the well-being of people and communities over big business should also be considered personal finance; so should volunteering at organizations that help those who are financially struggling, and advocating for policies that ensure that everyone’s baseline needs are met. In an ideal world, the personal finance industry would not be, as it currently is for so many, a mythic guide to mere survival. Instead, it would exist to help us satisfy our desire for extras, or fluff: a way to make lives that already have their basic needs met just a little bit brighter.