The U.S. Financial Diaries with Jonathan Morduch
Summary: Much has changed for the average American family from a financial standpoint in the last few decades. Much of the advice we receive is outdated in today’s climate. Today we discuss The U.S. Financial Diaries with Jonathan Morduch.<br> Today we discuss the new book The U.S. Financial Diaries with Jonathan Morduch.<br> Jonathan Morduch is a Professor of Public Policy and Economics at the NYU Wagner Graduate School of Public Service and Executive Director of the Financial Access Initiative at New York University. He joins us to discuss his new book, The U.S. Financial Diaries: How American Families Cope in a World of Uncertainty (Princeton University Press; April 2017).<br> The Old Advice No Longer Works<br> Financial advice is still geared towards a model that no longer exists. The advice works well when we assume people will graduate from college, get a secure job that provides, predictable, steady income with yearly raises, buy a home, save for college, retire at 65 with a pension.<br> But for millions of Americans that path is no longer available. The cost of college has soared <a href="https://www.bloomberg.com/news/articles/2013-08-26/college-costs-surge-500-in-u-s-since-1985-chart-of-the-day">538%</a> since 1985 and people are saddled with tens, sometimes hundreds of thousands of dollars of <a href="https://www.listenmoneymatters.com/go/sofi/">debt </a>before they even enter the job market.<br> Job security is a thing of the past and will only get worse as more and more jobs become automated. Even those employed at larger companies may not be employed by those companies. Many work on contracts.<br> Companies no longer share their success; profits are now only for shareholders.<br> Home prices are out of reach. Pensions are part of a bygone era. Only <a href="http://money.cnn.com/retirement/guide/pensions_basics.moneymag/index7.htm">4%</a> of American workers in the private sector have a pension as their only retirement account, down from 60% in the early 1980’s.<br> You can see why the old advice doesn’t work. Getting a college degree is no longer the almost sure path to the upper middle class. If you do get a degree, it’s hard to <a href="https://www.listenmoneymatters.com/how-to-save-for-a-house-fast/">save for a home</a> when your student loan payments are so high.<br> It’s hard to make a <a href="https://www.listenmoneymatters.com/go/mint/">budget </a>when your hours and therefore your paychecks vary week to week. An employer-sponsored <a href="https://www.listenmoneymatters.com/401k-loan/">401k</a> is the first introduction to retirement savings and investing for many people.<br> If your employer doesn’t it, you may never know there is such a thing as tax-sheltered savings and lose out on all of the time that money had to compound.<br> The U.S. Financial Diaries<br> The study is based on 235 families from all across the United States. For one year they gave the authors access to every detail of their financial lives. The families were not among the poorest nor were they among the richest. A quarter was below the poverty line, half were at or making two times the poverty line, and a quarter were above the prior group.<br> To understand what that means, federal poverty guidelines for a family of four is <a href="https://www.zanebenefits.com/blog/2017-federal-poverty-level-guidelines">$24,600</a> per year.<br> The book bears out what we described above, that the model has changed, but the advice has not. And many people, notably politicians, don’t want to admit that the model has changed. To them, the advice is excellent and the people struggling are entirely to blame for their situation because they have failed to follow it.<br> The book proves otherwise. The model is no longer predictable, and people can do everything “right” and still find themselves one relatively small, unforeseen expense, away from financial disaster.<br>
