Financial Planning

Financial Security Is Still Achievable

Social critics argue that financial progress is impossible for most Americans in today's economy. Powerless victims? No way.

For more than 65 years, this magazine has tried to educate the American people about how to manage their money wisely to achieve basic financial security in good times and bad.

Judging from the testimonials we get from our readers, we’ve done a pretty good job of it by focusing on the basics: living simply, deferring gratification, putting saving on autopilot, reducing risk with insurance and diversified assets, and avoiding investment fads. Despite the financial challenges of the past dozen years, I fervently believe that financial security is still achievable by every productive American.

But this premise is under broad attack from social critics who argue that financial progress is well-nigh impossible for most Americans in today’s economy, given the realities of less job security than in the past, the high cost of college, pressure on pay from foreign competition and automation, and the demise of employer-paid pensions.

Nothing short of a broad economic overhaul, led by a more generous and controlling federal government, can change this, they say. Individual initiative will always be trumped by forces beyond our control.

An overstated case. That’s the grim message of a new book, Pound Foolish, by freelance journalist Helaine Olen, who wrote a personal finance advice column in the Los Angeles Times called “Money Makeover” back in the 1990s. “No amount of personal initiative and savvy could guarantee anyone an exemption from broader negative economic and social trends,” she writes. She’s right about that, but in what era did we ever have a guaranteed exemption from life’s risks?

Her book is ostensibly an indictment of the financial-services industry (for being more concerned about its profits than its clients’ success) and financial-advice celebrities such as Suze Orman, David Bach, Dave Ramsey and Jim Cramer (the first three for giving their motivational advice with a scolding tone, and Cramer for dispensing stock tips as manic entertainment).

Olen also slams the financial-planning profession, the financial-literacy movement and personal finance journalism as futile at best, misleading at worst. “We do not live in an economic environment that will permit mass personal financial progress, no matter how well meant the guidance or advice,” she writes. “We were sold on a dream—a dream that personal finance [advice] had almost magical abilities, that it could compensate for stagnant salaries, income inequality and a society that offered a shorter and thinner safety net with each passing year.”

At Kiplinger, we’ve never claimed magical powers, and we’ve often written that fin­ancial security starts with your own earning power, in an occupation for which demand is strong. Before you can practice sound money management, you’ve got to earn and save some money to manage.

Outdated pessimism. Books like Olen’s tend to be conceived in times of severe economic stress, such as the Great Recession. But by the time they are published, in a mending economy, their pessimism seems outdated. Her reference to a “shorter and thinner safety net,” for example, doesn’t quite square with the coming of universal medical coverage and the expansion of Medicaid to millions of lower-middle-income families.

I don’t buy Olen’s key thesis, that most Americans are powerless victims who cannot achieve financial stability without a lot more governmental help and regulation. This flies in the face of progress being made by women, racial minorities and immigrants. “We’d been sold a dream of saving and investing that had no basis in any history or reality,” Olen argues. Well, I know quite a few longtime Kiplinger readers who might disagree with that. And we’re still here to help them.

Columnist Knight Kiplinger is editor in chief of this magazine and of The Kiplinger Letter and Kiplinger.com.

Most Popular

Tax Wrinkles for Work-at-Home Employees During COVID-19
taxes

Tax Wrinkles for Work-at-Home Employees During COVID-19

Are your home office expenses deductible? How does going out of state to work for a while affect your tax picture? There are some interesting wrinkles…
November 9, 2020
Retirement: It All Starts with a Budget
personal finance

Retirement: It All Starts with a Budget

When you’re meeting with your financial planner, do you talk about your budget? If not, you should.
November 10, 2020
Will Joe Biden Raise YOUR Taxes?
taxes

Will Joe Biden Raise YOUR Taxes?

During the campaign, Joe Biden promised that he would raise taxes for some people. Will you be one of them?
November 10, 2020

Recommended

Peering Past the Pandemic
Travel

Peering Past the Pandemic

I’m looking forward to a time when lunches with the girls (or guys), volunteering and travel will resume.
November 24, 2020
Find Higher Yields for Your Cash
Financial Planning

Find Higher Yields for Your Cash

Interest rates are scraping bottom, but here’s a road map to accounts that will help your money grow.
November 24, 2020
How to Automate Your Savings in 6 Easy Steps
savings

How to Automate Your Savings in 6 Easy Steps

Take advantage of technology to make building your savings and investing it a seamless – and pain-free – process.
November 19, 2020
11 Year-End Moves to Lower Your 2020 Tax Bill
taxes

11 Year-End Moves to Lower Your 2020 Tax Bill

What you do between now and the end of the year can have a significant impact on how much tax you have to pay next April.
November 17, 2020