Neal Gabler’s financial woes, as he recounts in the May issue of Atlantic, point out a simple fact that should never be overlooked: Although money errors often stem from calculation or simple planning errors, they at least as often result from more intimate reasons in psychology and our personal histories. .
How we manage our money is a surprisingly loaded question, affecting our relationships with those close to us. Problems of control, trust, proximity and boundaries lead us astray and hamper transparent planning. Money issues also humiliate in a way that few other things do. I see it among my students, who share Facebook passwords and old boyfriend secrets with their partners, while remaining close to the waistcoat regarding their Visa bills. I see this in my colleagues, who are embarrassed to speak candidly about their underwater mortgages or to get help with their underfunded or poorly invested 401 (k) s.
Nobel Prize-winning economists George Akerlof and Robert Shiller, in their entertaining book Phishing for Phools, note that pop psychologists had been looking at this topic long before serious economists knew it. Akerlof and Shiller cite the example of financial guru Suze Orman. As one fan told them, âSuze Orman isn’t about the money. She takes care of people.
Orman’s kitsch investment advice is appalling when seen through the prism of any sane investment theory. Yet it is often useful to millions of people. Why? Because it reflects the reality of how many of us go about our financial lives. When she reminds people not to go into debt and live below their means, she warns of the missteps and relationship traps that lead many people to life-changing financial problems. She might have saved Gabler a lot of grief with some timely advice.
Gabler says he is financially helpless. The reader can feel what he wants to say. A seemingly successful person, he has faced a series of worsening family financial problems. His growing difficulty in keeping up appearances led him to even more serious financial problems.
To take the most obvious example, Gabler’s wife had previously worked as a movie director. She left the paid work force to raise her children. By the time she was ready to return, her old career was no longer an option. Gabler didn’t want her to lower her eyes to take a more subordinate position, although that was financially disastrous for any lucid accounting:
[W]With my antediluvian male pride at stake, I told him I could support ourselves without his help – another example of hiding my financial helplessness even from my wife. I kept the books. I kept it in the dark.
Many couples experience similar difficulties. Writing in the American Journal of Family Therapy, Joan Atwood notes that “couples would rather talk about sex or infidelity than how they handle family finances or how much money they make.” family therapy. On the other end of the spectrum, a profitable segment of the financial services industry exists to help high net worth individuals navigate and discuss sensitive financial matters with spouses, children, and other family members. There is even a Financial Therapy Association at the intersection of financial planning, mental health, and relationship therapy services.
Much of what Gabler went through was compounded by the psychic turbulence of downward mobility. Downward mobility is particularly difficult. My own family suffered a financial crisis when my mother-in-law passed away suddenly and her son, who lives with an intellectual disability, had to move in with us. My wife needed to leave the workforce to take care of him. That ruled out the possibility that we would become the high double-earning affluent couple that we thought we would someday be. We have experienced real challenges and some heartbreaks. Yet we never had to sell our house or take our children out of school. We have never descended into the world in a way that is visible to others. It would have been even more difficult.
For Gabler, the shame of this collapse seems to have kept him away from the advice of others. If he hadn’t tried to hide his despair, he might have slowed his descent. He might have discussed the challenge more frankly with his wife. He could have asked for help, made a reasonable plan. Over time, these got worse than they needed to be. When a person goes through their financial difficulties alone, isolation breeds hopelessness and mistakes too.
Honest financial communication is especially necessary when considering another reality reflected in Gabler’s story. Serious financial problems cannot be solved by nibbling away at the margins. You can stop going to Starbucks or taking a nice vacation if you have a work-related setback or a family member gets sick. You can’t stop paying your mortgage or your taxes. These big things (not to mention your children’s school fees) matter more than the little things you can easily control. Tackling the big things requires real life changes, with the compromises, admissions, and disappointments that come with them. They have important implications for everyone involved and, therefore, require that everyone, certainly both spouses, be involved.
Gabler provides some precise figures in his confessional. So I don’t know exactly what happened. It’s clear that he’s stretched too far in a way that now seems silly:
I never wanted to follow the Joneses. But, like many Americans, I wanted my kids to follow the Jones’ kids because I knew how easily my daughters could be marginalized in a society where almost all rewards go to a small, well-educated elite. (Okay, I wanted them to be winners.)
This passage will not gain much sympathy from Gabler. After all, he enjoys a myriad of blessings. He is a distinguished writer who has won prestigious awards. He has numerous television credits, is the author of several respected books. The safety net provided by her parents’ wealth propelled her daughters to an impeccably accredited professional life. He received help in the form of a loan modification. And perhaps his best chance: he is apparently in good health.
But even with all of these blessings, he still made some serious mistakes, which were made worse by bad luck. Indeed, I suspect that the gap between his social and financial status made such mistakes more likely. He overinvested in real estate, then got stuck with two mortgages in the madness of New York’s co-op economy. He took a financial hit on a missed book deadline.
So now he’s counting his pennies. He hasn’t taken a vacation for 10 years. He eats out once every few months. He drives a 1997 Toyota. These lifestyle changes are inevitable. They are far from sufficient.
Gabler cites tons of national economic statistics in an attempt to explain his situation, noting that most Americans have meager assets beyond the family home. Indeed, the 2013 Federal Reserve Survey of Consumer Finances indicated that median financial assets held by American families are only around $ 21,000.
Gabler’s real problem is more specific than a stagnant national economy. Like the displaced steelmaker, he had the misfortune of working in an industry that contracted if not collapsed. The glossy media economy no longer generously supports non-superstars and respected figures like him.
As a result, Gabler is making a lot less money than he could reasonably have predicted from a perspective 30 years ago, before the internet ripped out the core of the old media economy. Add in a little age discrimination (prevalent in both serious journalism and entertainment) against the two Gablers in their respective fields, and you have family financial disaster. If Craigslist, Huffington Post, and the rest had arrived 20 years later than them, I bet Gabler would have been fine, despite his bets and blunders.
By his own admission, Gabler is an atypical and rather unsympathetic protagonist in any story of American economic woe. I fear his essay will receive a cruel reception. Yet he is not alone. Millions of people get sick or are otherwise unlucky. They earn low wages. They screw up. They are the prey of greater economic forces. For one or all of these reasons, millions of us will approach our old age like the Gablers now do, with meager financial resources. His choices may have been idiosyncratic and even senseless, but there is a common story behind it all. Its mistakes and misfortunes underscore the necessity, difficulty and ultimately the fragility of prudent financial planning as the foundation for a stable middle-class life.
Thank goodness for social security. Many of us, even famous writers, could never survive without it.