The End of Personal Finance

by Milo on May 4, 2009

Did you ever see a basketball game where a defender swiped the ball from the point guard, ran the length of the court, and then missed the layup?  It’s painful to watch.

That’s how I felt reading an article from that’s circulating around the net called The End of Personal Finance.  The article raises an important point about how betrayed many people feel by the current financial paradigm in which they attempt to accumulate wealth during one half of their adult lives in order to support themselves during the other half without additional wage earnings.  Unfortunately, the author doesn’t do much with this point other than to run around the court in several directions, apparently unconcerned with where the basket might even be located.

What makes the article a little dangerous, though, is that it wraps important truths within several misleading arguments.  For example, the writer notes correctly that many people underestimated the risks of stocks, in part because of encouragement by the financial-services industry to buy them.  True enough.  But her proposed alternative is not a diversified portfolio of financial assets, or even to avoid risky assets altogether. Rather, for her the answer is gold.  Why?  Because it’s had a great run the last several years.  

Talk about replacing one idol with another . . . .

The author also blames the “personal-finance” industry for having encouraged a false belief in self-reliance.  It’s an interesting point and one I wish she would have explored.  But ever since Americans began settling the West under the doctrine of Manifest Destiny, and even well before as writers such as Henry David Thoreau articulated, the notion of self-reliance has been central to American identity.  The personal-finance industry had nothing to do with creating this belief.  All it did was recognize the truth that any marketer knows:  people love a good story that confirms what they’d like to hear.

Don’t get me wrong.  I can talk about the problems with the personal-finance industry for hours. But this article’s great start down the court ended in a giant air ball.

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