What's the matter with understanding an individual's economic outcomes solely in terms of personal finance? (quote the article)

There's also deferment and forbearance, which is sort of like hitting the pause button on your loan. With deferment and forbearance, you take a break from your monthly loan payments, and your interest is deferred or accumulated Even a savvy consumer can be duped when loan servicers give inaccurate information to borrowers or banks behave during that period. Refinancing or consolidation can also help people lower their debt, but be careful because many in ways that harm consumers. When predatory companies double as financial advisers, it's even harder for consumers to know what's best. The Consumer Financial Protection Bureau is a resource, but under the Trump companies take advantage of consumers. administration, which has been critical of the bureau, many of its consumer protections against predatory businesses Refinancing is when you pay off one loan with another loan, and consolidation works the same way, but groups all of have loosened. For example, its new director, appointed in 2017, has eliminated many restrictions on payday lenders. your debt into one, new loan. Either option can make sense if the new loan has better terms - namely, a lower Dr. Bahn said that the best policies for change are the ones that give more power to workers and consumers. "We interest rate. The Department of Education offers federal loan consolidation, but the interest rate won't be lower. need to audit banks and employers and small business lenders to make sure they're not engaging in discriminatory Keep in mind, if you refinance your public student loan or consolidate with a private lender, you lose those federal practices," she said. Pay transparency and recent bans on asking about salary history are other policies that are relief options. To see if refinancing makes financial sense, plug your numbers into a refinancing calculator. meant to empower workers and tear down longstanding structural barriers. NerdWallet's calculators are easy to use and the company has both a mortgage refinancing calculator and a student loan refinancing calculator. In an era when banks and corporations seem to have more protection than people have, it's difficult to offer practical advice on how to navigate the system and sometimes seems unfair to do so. Dr. Hensley said that policymakers and The 10 percent rule is too much - and not enough advocacy organizations are part of the solution, but contends that education is, too. In a system in which so much is Traditional personal finance advises people to save 10 percent of their income for retirement. The problem is that it's seemingly out of our hands, it can take a lot of effort to feel financially empowered. The financial shame that's implied both unrealistic for many people but also not enough to fully fund a retirement. in so much blanket money advice makes the process only more overwhelming. People are living longer, fewer of them have access to a 401(k) and Social Security benefits are decreasing. This is "Financial education should not be, 'Do it this exact way, or you're a failure," Dr. Hensley said. "We need to humanize why most experts now agree that 10 percent is not enough. Retirement calculators can be a helpful way to figure out the topic." how much you need to save based on these factors, but it can also be discouraging to see how much you should have saved, depending on your age. Most Americans don't have nearly the amount they should for emergencies or for retirement, and it would be easy to believe this is because they just don't know the importance of retirement savings. But that's not true - according to Ms. Schneider and Mr. Morduch's data, people are very aware of how much they need to save for retirement. They simply need that money now. 9. What's the matter with understanding an individual's economic "What we're seeing when people cash out their retirement plans, or borrow from them, or fail to save for an outcomes solely in terms of personal finance? emergency is not a lack of knowledge or awareness, but the result of people genuinely needing to spend the money today," Ms. Schneider said. 10. What is the main takeaway from Ms. Schnieder's research, in your view? The other issue is 401(k) leakage. Many people cash out their retirement plans or borrow from them to make ends meet. At a personal finance workshop, I once met an attendee who saved as much as she could to get a 401(k) match, 11. What is the standard personal finance advice regarding saving but then stretched her finances so thin she couldn't pay her bills or make her debt payments. Her intentions were money and how should we re-think it? good - she was only following traditional finance advice she had read. But this resulted in accrued interest and late 12. List the debt relief options (five) and circle the one you think payments, and she became discouraged from saving at all. you might need some day. One way to combat this problem, Ms. Schneider said, is to encourage people to save for an emergency while they 13. Why don't most Americans have enough saved for retirement? save for retirement. It can be helpful to remember that while your 401(k) match is an outstanding perk, you need a financial safety net, too. Retirement advice varies, depending on your age, but treating it as a habit and looking into individual retirement account options if you don't have an employer 401(k) is a good place to start. Beware of predatory financial services Predatory financial services often operate under the guise of giving people solid financial advice. For example, I was recently driving around a different city and tuned in to a radio show dispensing financial advice. The host told listeners to cut back on retirement savings and instead invest in real estate. I couldn't believe what I was hearing - most people don't have nearly enough saved for retirement, and this personal finance expert was asking them to save less and put more of their eggs in one basket. It didn't take long for me to realize this wasn't a financial advice show at all, but a long commercial for a real estate investing course. After that spot, another show advised listeners to take out a reverse mortgage on their home. Again, the show was publicized as financial advice, not a commercial.economy.html The New York Times https://www.nytimes.com/2020/01/23/smarter-living/does-personal-finance-still-work-in-our-changing- person could fall below the poverty line in any given month. "This has a huge impact on how people deal with money," Ms. Schneider said. "The economy has been growing and Does Personal Finance Still Work in Our Changing Economy? the unemployment rate is relatively low and declining, yet we're not seeing that growth and prosperity getting distributed down to the bottom." While Ms. Schneider agrees that financial education is necessary and can be useful, With a financial system so drastically shifting, what can we do about money? she also worries that overemphasizing it as a solution to financial challenges shifts responsibility away from our economy's major players, like banks that offer subprime predatory loans or companies that take advantage of By Kristin Wong workers. Jan. 23, 2020 One thing proponents and critics of financial education seem to agree on, however, is that if we're going to help people navigate this existing system, the way we talk about money has to evolve. With that in mind, here are some Don't buy a car you can't afford. Save 10 percent of your income for retirement. And, for crying out loud, stop new ways we can think about personal finance. throwing away money on lattes. Saving is a habit, not an objective We've heard it all before. "If your budget is dramatically different one month to the next, then a whole bunch of standard financial advice does Traditional personal finance advice is often tossed around in blanket statements. While the advice is sound in theory, not apply to you," Ms. Schneider said. Most financial advice starts with making a monthly budget, but many people the way we actually deal with money is much more complicated. manage their money on a daily basis, asking what they can afford today. This makes traditional savings approaches difficult. Our changing economy has made this a more common reality. Consumer spending is increasing and unemployment rates are low, but wage growth has been slow, some people have given up the job search and income inequality is still Traditional personal finance advice focuses on saving a lump sum, like eight months' worth of living expenses, or very much a thing. With a financial system so drastically changing - and seemingly for the worse - what can we do $1,000 for an emergency fund. But that can be hard to plan when you have an income that fluctuates wildly. It's better about money? to think of saving as a habit rather than an objective, especially when you have a variable income. "I'm interested in the causes and consequences of inequality, particularly from a labor market perspective," said Kate "It's very easy to fixate on a savings amount as a goal," Ms. Schneider said. "Those benchmarks give you a goal to Bahn, director of labor market policy and an economist at the Washington Center for Equitable Growth, a research work toward, but it's like trying to get in 10,000 steps on your Fitbit. You're supposed to walk every day, it's not like organization. Dr. Bahn argued there's not enough emphasis on the larger structural barriers that make people's you reach 10,000 steps and then you stop walking." For example, instead of thinking of your savings as a $5,000 goal, financial lives difficult. Personal finance might further de-emphasize these barriers, she said. "Maybe that's why I'm approach it as a habit of saving $100 a week. so frustrated." Ms. Schneider's research also found that once some savers reached their objective, they did everything they could to There is, for example, a concept called labor monopsony, which is what happens when a single hiring entity controls keep that amount intact - which sounds great, but can backfire. Even if savers had an emergency, they would pay the work force. "So employers will take advantage and pay workers less because there's nowhere else to go," Dr. for it with a loan or put the expense on a high-interest credit card just to maintain their savings. "It's demoralizing for Bahn said. "It's geographically remote areas where there may be only one big employer, and there's no other people when they have to break their savings," Ms. Schneider said. "The data supports that people are more likely to company to work for, so that company can pay whatever they want because workers can't say, 'Screw this,' and go continue saving if they think of their savings as an ongoing behavior rather than a one-time objective." somewhere else." Debt relief options are more important than ever Dr. Bahn's argument is that personal finance is necessary, but not sufficient. It's put forth as a solution when policy is "The rising debt burden is a problem we should pay close attention to," Ms. Schneider said. And it's not just student what's really needed, she said, and places priority on personal choice over issues that are, unfortunately, out of most loans, but also credit card debt, car loans, mortgage debt and, of course, medical debt. In 2018, Americans borrowed people's control $88 billion to pay for health care. Others say that personal finance remains helpful because it is a way to share information that people are often Traditional personal finance advises people to pay off debt before making any other major financial decisions, discouraged from seeking. "People have criticized financial education, saying it doesn't work because people are still sometimes even including investing for their retirement, but that may not be realistic for many people who are faced making mistakes," said Billy Hensley, president and C.E.O. at National Endowment for Financial Education, a private with years of paying off a student loan. This is why some experts now follow the 5 percent rule: If the interest rate on nonprofit. "Education can't help access jobs, but it can help people navigate the system as it exists." your debt is 5 percent or higher, focus on paying it off; but if it's lower, invest while you pay it off because you'll get a But it's hard to measure the effectiveness of personal finance because so much of it is, well, personal. Rachel better return over time. Schneider, a researcher and co-author of "The Financial Diaries: How American Families Cope in a World of Debtors should also be familiar with opportunities for relief. Federal student loan borrowers, for example, may have Uncertainty," wanted to look at how people handle money in the real world. She and her co-author, Jonathan forgiveness options. There are also income-driven repayment plans, with which you can extend the life of your loan in Morduch, a researcher and professor at N.Y.U., worked with over 200 families for a year, gathering information on exchange for a smaller monthly payment. Keep in mind, you'll pay more over time, but for those who struggle to every dollar that went in and out of their homes. afford rent, the relief may be just what they need to get back on their feet. Some private student lenders and credit card companies also offer relief options. You can call and ask if they have any hardship payment plans. Typically, you "A huge finding was the level of volatility people experience in their financial lives over the course of a year," Ms. have to qualify for these plans, and qualifications might include job loss, unemployment, divorce or family Schneider said. Although she expected to find income volatility year to year, it was surprising to see how widely emergencies. The lender or issuer may lower your monthly payment and may also agree to a smaller interest rate or income varied within the year, too. A subject could be above the poverty line for the year over all, but that same to waive your fees over a short time. gig economy - a labor market characterized by the prevalance of short-term contracts or freelance work as opposed to permanent job"