In praise of financial resilience

I had lunch with my friend Craig a few months ago. Craig is an architect, and he took me on a tour of his company’s offices. “The cool thing about this building,” he told me, “is that it’s especially resilient.” I could tell from the way he said it that the word resilient meant something a little different than what I might expect.

“What do you mean?” I asked.

Craig explained. “In architecture, resilience refers to a structure’s ability to return to its original state after a disturbance. Say strong winds cause a skyscraper to sway or an earthquake shakes a house. If they’re resilient, those buildings move with the outside forces but then return to normal when things calm down.”

“Ah,” I said. “When I talk about personal finance, I preach resilience.”

“Sure,” he said. “Resilience is a good thing, both in buildings and in people.”

Ten years ago, when I was still struggling with money, my finances were not resilient. I had no savings, and I was living paycheck to paycheck on $50,000 a year. When even small things went wrong, such as car trouble, I found myself in crisis mode. How would I pay to fix the problem? How could I meet my other financial responsibilities?

When I began to turn things around, one of my first actions was to set aside a small ($500) emergency fund to cope with the unexpected. This idea — promoted by Dave Ramsey and many others — built some resilience into my budget, allowing me to cope with minor crises.

As time passed and my financial situation flourished, my ability to bounce back from unexpected blows improved. This was partly because having more money gave me more options. But it was also partly because I adopted an internal locus of control, accepting responsibility for the things that happened to me in life. Instead of waiting for someone or something else to fix problems, I decided that I would fix them myself.

The National Economy vs. Your Personal Economy

Over the past five years, I’ve come to hate the phrase “in this economy.” After the market crash in 2008, the mass media seemed to adopt the notion that we’re weathering an economic storm that simply will not stop. Even today — despite the fact that most economic indicators are positive — there are tons of articles built on the premise that the average person is being buffeted by forces beyond her control.

I disagree.

Besides, even when the national economy is bad, that doesn’t mean your personal economy has to suffer. For a few years now, I’ve been sharing a metaphor I’ve come to love.

It’s as if each of us is the captain of a ship sailing on the ocean. Sometimes the elements are favorable. Sometimes the seas are stormy. Yes, we can choose to surrender to the whims of the weather, but a smart captain does what he can to prepare for bad weather so that he can steer his ship safely to harbor. In short, the national economy does affect your personal economy, but you can’t control the former while the latter is entirely in your hands.

To make your financial ship resilient, you must adhere to certain fundamentals, such as:

  • Maintaining an adequate emergency fund.
  • Limiting your use of debt.
  • Practicing thrift.
  • Investing for the future.

To paraphrase a famous philosopher, a resilient person is in the world but not of the world. You cannot escape the national economy. You cannot escape the mass media. You cannot escape your friends and family. But that doesn’t mean you have to buy into what everyone else is doing. Most people have fragile personal economies that crumble when times get tough. You want yours to be flexible and adaptable.

Mind Over Money

It’s also important to remember the psychological side of money management. Many of my financial tenets are based on the need for financial resilience, or mind over money.

  • When I say that it’s important to spend less than you earn, that’s because a positive cash flow allows you greater flexibility to respond to life situations. If you’re deficit spending, it can be tough to find the funds you need to cope with a crisis — especially if you have no savings. But if you have a “profit” at the end of each month, you have the ability to redirect some of the money temporarily to take care of business.
  • I argue that the perfect is the enemy of the good because when you’re obsessed with finding ideal answers, you set yourself up for frustration when you realize there usually isn’t an ideal solution. Plus, perfection also produces procrastination and resistance, two natural enemies of resilience.
  • Another aspect of resilience is the ability to respond to failure. Failure is okay. What matters isn’t the mistake, but how you respond to the mistake. Successful people brush failure aside and continue marching toward their goal. (This is almost the definition of resilience!)
  • And, of course, there’s the motto of this site: Do what works for you. Each of us is different. We have different goals, personalities, and experiences. We each need to find the tools and techniques that are effective for our own situations. There’s no one right way to save, invest, pay off debt, or buy a house. When you buy into the idea that there’s just one right answer, you’re subscribing to a fragile mindset. Resilient people are open to the idea of multiple paths to success.

In psychology, adaptability refers to how well a person can adjust herself to changed circumstances. Because we live in a constantly changing universe, your ability and willingness to adapt is a barometer that measures both your ability to thrive and your capacity for happiness.

In personal finance, adaptability and resilience are also barometers for ongoing success.

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There are 55 comments to "In praise of financial resilience".

  1. FrugalSage says 05 December 2013 at 04:39

    This is something i’ve been thinking about recently.

    I totally agree about an emergency fund providing resilience.

    But it goes beyond that, as it’s actually access to capital of any kind provides a certain measure of resilience. Car broke down? No emergency fund? But you have a CC? Great no problem.

    Now don’t get me wrong I am definitely not saying that you should have no emergency fund, nor am i singing the praises of using debt.

    Using CC’s like this is a temporary ‘shock absorbing’ sort of resilience that shouldn’t be used in an ongoing matter. But it is one of the true benefits of the banking system. (as long as the bank doesn’t go bust and the funds are available when you need them!)

    The problem for most people is that when they use debt is. Instead of using it as an extra buffer, they just see it as being a part of a bigger kitty that they can now waste and use to live in the ‘now’.

    • FI Pilgrim says 05 December 2013 at 05:11

      I would argue that this is exactly the mindset that gets so many people stuck in a “minimum monthly payment” spiral.

      If you can’t save $1000 for emergencies when things are going well, what makes you think you can save enough to pay off that same $1000 when you’re paying high interest rates on a credit card?

      It’s the habit of saving that has to change in order to be “resilient”, whether that’s before or after the emergency. If you can change it before the emergency then it takes a lot of the stress out of life.

      • Vanessa says 05 December 2013 at 05:53

        I understand what you’re saying, but I also understand what FrugalSage is saying. It would be great if emergencies would postpone themselves until we’re financially able to deal with them, but life doesn’t work that way. And in the meantime you have to make the best decision you can with the resources you have access to in order to survive.

        I’m not in debt now but I have been in the past and I’m much better off for it. But I only did it after weighing all other options and using debt in ways that made my life better.

      • Jon says 05 December 2013 at 06:13

        I use a strategy that does both – incorporates having “emergency fund” savings with using a credit card for instant access to cash to cover true emergencies. When my truck broke down in the middle of nowhere, I didn’t have access to an ATM – I needed to use my Visa to pay the tow truck driver. Doesn’t mean I’m irresponsible; I pay the Visa bill in full every month. I never put things on the Visa I don’t have cash on hand to pay for, and I get various other benefits for using the card.

      • Frugal Sage says 05 December 2013 at 20:24

        “I would argue that this is exactly the mindset that gets so many people stuck in a “minimum monthly payment” spiral.”

        I do not disagree with you. Our views are not mutually exclusive. Although, you are talking more about preparing prior too, and then coping with events after an emergency.

        I tried adding enough caveats to my point to try and avoid this sort of automatic reaction to anything debt related. I am not saying that you should only ever use debt as your emergency fund.

        I am just saying that access to funds – of any kind – adds a level of resilience to a persons life.

        I did mention that debt was a temporary resilience. Sure, it is far better to have a longer/safer form of resilience in the form of an emergency fund.

        As long as people are careful and understand the choices available to them, then other options are okay. As some people mentioned, utilizing home loan redraws is a case in point. They still have access to funds in the case of an emergency, yet are using their money in a more efficient manner.

        It’s always up to the person as to how they prepare for, then cope with emergencies once they’ve occurred. In some cases debt may be required. Debt is not evil, although I do agree, it is abused and misused far too often.

        For me, I have an emergency fund. I also have an emergency CC. I have never been forced to use the CC, but it’s a part of my safety net. Having those extra funds available ADDS to my resilience.

        Could i abuse it? Sure. But i could also abuse any savings as well. We all have the a similar set of financial tools available to us. But it is how we utilize them that defines us.

    • PB says 05 December 2013 at 09:21

      I agree that CCs can help in the short term. This past summer, we had two unexpected expenses: major car repairs (took it in for one thing, found three others) and my daughter’s wedding (the one who said her whole life that she was never getting married). These events went through both the emergency fund and the catastrophe fund (and it was NOT an extravagant wedding)and wound up partly on the credit card. I decided how long I was willing to have anything on the card (6 months), divided the debt up, and will be out from under in January. Then back to rebuilding the funds. But it was very helpful to have a temporary shock absorber!

    • Sarah says 05 December 2013 at 10:20

      Frugal Sage’s comment is important, and a concept that too often in the world of personal finance is railed against, and I have to admit I am having a hard time learning to live in peace with the thought of my emergency fund being on credit…but right now we have a home equity loan for a land project. We paid off out of pocket 110,000 of the project. $40,000 is on the equity line. For me there was no sense keeping $25,000 in an emergency fund when I’m paying 3% interest, so I put the emergency fund to paying off the home equity loan. Now I have no emergency fund, but if I have an emergency, I’ll dip into home equity. I find this unnerving, but it made the best financial sense. Maybe my own anxiety with this process though is my safety net, and also, maybe this is part of financial growth. I am spurred on to keep paying down the home equity while avoiding risk. Thoughts?

      • MelodyO says 05 December 2013 at 19:51

        We have the same emergency plan, and I think it’s a fine one as long as interest rates stay low. And honestly, if you’re good with your money overall it seems like a pretty solid bet that if you did use your LoC, you’d pay it off ASAP and be back on track in no time.

  2. Phoebe@allyouneedisenough says 05 December 2013 at 05:45

    I love this article! I have written about a similar topic, but instead of saying I have resiliency, I said I was insulated.

    I too was living paycheck to paycheck (actually not even, more like credit card to credit card) just a few years ago, and it really struck me how far we’d come when the first “financial cliff” started being discussed and it didn’t even phase me.

    In the past I would have been biting my nails worried that I would go down if the carefully balanced plates I was spinning got disturbed at all, but now it will take a whole lot more to pull me under.

    Great article!

  3. Adam Hagerman says 05 December 2013 at 05:48

    “Even when the national economy is bad, that doesn’t mean your personal economy has to suffer.”

    I love that sentence!

    Every day I have people continuing to blame the national economy for their own personal financial downfalls. When they continue to tell themselves that “hey, it’s not my fault”, their finances remain unchanged as they are waiting for something else to change. The problem is, when the national economy does change, their personal situation will still most likely be the same. Then, they find someone or something else to blame.

    Thanks for the quote. I’ll be using it daily now!

    • BD says 05 December 2013 at 10:57

      What about those of us who have always been frugal, have always saved what little money we have, but have been unable to find work? This economy IS bad, and for those us who are jobless, getting a job has been near-impossible. It’s easy to talk about how the economy isn’t all that bad when you’re employed, but for the unemployed, this is a nightmare. (And yes, I’ve been doing everything I can to get employed).

      • Adam Hagerman says 05 December 2013 at 11:56

        My apologies BD. I guess I should have elaborated a little bit about who my clients are.

        I work at a large enterprise in which all of the clients I see are employed. Even though they are employed, several still blame the national economy for their financial woes.

        It’s upsetting for me to hear because there are millions out there just like you struggling to find employment.

        Have you read the book “What Color Is Your Parachute” by Richard Bolles? I utilized a lot of the information in that book to land the job I have now. I think there is some great stuff in it.

        Good luck in your search.

  4. Matt Becker says 05 December 2013 at 06:37

    Resiliency is absolutely one of the most important parts of a good financial plan. It’s the reason why I believe so strongly in having good insurance coupled with cash reserves. The cash reserves help you handle the smaller stuff and the insurance makes sure you’re not devastated by the big stuff. Having that security actually gives you more freedom to take risk in other areas of your life that really matter to you. To me, that’s invaluable.

  5. Brian@ Debt Discipline says 05 December 2013 at 06:57

    Totally agree! Keeping your personal finances in order at all times give you a lot of flexibility, one example that comes to mind is buying investment properties at great deals when the national economy is bad to build further wealth. You don’t want to have to rely on someone else inability to manage finances to affect your way of live.

  6. Curtis@PayOffMyRentals says 05 December 2013 at 06:58

    Nice post!

    We often have far more control over our personal finances than we care to admit. I like to think of it as a moat. The wider and deeper the better. The four items lending to greater resiliency are excellent:
    -Maintaining an adequate emergency fund.
    -Limiting your use of debt.
    -Practicing thrift.
    -Investing for the future.

    I’ve just spent all of 2013 paying off a rental house. I just wrote a celebratory post about it. It widens and deepens my protective moat because I now have $425.00 less in monthly debt obligations and $425.00 more in income. Two more to go before FI. Should accomplish that in 2-3 years if I can stay on my compass heading.

  7. Matt says 05 December 2013 at 07:14

    Great article, like with houses and buildings financial resilience is a series of foundational elements that work together. Its interesting to observe the strengh of your own financial resilience without panicking like most people do.

    Unfortunately this financial resilience is quite dependent on good financial literacy which I believe is generally lacking in our society. I didn`t learn much about my personal finances in school and my parents didn`t know enough thus I struggled for the early part of my adult life. This is a great reminder of the basics.

    • Anne says 05 December 2013 at 08:45

      I don’t mean to be unkind, but I hear a lot of people complaining about not being financially literate and so they got into trouble. I have to respectfully disagree *somewhat*. You don’t have to have read any finance books to realize that one needs money behind you for a rainy day.

      I feel that falls under common sense.

      • El Nerdo says 05 December 2013 at 10:02

        Hi Anne,

        What you say makes perfect good sense, having money aside for a rainy day is only logical, but I find it’s quite “uncommon sense” nowadays. I think I’m the only person I know in real life that has an emergency fund.

        The “common sense” I see all around me is to borrow money when you need it. Young people, old people, It’s what I see them do. Call it brainwash or indoctrination or something else, but the norm is to spend all you have, and when you hit a bump just put it on credit– from fancy rewards cards to crummy payday loans to a family member floating you money: plan to borrow.

        I vaguely remember some credit card commercial from the 90s– some professional-looking guy is talking about how when his father died he needed some fast money to fly to the funeral and he was able to call Visa and get his credit limit increased in a moment. A grown man with a professional career needs a credit limit increase to buy a plane ticket! This was not some minimum wage person with a payday loan, but a white collar character who should know better. Of course it’s just a commercial but I’ll get to a real case in a moment.

        Yes, it doesn’t make sense to borrow money when you understand the power of compound interest, but most people don’t get it, or if they do they ignore it in the face of larger social forces– “everyone is doing it so it must be okay, right?” While one has to study and pass a test to get a driver’s license, all you need to do to borrow is fill up a form, and most people just do what everyone else does– the credit card, the installment plan, the emergency LOAN.

        Last year I was at a party and someone I knew was sharing some gossip about other person’s finances (they quit their job and were piling up debt while going on an endless road trip). I pleaded for the disclosure to stop as I thought it was in poor taste to pry into some stranger’s finances who wasn’t voluntarily telling us (I’m a real killjoy when it comes to this stuff), but one of the people in the conversation thought this was okay because “we’re all in debt.” Wow. I flinched when I heard that.

        So the common sense seems to be– we’re all in debt so it’s okay to fritter away your future! That’s the “common sense” I see in every day life, even among professional and educated people. Not just in commercials. Maybe it’s this ideology of perpetual optimism where people blindly believe life will always be better, they will always have raises, and they will pay back some day, but I find that most people’s “emergency fund” is credit. Crazy but true– ideology trumps logic every day!

        • Adam Hagerman says 05 December 2013 at 10:47

          Well said El Nerdo!

          Being a financial coach, I see this way too often.

          Like you said, there’s this mentality of “well, everyone is in the same boat as me so I might as well enjoy myself”. Getting people to alter that way of thinking is one of the toughest things I do.

        • Anne says 06 December 2013 at 12:05

          Yeah, I get you’re telling about the common “perception” of financial life, perhaps among the majority of people. But I wouldn’t call it “common sense.”

          But semantics aside, there have always been people who just realized that rainy days and broken cars will come into their lives and they prepared for them as best they could. Since the very beginning of time there were people who put away some of their acorns and those who didn’t.

          We all know both sorts. My objection is saying that those who are careful for the future are those who read financial literacy books. I think there is absolutely no connection, other than possibly a reverse one.

          I believe when it dawns on some that life is scary and uncertain and they had better get their act together, THEN they may start reading the material. But, at least IMHO, the epiphany came first.

  8. Jacq says 05 December 2013 at 08:35

    Even if you don’t have financial resilience, you can build it in times where many are having difficulty. (Not that I’d wish that on anyone but it sometimes happens.) My grandparents made a good part of their stash in the 1930’s Great Depression.

    I had my by far best earning year in 2008-9 winding down a company going through CCAA due to the financial crisis and working a second job at the same time. Plowed all of that cash into the market and then some and had a killer year in the 2009 stock market.
    Sometimes resilience can just be the willingness to work your butt off, save and maybe take a few risks when other people aren’t doing those things. I’ve rarely seen anyone do that where it didn’t translate over time to cash in the bank.

    Recommend Nassim Taleb’s book Antifragile and prefer his concept of going a step beyond resilience / robustness:
    Fragile: vulnerable to unforeseen shocks
    Robust: indifferent to shocks
    Antifragile: thrive on shocks, up to a point

  9. Anne says 05 December 2013 at 08:47

    J.D., one of your best posts ever. Clear, straight forward and tells it like it is.

    Love the word “resilience”.

  10. Matt YLBody says 05 December 2013 at 09:13

    I wouldn’t say there are a lot of positive indicators about this economy…

    The printing press keeps running artificially inflating the stock market while making the value of the dollar even more worthless.

    The middle class are having difficulty buying homes as any affordable homes are being bought in cash by wealthy and/or foreign investors.

    The cost of living continues to rise while wages stay stagnant. In fact, people are bringing home less money now than they were several years ago.

    There are troubling times ahead…

    • Ramblin' Ma'am says 05 December 2013 at 10:21

      I agree. The market looks good, and sure, I’m happy that my 401(k) is doing well, but a lot of that is due to the Fed’s stimulus. Many jobs have not been replaced. Many full-time jobs have been replaced by part-time jobs. A lot of people have simply left the labor force.

      It seems that the performance of the stock market has less and less to do with the economic reality for most Americans.

      However, I do think JD’s larger point is correct. We shouldn’t be defeatist about our personal finances because of the larger economy.

    • El Nerdo says 05 December 2013 at 10:31

      Hi Matt–

      here some upsides to your downsides

      weak dollar: good for exports

      the house thing: foreign investors are showing confidence in america; their investments stabilize homeowners equity and keep neighborhoods safe.

      cost of living vs. wages: good chance to trim the fat!

      troubling times ahead: nobody can predict the future– not even experts who are great at interpreting the past. but if it’s true the sky will fall, then now it’s a good time to build resilience.

      • Carla says 05 December 2013 at 11:11

        Many people don’t have much “fat” to trim.

        • El Nerdo says 05 December 2013 at 11:42

          Hi Carla– I grew up in a poor country, so here in the US I can see oodles of money everywhere– like those interminable interstate highways or the expensive traffic lights everywhere or the speedy supermarket checkouts.

          I remember when I first came here some guy complained to me that his family was poor and he suffered because they had an old car. And old car! A Cuban would give an arm for one of those (I’m not Cuban, but you should see what they can do with old cars.) And then people say that eating at McDonalds is “cheap” and it’s considered food for the poor. I think all fast food is expensive! 5 bucks per meal? $15 a day? $450 a month? Expensive!

          Now, I’m not talking about anybody’s particular circumstances, and I’m not decreeing everyone should be on rice and beans and wear shoes made from tires, but the consumption level in the US is *very high* compared to the rest of the world. Very very high! Which is a good thing of course.

          Here, the poor have computers, cable tv, and even air conditioning– this last isn’t so common even in prosperous European countries. We have cheap power, cheap gas, cheap and abundant agricultural staples, cheap meat, really, even in “this economy” (ha ha) it’s a place of *tremendous* abundance. If there is an area where things are crazy is health care, but supposedly we’re fixing that– we’ll see.

          In any case, I’m not saying that everyone can do this, or should do this, or would want to do this, but for those who want to or have to live on less, here’s a good start:
          http://earlyretirementextreme.com/how-i-live-on-7000-per-year.html

        • Carla says 05 December 2013 at 12:05

          Hi El Nerdo – You definitely have two extremes from your life experience to compare. I don’t live on $7,000 a year (it would honestly depress me to no end), but my income on SSDI and my part-time job combined is pretty low.

          With that said, I do live a better life than a lot of people in my situation. I don’t have kids, don’t spend money on items I don’t need, I don’t travel – even to visit family, don’t vacation, rarely take a day off from work (which is not good for my health actually). No bars, no clubs, no outings with friends where money would be spent, etc.

          When I think about it, there is more fat to trim, but where would that leave me? Depressed, I know.

          I guess its a question everyone must answer for themselves.

        • imelda says 05 December 2013 at 16:40

          Um, really poor people do not have computers and air conditioning, at least where I come from (NYC). That’s exactly why, for example, our public libraries are so crowded in the summers.

          My mom teaches at a low-income public school, and a huge number of her kids do not have computers or internet at home.

          Cable TV, that I won’t argue. It’s pretty much an accepted basic need in this country; I don’t know why.

        • Carla says 05 December 2013 at 22:43

          @imelda – I don’t know about the current age of digital cable, but back in the day many poor people I knew that had cable lived on stolen cable and bootlegged videos. They weren’t buying it.

        • El Nerdo says 06 December 2013 at 09:27

          Imelda– I am related to and neighbor to a lot of “rural poor” and they have trucks and cars, cellphones, xboxes, satellite tv, etc.

          Compare vs. the rural poor in, say, Bolivia.

        • Erman says 06 December 2013 at 23:10

          I also grew up outside the U.S. and I am going to have to agree with El Nerdo. Even the poorest of the poor in U.S. is in relatively better shape than the poor people in most part of the world. Forget about cable TV or AC. We are talking about millions of people where 3-4 families share a hut, they do not have access to ‘luxuries’ such as clean water, a toilet, a bathroom or furniture and they eat the same cheapest possible meal 3 times a day.

  11. Carla says 05 December 2013 at 09:43

    I like the idea that there are multiple paths to success. Far too long I got stuck in the mindset that I needed to have follow a formula to be successful financially (and other aspects of life) and therefore I am doomed because I didn’t follow that for reasons within and beyond my control. Thankfully, eventually, I learned there are more than one ways to skin a cat.

    The other aspect of my continued downfall was due to my belief that no matter what, I,/b> will always be a failure, so why try? I took more than financial literacy books and “common sense” for me to work out of that and it’s still a work in progress.

    • Carla says 05 December 2013 at 11:10

      Eeek! Didn’t mean to bold everything.

  12. Amanda @ Passionately Simple Life says 05 December 2013 at 09:58

    Love the idea of resilience, being able to get back to your natural state after some event. I really believe that is why we need to have an emergency fund all throughout life. But most people don’t want to believe that the good weather will have to give way to rain sometimes.

    Great article!

  13. El Nerdo says 05 December 2013 at 10:12

    Over the past five years, I’ve come to hate the phrase “in this economy.”

    Oh man!– me too. It’s like saying “let’s start this conversation by hypnotizing ourselves into feeling powerless.”

    Lately I’ve been just retorting with phrases like: “WHAT economy?” or “What is this economy you’re talking about?”. That usually snaps them out of their slumber.

    I hate it when people put their minds in autopilot.

    And great article. Thanks.

  14. Ramblin' Ma'am says 05 December 2013 at 10:36

    JD, while I don’t share your optimism about the economy (see my comment #21 above), I do agree with your larger point.

    I know a lot of people don’t like Suze Orman–I like her take on the psychology of spending, but wouldn’t turn to her for investment advice. She said something last year that I thought was really smart. I’m paraphrasing, but it’s something like, “People think the American dream is a single family house in the suburbs. Actually, the American dream should be, ‘What will enable me to sleep at night, no matter what is going on in the broader economy?'” And that answer could be different for each person.

  15. Lindsey @ Cents says 05 December 2013 at 10:50

    I love this post. These reminders help me keep perspective with my own financial mistakes – and there were plenty! All I can do is take responsibility and move forward with a plan for the future and better money habits.

  16. Whatnut228 says 05 December 2013 at 11:53

    Great point about the “bad economy” effect your personal economy. I would suggest that the media and government want you to believe this so that they can sell you on the idea that we need more government for the solution.

  17. Chuckie G. says 05 December 2013 at 12:35

    “When you buy into the idea that there’s just one right answer, you’re subscribing to a fragile mindset. Resilient people are open to the idea of multiple paths to success.”

    I think this is what I enjoy about GRS. This is what makes GRS unique. Lack of this is why I walk away turned off from MMM and the like.

    JD – a couple of months or so you were talking about how you were perplexed as to why some people balked at MMM’s statements/teaching. I’ve thought about this myself as I tend to agree with a lot of what he is saying. Ultimately, I think the reason is he falls short on empowering people to do what works for them individually. MMM would probably categorize me as a whiny little @!#$%, the likes of which he has no business coddling. Fragile mindset indeed.

  18. Big-D says 05 December 2013 at 13:30

    I think this is an issue that is much larger than simply looking at it the way you did JD. It is all about Locus of Control. If you are an indivdual who believes that everything around you is beyond yoru control, and spend your entire life just going between experiences/issues/drama then you have an external locus of control. If you believe you can plan for things, and want to control as many things as you can so things are not unexpected, then you have a high internal locus of control.

    The people who say things like “In this economy” or “the government should help” etc. are those types of people who have a viewpoint of someone who has a high external locus of control. Someone else, something else, some diety else, shall guide me to the right path. If you have a high internal locus of control, you cringe at those thoughts, and probably read personal finance blogs 🙂

    An example I will give. I moved in September 2007. Probably the crappiest time to try to sell a house. I made 2 mortgage payments for 2 years (old and new house) along with all the expenses. So, did this experience ruin me financially? No. I planned, and thought this might be an outcome (did not expect it to be, but thought it could). So at thoat point I pulled up my pants, lowered expenses, and made my salary work for both places until I sold the other one 2 years later. I put of upgrades to my new house for a few years that did not include manual labor (painting, taking down wall paper, etc.) Things like finishing the basement, the master bed/bathroom, etc. were done when I had sold the other house. I even put off buying new drapes as that was several hundred dollars.

    My point of sharing this story was not to say “hey look at me, I am smart” or something ego driven. My point of this story was that I realized my situation, planned for it, and then did what I had to do to get through it. Others might still spend money and get tons of debt living their lifestyle because that is what they “want”. I want new drapes and carpet. I want this or that. This is the type of person who has the self control of a gnat, and the external locus of control as they bob and weave as a bump on the log all they way through the impeller of the dam’s power generator 🙂

  19. Sarabeth says 05 December 2013 at 14:12

    The unemployment rate is currently 7.8%, which is still high by historic standards. For those who are employed, real wages have stagnated for the past decade (despite record corporate profits). The minimum wage is at its lowest rate (in real dollars) in many many decades. Yes, individuals should do what they can to promote resilience. But ignoring the structural forces that work against the efforts of many Americans to achieve financial stability is frankly insulting. It also promotes a political agenda that favors the interests of the owners of large corporations over those of most working Americans.

    • El Nerdo says 05 December 2013 at 16:39

      Yes, individuals should do what they can to promote resilience. But ignoring the structural forces that work against the efforts of many Americans to achieve financial stability is frankly insulting.

      I would love to agree with this but I can’t anymore. I used to hope that politicians would fix things for the rest of us but the cure isn’t coming– not soon enough for anyone to keep waiting. My friends who insist in complaining about the state of things are all broke and in debt.

      Of course nobody should ignore the structural forces you mention. They are out of the bag like the proverbial cat and they won’t go back inside– globalization and technology have made countries with cheaper labor more competitive, and we can’t turn back the clock and close our borders. We’re no longer the undisputed heavyweight champion of the world. Our declining auto industry had to be rescued by the government. Only fools can ignore that.

      The thing is, I don’t know that politicians can do much about these structural forces. Sure, they can pander, they can promise, but I don’t know what they can do a lot– I have little faith in them.

      We can go in the streets, and carry signs, and occupy this or that, but I don’t know that this would achieve a whole lot. Force an increase of wages politically past a certain point, and capital will go where it can find a better return on investment.

      I think there are some advantages in the economic slowdown and the growth of our economic rivals. One of them is the new insourcing of manufacturing. E.g., read this: http://www.theatlantic.com/magazine/archive/2012/12/the-insourcing-boom/309166/

      Just the other day I bought a washing machine. It was made in America (hopefully “America” not the name of a Chinese town). Now, I don’t know if this will be as good as the machines from the golden era of American manufacturing, but it’s been a loooong time since I had seen a US-made appliance in a store, and I was happy to buy one.

      Sure, after the end of World War II the US was the only developed country that hadn’t been reduced to ashes, and we absorbed a lot of intellectual capital from Europe, so for a while we enjoyed a tremendous advantage over everyone else– the structural forces were stacked in our favor and we dreamed of perpetual supremacy.

      Now the field has changed, new frontiers have opened up, there are other big players out there, and competition is harder. Of course we are going to experience some decline, things will level off and we need to make adjustments. Our future isn’t like the Jetsons.

      Please note I’m not advocating for corporatist policies, and I think there’s a place and a function for pursuing the public interest in the political arena–but if the fire department isn’t coming to our rescue, should we just watch our home burn while we complain about the fire department? That’s what my broke friends are doing. I’ve fled that scene and I no longer want to be that way.

      • imelda says 05 December 2013 at 16:43

        “I would love to agree with this but I can’t anymore. I used to hope that politicians would fix things for the rest of us but the cure isn’t coming— not soon enough for anyone to keep waiting.”

        Gah! Gah! Of course the cure isn’t going to come if we all accept this mentality! Gah!

        Keep complaining! Get angry! Speak up! Jeez!

        ETA: This mentality, to me, is like saying we should all focus on what we can do to save the environment (recycle, take short showers, etc.), which is all wasted energy as long as our industries are spewing and chopping and dumping without us doing anything to stop them.

        • El Nerdo says 05 December 2013 at 17:14

          But Imelda, I’ve done all that and much more, and have nothing to show for it except for a collection of disappointments. I’ve picketed capitols, lobbied legislators, I’ve canvassed and donated, I’ve roused rabbles, I’ve collected signatures and signed petitions, I’ve marched on cities. Play that game if you like, but I’m done with it, at least in the economic arena.

          Now I’m doing like Candide and I’m cultivating my own garden.

          Help isn’t coming. I’m not waiting any longer.

          Re: the environment– vote with your dollars. Don’t buy from the spewers. In a consumer society, industry will provide what the consumer wants. If the consumer wants a cheap can of tomatoes regardless of pesticides or pollution, industry will provide. If the consumer will pay a premium for local and organic, industry will provide. Demand works faster than politicking.

        • imelda says 06 December 2013 at 22:59

          “Vote with your dollars” is the same as “take shorter showers.” Individual action is not going to do a damned thing without group involvement.

          I sympathize, very much, with your jaded feelings about the hopelessness of change. All I can do is tell myself that real change takes time – sometimes even generations. Like suffrage, or civil rights. Incremental progress is still progress.

        • Whatnut228 says 07 December 2013 at 08:57

          I’ll keep taking shorter showers, growing a few of my own vegetables, and living below my means.
          And when I and other people who live a frugal lifestyle to save a few bucks for comfortable retirement you can say we were lucky or more fortunate.

      • Beth says 05 December 2013 at 20:36

        “Sure, after the end of World War II the US was the only developed country that hadn’t been reduced to ashes,”

        I was nodding along with you, but you lost some credibility here! 🙁

        I’m not trying to be snarky here, but maybe you’d be interested in learning more about Canada?

        • El Nerdo says 06 December 2013 at 04:34

          Ha ha– oww! Sorry, I’ve got the ‘Merican myopia. Yes. I’ve been to Canada and I love it. Nova Scotia in summer is incredible. Maybe I should have said “the only major power” instead of “the only developed country”– there was after all Switzerland that survived WW2 intact and with all that loot, and I’m sure someone else can mention other places. But yea, no disrespect meant, eh?

        • Beth says 06 December 2013 at 05:20

          lol! I’m glad you didn’t read sarcasm into my comment. I’d be curious to hear your thoughts about the Canadian economy sometime, actually. Americans tend to have a very different view of their country than the rest of the world has of the U.S. I wonder to what extent the same is true for Canada.

          But I digress 😉

      • Anne says 06 December 2013 at 12:17

        “Hopefully ‘America’ is not the name of a Chinese town.”

        Best line I’ve heard in a long time. May I please borrow it?

  20. imelda says 05 December 2013 at 16:46

    I think that home ownership is – should be – a key part of resiliency. Once you own your home outright it frees you from the number 1 concern of working stiffs, how to keep a roof over your head.

  21. Micro says 05 December 2013 at 17:44

    Reading your description of nation economy vs personal economy reminds me of something I read that brought up a similar idea with inflation. Just because the nation inflation measurement goes up x% doesn’t mean your personal spending also has to. You can find ways to keep your costs down so that your personal inflation rate is lower. This will also really come in handy when you are trying to make your money last through retirement. If the cost of beef skyrockets, turn to chicken or turkey. Or you can always mix the beef with cheap fillers like liver, rice, etc to stretch it farther.

    • Beth says 05 December 2013 at 21:09

      I don’t think it’s quite so simple — if more people start eating chicken, then won’t chicken become more expensive (supply and demand)? 😉

      I think we have a better shot at saving money when we go against the grain so to speak. I agree with you that we have to look at our own spending and find ways to cut costs rather than focussing on a number which may or may not represent what’s happening with our budget.

  22. Trace @ Independence Investor says 05 December 2013 at 21:37

    I’m also a strong believer in “Do What Works for You”. The pay yourself first strategy has worked well for me over the years. I’ve never been the type of person who budgets every dollar. I am however careful with the big ticket items.

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