By: Laura Walton AFC®
Unfortunately, I’m not too surprised that 47% of Americans can’t come up with $400 in the case of an emergency. I am surprised, however, at what Neal Gabler revealed about his own financial decisions.
Gabler’s article in the May issue of The Atlantic, The Secret Shame of Middle-Class Americans, is an excellent look at the cost of a middle-class lifestyle and the valid reasons why many people find themselves living so close to the financial edge. But, then, he tells us his story and that’s when I have to say ‘wait a minute’.
Neal shares that he’s had a respectable career as a writer and has “typically made a solid middle- or even, at times, upper-middle-class income”. And then he openly and honestly shares the mistakes he’s made along the way:
- “I chose to become a writer, which is a financially perilous profession, rather than do something more lucrative.”
- “I chose to live in New York rather than in a place with a lower cost of living.”
- “I chose to have two children.”
- “I chose to write long books that required years of work, even though my advances would be stretched to the breaking point and, it turned out, beyond.”
- “I never wanted to keep up with the Joneses. But, like many Americans, I wanted my children to keep up with the Joneses’ children…”
- “We sent our girls to private schools…because the public schools in our neighborhood weren’t very good.”
- “We believed [our daughters] had earned the right to attend good universities, universities of their choice….It meant that we depleted not only our own small savings, but my parents’ [savings] as well.”
- When his wife was unsuccessful re-entering the workforce once their girls were grown, he says “I told her that I could provide for us without her help—another instance of hiding my financial impotence, even from my wife. I kept the books; I kept her in the dark.”
- “I couldn’t sell our co‑op in the city, because the co‑op board kept rejecting the buyers, which meant I had to carry two mortgages for years” (they had rented, then bought a home out of the city without first selling their co-op). “The housing market in New York soured, and I eventually sold the apartment for a steep loss, because I had no choice. I suppose I could have slashed the price sooner.”
- “We have no retirement savings, because we emptied a small 401(k) to pay for our younger daughter’s wedding.”
- He chose not to pay his taxes in full on an advance from his publisher which resulted in a balance owed to the IRS plus interest and penalties. “The problem is that the penalty meter keeps running, which means that the arrears continue to grow, which means that I continue to have to pay them—I cannot, as it happens, pay them in full.”
- The final blow: “A publisher with whom I had signed a book contract, and from whom I had received an advance, sued me to have the advance returned after I missed a deadline. (Book deadlines are commonly missed and routinely extended)”
As a good friend of mine would say, I can hardly see the page for the red flags. Neal Gabler made poor choice after poor choice and, even after recounting them, offers some rationalizations:
- “But, without getting too metaphysical about it, these are the choices that define who we are. We don’t make them with our financial well-being in mind, though maybe we should. We make them with our lives in mind. The alternative is to be another person.”
- “Perhaps none of this would have happened if my income had steadily grown the way incomes used to grow in America. It didn’t, and they don’t.”
- “I made choices without thinking through the financial implications—in part because I didn’t know about those implications, and in part because I assumed I would always overcome any adversity, should it arrive.”
The article is a compelling read but his personal financial history is a very different story from that of many millions of Americans who legitimately cannot come up with an extra $400 even if they make all the right choices.
Next week: What Neal Gabler could have learned from sixth graders in Chicago…