Are almost half of all Americans really living paycheck to paycheck? When I ask this question to colleagues that I work with in financial services, they are surprised by the answer. Ask anyone who lives this experience every day and they know the answer. My personal obsession with this question started when I read Neal Gabler’s article, “The Secret Shame of Middle Class Americans”.
I have spent more than 25 years working at the crossroads of finance and technology. Given the profound effect that money has on everyone’s life, I have always found it to be a fascinating industry.
The central role that money plays in so many aspects of our day-to-day activities also means that there is a tremendous opportunity to help people improve their financial wellness. When you combine that opportunity with the dramatic advances in technology, the possibilities for changing people’s financial situation are boundless. Simply put – technology can help people start saving more and get the most out of those savings by investing in a balanced portfolio of stocks and bonds.
Reading Neal’s article opened my eyes. I sought out every piece of data and article that I could find on this topic. The more I learned, the more I realized that this societal problem is even deeper and more insidious than I had imagined. Even more troubling, the overall trend is getting worse. It is time to talk about it, and take action.
Just as I began to grasp the magnitude of the problem, I was faced with a personal crisis. My mother was diagnosed with an aggressive and terminal form of cancer. I painfully walked through the final months of my Mom’s life and watched an amazing role model play her final part with inspiring grace. Saying our tearful final goodbyes, I also knew she had given me one final gift. In the most powerful way possible, she reminded me that life is short. If I feel this strongly about an issue, I had better do something about it now.
This is my attempt.
The data about our county’s financial wellness is bleak at best:
- Just under one-fourth of adults are not able to pay all of their current month’s bills in full
- Forty-four percent of adults say they could not cover an emergency expense costing $400, or would cover it by selling something or borrowing money
- Fifty-three percent of adults with self-directed retirement accounts are either not comfortable or only slightly comfortable in their ability to make the right investment decisions
- Approximately 33.5 million households (27% of households) are unbanked or underbanked
- The average checking account holder will pay almost $1,000 in fees over ten years
The answer to these problems is deceptively simple. Implementing the answer is a whole different story. The simple version of the answer is to start saving today, invest your savings well, and avoid as many fees and taxes as possible. Acting on this advice goes against how many of us are wired. It also requires navigating an increasingly complex financial landscape that most people find too overwhelming. With so much baffling information, how can they begin to design an effective plan?
Thankfully many incredible thinkers have done the heavy lifting to make this plan possible. One of the first contributors was Harry Markowitz in 1952. He published groundbreaking research on Modern Portfolio Theory in 1952, but in a common problem for academic research, his writing was so complicated and inaccessible that it remained almost unnoticed for a decade. Markowitz was followed by a string of economists and financial experts that have laid a clear foundation for very efficient investing practices.
To help us get on the right path, the University of Chicago’s most recent Nobel laureate, Richard Thaler has published entertaining and accessible frameworks for choice architecture and how we can structure choices to help people make more optimal decisions.
The final piece of this puzzle involves creating innovative tools that harness the power of our smart phones to make change possible. That’s where my passion and expertise in technology and finance come in. My goal with Evati is to give people a compelling and achievable way to solve this problem. My goal for this blog is to share some of the things that inspire me and drive me to ask more questions about how to help people continue to make small changes that will have a big impact on their savings and long-term wealth.
I believe linking these sound investment practices to simple and elegant choice architecture will help people find a path to financial fitness. The Evati team is dedicated to putting all of these pieces together, solving this puzzle, and helping people make this journey.
It’s time to move forward.
CEO & Co-Founder of Evati, Inc.