wellbeing

31 Dec 2011

Where to Find Financial Security

I grew up with the expectation that I should strive to financially support myself and my family all by myself, regardless of what my partner might earn. Why? Death, divorce, disability, disease, you name it. Life is risky. Anything can happen and often does. My work ethic was my personal safety net to insure me against potential financial disaster. I thought as long as I could work, I would be safe.

And then one day, I couldn’t work anymore. Poor health and severe post-partum depression set in after my daughter was born, and I left the workforce to care for myself and my new baby. When I suddenly realized I no longer had the self-sufficiency that working meant to me, my depression deepened. I felt helpless without a means of earning money. I hated depending on anybody, and my stress compounded with financial insecurity.

In truth, I wasn’t financially insecure at all. I was actually deeply supported by my husband, family, friends and collegues. I had a spouse with a job, some savings, maternity leave and COBRA health insurance. Those people and resources helped me get better, and two years later I joined the workforce again.

Here’s what I learned from that experience: When I thought what I needed was more cash, what I really sought was freedom from financial anxiety. I didn’t want to worry about if we were going to have enough to pay the rent just because I couldn’t pull my weight at the moment, but I also thought that caring for myself was a luxury I could not afford. What turned the dial down on my financial fear and worry was recognizing that I was part of a community that was not going to let me fall through the cracks. It turns out that my self-sufficiency — my confidence in my own resourcefulness to be able to care for myself and family – had a limit, and that limit was me. My bootstraps could only pull me up so far. To transcend the limits of my self, I needed to see that I was connected to and supported by others — even financially.

It turns out that even people who do have ample bank accounts feel financially insecure. A study from early 2011 by Boston College’s Center on Wealth and Philanthropy found that even the super rich “still do not consider themselves financially secure; for that, they say, they would require on average one-quarter more wealth than they currently possess.” The average net worth of the people in this study was $78 million. If $78 million didn’t make someone feel financially secure, then what would?

Our instinct in times of financial hardship is to narrow our focus to the survival of ourselves or our family. Unfortunately, it also ends up narrowing our focus of solutions to what we can do all by ourselves: cut expenses or increase income. Ironically, what creates the financial security and financial wellbeing that we actually seek lies outside the small, narrow focus in the larger networks of communities. With more resources to access, there is also more flexibility in how to respond.

But right now, our communities and governments are going through the same downward spiral of scarcity, cost-cutting and income-raising dilemmas we have at home. This is the time to make investments in our capacity to support each other. Instead of debating what to cut and who to tax, we can ask ourselves:

How would we feel if we knew that the community supporting us was as big as a town, city, nation or a continent?
What would we do differently if we knew that our basic financial needs would be met through our community networks and supports when we hit rough spots such as unemployment, caring for sick family members, our own ill health?
What government policies can create the conditions in which we will feel supported by the financial strength of an entire community until we can regain our self-sufficiency?
What can we do now to dial down our collective financial fears? Who needs to be involved and how?

I’m not suggesting that we don’t need to cut expenses or raise taxes, but those are actions that need to be taken in the context of a vision we are trying to achieve. We are a country of unquestionable, tremendous wealth, and that wealth was supposed to be a proxy for financial security. But none of us feel financially secure, even if we have the wealth. If having the wealth doesn’t do it, then what would actually free us from financial fear?

Here are two things we can do with public policies to create conditions that lessen financial fear and increase our overall financial security:

Narrow the bandwidth for wealth– The wider the gap in wealth, the more room there is for comparison and stronger feelings of financial inadequacy. It’s like trying to keep up with the Joneses but always failing because there will forever be someone with (lots) more money than you. The more narrow the room for comparison, the less inadequate we feel. Plus, when we narrow the bandwidth, the fall from fiscal grace is shorter and the climb back up not so steep. Policies that narrow income and wealth gaps (such as progressive taxation) can do this.
Fulfill universal needs without contingencies for income — Our need to be able to care for each other is universal, not limited to those at the poverty line. If the need is universal, then so should be the program. Designing policies that help anyone who needs it, not just those who fall below certain income thresholds, creates a public good for everyone even though it will only be used by those who need it when they need it. One existing example is the Family and Medical Leave Act which requires employers of a certain size to offer unpaid leave to workers caring for new or ailing family members. Workers are eligible regardless of their income, and while anyone can envision a situation where they might need to use it, only some will need to at any given time. Strengthening this program allows us to focus on supporting the people who support others in need, so that there isn’t a competition between income and care. It supports a community’s ability to care for itself.

Maybe our government solutions to provide income supports (such as unemployment or welfare) have been incomplete in part because of our focus on getting individuals back on their feet. Investments in the community’s capacity to care for each other could top off those efforts, because it’s the supportive relationships that will give us the financial security we truly seek.

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Note: This is the last in a series on financial wellbeing. You can read the other posts in the series here, here and here.

Categories: Government, Taxes, wellbeing Tags: income, relationships, wealth, wellbeing, work

26 Sep 2011

Give vs. Take

By Kim Tso 10 Comments

As the board chair for a local education foundation, I have to confess that what we do as an organization is a bit strange. Most foundations use their endowments to generate money that they give out as grants. We volunteer a ton of time to raise a bunch of money so that we can give it all away. Why?

Because it is fun.

It is fun to create something, especially with other people. It is fun to support programs that make a positive difference in children’s lives. It is fun to know that the work you do helps teachers teach and students learn. It is fun to turn your life and your community into the kind of place where you want to be.

Giving is one way to create something that lasts. It is one of the many reasons why charitable giving feels so good and is a core element of our financial wellbeing. We enjoy making a difference and using money with broader impact and purpose.

What if we thought about taxes in this way — a vehicle for giving, for creating something valuable and meaningful together? What would be different? What would need to be different about taxes to imbue them with this sense of purpose and generosity? How can we bring our experiences of raising and spending public revenues closer to the good vibes we get when we make charitable donations? I’d love to hear what you think.

Categories: Emerging Economic Models, Taxes, wellbeing Tags: new models, taxes, wellbeing

09 Aug 2011

Creating and Distributing Time

By Kim Tso 2 Comments

Click on photo for easier viewing.

What is needed in order for us to have great relationships and life experiences?

Time.

If we had more time, we could use it to play with our children, visit with friends or volunteer in our community. We could go back to school, exercise or take up a hobby. All these things increase our sense of wellbeing, particularly our financial wellbeing according new Gallup research detailed in Wellbeing by Tom Rath and Jim Harter.

Time is the ultimate finite resource — we all have the same amount, we can’t store it and we can’t transfer it. If we were to aim the economy at creating financial wellbeing and know that time is an important part of it, how could we create more time?

Productivity has been one way that businesses have sought to get more out of workers and other resources in the same amount of time. The promise of productivity from a worker’s perspective is that if we are able to produce more in less time we could receive our dividends in time off or leisure.

While many Americans say they would exchange less money for more time, try finding a 30-hour a work week job. It’s not easy to do, because our jobs are structured according to a forty-hour standard. Benefits such as health care, workers compensation and retirement benefits are also tied to this definition of full-time work which provides employers with strong incentives to squeeze as much work out of as few workers as possible.

While our national productivity has been consistently high, few people get the time to enjoy it. Juliet Schor’s classic book The Overworked American demonstrated that Americans were working longer hours since the 1960’s and had not reaped the productivity gains one would have expected. Had all those gains been translated into time instead of pay, we would be down to 20-hour work weeks according to Schor (in “The (Even More) Overworked American” in Take Back Your Time by John de Graaf).

While some of us are overworked, increasingly more of us have no work at all. National unemployment is currently at 9.2% (Bureau of Labor Statistics, June 2011). This fact isn’t good for wellbeing either. Widespread and persistent unemployment is going to have some drastic impacts on how we feel about our lives, because according to Tom Rath and Jim Harter:

A landmark study published in The Economic Journal revealed that unemployment might be the only major life event from which people do not fully recover within five years…Our wellbeing actually recovers more rapidly from the death of a spouse than it does from a sustained period of unemployment. (emphasis in the original)

So from the perspective of wellbeing, we have a distribution problem with time where some have too much work hours and others too few. According to recent CPS data, the average full-time worker in the U.S. works more than the standard 40-hour work week (42+). If some people need time and other people need work, isn’t there something we can figure out here so that needs are met with the resources we already have?

Redistributing work hours through practices such as job sharing to reduce unemployment is one possibility that has been successfully tried recently by Germany and the Netherlands to help them weather the global economic storms in 2007. Rather than making time scarce for some and paid work scarce for others, we can implement policies that create both time and jobs for those who need them and in the right amounts. Giving people more time and reducing the strain of financial worry increase our sense of financial wellbeing especially during a tough economy — which is what we are really after, isn’t it?

[This post was the second in a series on wellbeing. The first can be found here.]

Categories: Emerging Economic Models, wellbeing Tags: time, wellbeing, work

27 Jul 2011

Creating Financial Wellbeing

By Kim Tso 4 Comments

What makes life worth living?

This is the question answered by Tom Rath and Jim Harter in “Wellbeing: Five Essential Elements” and answered in a way only Gallup pollsters can. The answer is culled from massive amounts of data gathered by Gallup over fifty years and across 150 countries to describe what 98% of the world’s population would say is the best future possible for themselves. Rath and Harter call this best possible future “wellbeing” and say that it is:

the combination of our love for what we do each day, the quality of our relationships, the security of our finances, the vibrancy of our physical health, and the pride we take in what we have contributed to our communities.

The researchers refer to those elements as career wellbeing, social wellbeing, financial wellbeing, physical wellbeing and community wellbeing. They were careful to pick aspects that “we can do something about,” and throughout the book they make suggestions for what individuals can do to improve their wellbeing in each of those areas.

The book’s advice is limited largely because their definition of “what we can do something about” is restricted to what individual people acting by themselves can affect. For example, their three recommendations for boosting financial wellbeing are to: 1) buy experiences such as outings with friends and loved ones; 2) spend on others such as giving to charity; and 3) set up automated payments and savings. I do these things already but I don’t see them having a huge impact on my quality of life and virtually none on my community. I’m skeptical that these acts will create the wellbeing 98% of the population seeks.

The truth is that there is far more we can do to create wellbeing than the book suggests if we choose to pursue it together as a society. Take a look at the research findings about financial wellbeing that led them to their advice, because they are really quite profound:

Universally what matters to people are quality of the relationships and life experiences we have;
We derive more satisfaction giving money away than spending it on ourselves; and,
The freedom from worry of finances creates three times as much financial wellbeing than a higher income.

Notice that these things have less to do with money than we think. The quality of our relationships is more impacted by our time and attention; charitable giving (or even gift giving) can occur with very small sums of money or just volunteer time; and the last finding puts the role of high income way down the pecking order of what really creates financial wellbeing.

If we want to create a world with lives worth living, we could harness the power of economic policy and focus it on creating a society that promotes the financial wellbeing of its citizens rather than the accumulation of wealth. To do that, we might use those three research findings as goals and create the right economic conditions that allow people to have great relationships and life experiences, that allow people to give generously and freely, and that enable people to avoid and recover from financial disaster (the most common these days is just getting sick).

To know what the economic policies need to aim for, we can ask ourselves: “What is needed in order for us to have great relationships and life experiences?” “What are the things or thoughts or feelings that enable us to give freely?” and “What would financial security look like concretely in our lives and communities?”

What would your answers to those questions be? Mine are coming over the next few weeks.