Monday, January 12, 2009

It's not my fault!

This isn't a financial blog, but bear with me for a bit. From the Wall Street Journal comes the following tale of woe:

After watching her account drop 44% last year, Kristine Gardner, a 35-year-old information-technology project manager in Longview, Wash., feels no sense of security. "There's just no guarantee that when you're ready to retire you're going to have the money," she says. "You either put it in a money market which pays 1%, which isn't enough to retire, or you expose yourself to huge market risk and you can lose half your retirement in one year."

A lot of people are feeling the same way Kristine is feeling. They've heard the financial media tell them how to get rich by investing in real estate or the stock market or whatever. They've had financial advisers tell them where to put their money to get the best return. They've thought, "I want to retire in 2015, so I'll put my entire savings into this Target Retirement 2015 mutual fund."

And sizable portions of their money have vanished into thin air, just like that.

Now, they're searching for the culprit, the evil thief who stole nearly half of their retirement savings and who is forcing them to work an extra five years. They're blaming the evil bank CEOs for not lending money. They're blaming the evil president for "deregulating" the financial industry. They're blaming their evil financial advisers, who should have foreseen all this. They're blaming the evil government for not adequately protecting them.

But in the midst of all this blaming, whose fault is it, really? The bankers? The president? The financial advisers? The government?

Nope. They, individually, are the ones who deserve the blame. They made the decision to invest or not to invest. They made the decision where to invest. They made the decision of who to trust. They made free choices, under no coercion, and are now suffering as a direct result of those choices.

Harsh? Yes. Unfair? No. Look, Kristine, I'm sorry you lost money in the stock market. I'm sorry that you didn't realize that the stock market doesn't automatically bounce back up every time it goes down by 10%. I'm sorry you thought "it'll never happen to me." I'm sorry you weren't aware of the risks. But who made the decision to not spend 10-20 hours doing research and reading a good investing book, like The Bogleheads' Guide to Investing or The Four Pillars of Investing? You did. Who made the decision to not evaluate your risk tolerance? You did. Who made the decision to not read and understand your mutual fund prospectus? You did.

Everything you needed to know was out there; all you needed to do was invest a little money and time to learn about it. You would have found out that market crashes are rather common events. You would have found out that, historically, bonds have been less risky than stocks. You would have discovered that there are a lot of scary scenarios that could happen in the future, and you would have learned that there are different ways to prepare for them.

You would have learned that life is risk. You can't avoid it. All you can do is mitigate it and handle it. You must decide, consciously or unconsciously, which bad scenarios you are going to prepare for and how you will prepare for them. If you fail to prepare for the bad scenario that actually befalls you, that's not the government's fault, it's not your parents' fault, it's not your kindergarten teacher's fault. It's your fault. You are responsible for yourself. If you make a bad decision, you are not entitled to demand help from those who made good decisions. Learn from your mistake, make better decisions next time, and teach others not to make your mistake.

It's impossible to be justified in having a sense of security, because if you're alive, there's no such thing as security, and if you're dead, there's no such thing as a sense. Complete security is impossible. All you can do, all anyone can do, is evaluate which risks are most dangerous, make what you believe are appropriate preparations, and then live your life. If you evaluated poorly or just got unlucky, that's unfortunate, but you made the choice, and you must live with the consequences.

Sorry Kristine, but the bottom line is that you're an adult—put on your big-girl pants and take responsibility for your own decisions.

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