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Why Personal Finance Is Broken and How to Make It Work for Everyone

Princeton UP,

15 мин на чтение
7 основных идей
Аудио и текст

Что внутри?

The biggest financial decisions of your life can seem unmanageable. Learn how to make the system work for you. 

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Editorial Rating

8

getAbstract Rating

  • Applicable
  • Well Structured
  • Engaging

Recommendation

Today’s financial systems shape nearly every major life decision, yet their growing complexity often leaves ordinary people exposed to risks they never agreed to take on. Economists John Y. Campbell and Tarun Ramadorai unpack how modern personal finance — saving and borrowing for education, housing, investing, and retirement — has evolved in ways that routinely disadvantage everyday households. The authors explain how human psychology, opaque product design, and misaligned incentives allow for confusion, forcing some people to turn to informal or risky alternatives, often with damaging consequences. Campbell and Ramadorai lay out a compelling case for redesigning financial systems so that they are simpler and more in sync with how people actually live and make decisions.

Summary

Poor intuition and emotional decision-making can compound small financial choices into long-term hardship.

Renata Caines, a young woman from Boston, entered college straight out of high school with the hope of becoming a teacher. At 17, she took out a student loan to attend a local four-year school, underestimated the true costs, and then transferred to a college in New York, hoping things would improve. Instead, her aid fell through, and she left after one semester. Over the next decade, she patched together low-wage jobs and scattered coursework at multiple schools, only to return to Boston in her late twenties without a degree and carrying roughly $65,000 in student debt. Her story is all too common. After all, how could a 17-year-old understand how early financial decisions can lock people into long-term consequences?

Many people who struggle financially are not careless or unintelligent. They navigate a world that places far heavier demands on individuals than in the past. Extended families and tight-knit communities that once helped absorb financial shocks are weaker, while people live longer, have fewer children, and must...

About the Authors

John Y. Campbell is a professor of economics at Harvard University. Tarun Ramadorai is a professor of financial economics at the London School of Economics and Imperial College London.

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