On this Motley Fool Answers episode, Robert Brokamp is on his own to interview Rachel Schneider, a senior VP at the Center for Financial Services Innovation, and professor Jonathan Morduch, who teaches public policy and economics at NYU, about their new book, The Financial Diaries: How American Families Cope in a World of Uncertainty. For the study behind the book, their team tracked essentially everything about the finances of 235 families in five states for a full year, giving them deep insights into where we are succeeding, where we're not, and what obstacles are most commonly in our paths.

Now, as any fan of the Fool probably knows, budgeting and a modicum of frugality are must-haves in every personal finance tool kit. But as Schneider and Morduch explain in this segment, good choices or not, plenty of us are just one piece of ill luck away from the edge.

A full transcript follows the video.

This video was recorded on Sept. 26, 2017.

Robert Brokamp: We have very active discussion boards here at The Motley Fool, and one of the most active is one called Living Below Your Means. So you can imagine the people on this board are generally frugal. They tend to be budgeters. Very recently someone posted a cartoon on the board sympathetic to lower-income people saying that the people who are out to get them [payday loans, subprime credit cards, rent-to-own furniture shops] all end up costing them in the long term. But to a certain degree these are the only things that are available to them.

This set up a whole debate on the discussion board. And like I said, these people tend to be a little more frugal and pretty financially responsible, so there was a heavy contingent of people who felt like if you're poor it's at least partially your fault. And many of them had anecdotes of people who had too many kids. People who took out huge student loans to get English degrees. Someone told a story of a family who needs help because the father was killed in a motorcycle accident and didn't have life insurance. And they were saying, "Well, he had money for a motorcycle, but he didn't have money for life insurance." So there's that whole strain of that.

And then the other side was saying, "There but for the grace of God go I," and all those folks had stories like, "Well, my sister and I were on similar tracks, but then she had a kid with medical problems." Or the spouse ended up being an abusive alcoholic. And then a lot of the stories came up about what's happened down South with the hurricanes. A lot of this is just luck. These people didn't want these situations but something happened.

So if you were to wade into that conversation, how would you address the people who say people are poor mostly because of their own decisions, but also there is a level of personal responsibility? Even when I was reading your book, I came across [this] a couple of times, and I'm thinking, "Oh, man, that wasn't the right thing to do."

Rachel Schneider: Yes, we saw that, too.

Jonathan Morduch: We totally did. Both sides have some truth to them, right? In the end there was one thing that became clear, which was that everyone's making mistakes. I mean, when I look at what I've done over the past couple of years, it's like, "Wow! What was I thinking?" Or what should I have been thinking instead of whatever I was thinking.

The costs, though, that I paid for my mistakes are pretty small because in the big picture I can handle it. But the costs that the families we got to know are paying are just disproportionately large relative to the mistakes they made. And that's what changed it for me. You don't have enough money in your bank account and then something bad happens. Well, you should have saved before, and you can trace that back to some spending choice you made. That probably wasn't that crazy, but the costs you're paying in terms of fees and then follow-on problems are just huge for families that don't have much at the margin.

Schneider: I think that's well said. I also would say that of course we all bear some personal responsibility -- plenty -- for how our lives go. It seems self-evident. But it's also equally clear that there are forces outside of all of our control that impact what kind of lives we ultimately have. You mentioned the hurricanes which are a really visceral, painful current example where these families might have been doing everything right and they just live in the path of a hurricane and now they're starting from scratch. Well, that's true if you think about the economic forces that are changing our country, as well.

So Janice, as an example, has no responsibility for the economic opportunities that exist in her region of the country. In her region of the country, the job she got is a good job. Is it the best possible job one can get nationwide? Absolutely not. But that's what's available in her area. She went out and got herself the training and got herself into that job. I think what you see in our economy, right now, are some really big, systemic changes and they're affecting people's personal, financial lives in really clear ways.

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