I came across this sad piece while looking through CNN Money recently:

“My wife and I have been saving our money for many years in hopes of buying a retirement home and living off our investments. No matter how much we saved, it seemed that housing prices continued to escalate beyond any reasonable bounds. We feel like fools for saving our money, which only gets eaten by inflation.”

Inflation is not the only problem. In the article above, another woman mentions she has to declare bankruptcy for a lack of health care. Another couple is about to lose their home for lack of health care. A health care disaster is the main cause of severe financial difficulties in America today. Entitlements are teetering and the impending demand from retiring Baby Boomers may push these programs over the edge into insolvency (although I’m sure we’ll tax our way out of it). The government bails out investment banks, rescuing the bonuses of top management (which would have been reclaimed in bankruptcy) but refuses to do the same for homeowners swamped by overwhelming mortgages. The Federal Reserve (and other central banks) continue to pump paper money into the system, creating a long slow death for the US dollar. Ridiculous measurements are used to gauge inflation while we all know that the price of living soars past any reasonable measure of inflation when you consider the cost of gas, heat, milk and even basic foodstuffs. A war in Iraq - whether you support it or not - will suck trillions of dollars out of the budget for a generation to come (don’t believe anyone who says they are withdrawing the troops - the troops will still be there in 2012; we can’t even withdraw our troops from Germany yet). People are whispering the “D” word.

My fear is that too many people (including me) buy into the aphorisms: the market always goes up over time. Index funds are a great way to invest. Real estate always goes up. The US can’t just collapse - we aren’t the Soviet Union, or the Weimar Republic. Banks are safe. The US dollar is the best currency in the world.

Let me tell you what IS true: Your greatest asset is, now and always, yourself. Don’t be cheap, be frugal. Buy high quality goods that last a long time, because they will always have value. Do not ever believe that someone will be there to help you when times get bad: not the government, not your employer, not your neighbors or even your family or friends (because they may have troubles of their own). Expect times to be good, but prepare for times to be bad. Stay healthy; the single greatest risk to your wealth in America is to GET SICK.

That may seem overly pessimistic, but it is true. Don’t assume that dropping 15% into a 401K, having $1000 in an emergency fund and having a “steady job” are enough to protect you and your family. True protection comes from staying healthy, diversifying your income streams and investing nonstop in your greatest asset - yourself. You have to keep investing and saving and buying houses and paying down your debt, but never forget that even the most brutally frugal lifestyle is absolutely no guarantee of financial safety - or even stability.

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Steve S. is the author of Brip Blap, a blog about personal finance, health, career management, productivity and self-improvement. He lives and works as a contract governance and audit consultant in the New York City area, and has lived in Germany and Russia. He is an active lender at Prosper.