Financial health for a more secure future
One lesson to emerge from the current financial crisis is the importance of setting, and adhering to, financial goals. Financial institutions continue to develop better tools to help consumers gain financial literacy. As they do, here are a few things I think they should keep in mind.
The health care industry has shown that some simple behavior changes can improve quality of life, and they have been successful in getting people to pay more attention to things like diet and exercise. Most people are aware of tests to detect dangers like high blood pressure and colon cancer.
There needs to be a similar level of awareness among consumers of the implications of a low credit score or poor investment performance - or how a giant mortgage, huge credit card balances, and negative savings can endanger long term financial security. The financial industry can do more to encourage people to treat financial decisions like the lifestyle risks they are, learn to set realistic goals and evaluate their progress along the way.
As a case in point, my wife and I visited a financial counselor. To counsel us properly, she should have asked some simple questions. Did we plan to have children? Did we know that the odds were against us working for the same employer for 30 years? Instead of getting the basics right, she steered us towards investments that were unrealistic for a 20 something couple planning to start a family someday, but were probably more rewarding for her in terms of commission. There are 2 lessons in this experience: be sure to work with someone who understands what you want for your financial future and can offer a clear roadmap for how to get there, and take personal responsibility for evaluating both short term and long term goals to ensure they are in sync.
Like the changes in society brought about by major health care organizations sharing the benefits of a healthy lifestyle, it is up to the authorities on money, mainly large banks, to help educate consumers. This will help consumers learn about money for a lifetime of daily management and long term financial security.
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December 6th, 2008 at 8:37 pm
I agree. I also think financial institutions can turn things around. Enough of that bail-out mania and rewarding the irresponsible (borrowers, lenders, CEO’s, etc.)! How about a program for the responsible individuals? What if Bank of America created a program for Financially Responsible Individuals (FRI is perhaps not the best acronym – may need some rewording here). It would work like this: individuals who haven’t missed/been late on their payments (mortgage, credit card, utilities – you decide), can document their income, etc. in the last 5 years would be eligible for a reduced mortgage rate, let’s say 4%. The rate has to be lower than what is normally available to create a substantial draw of highly qualified people. This can be tied to a package where people are required to switch their bank and credit card accounts to BofA as well. So not only will BofA acquire highly responsible and financially secure customers, but this can be a great PR opportunity to show that being responsible pays too!
December 8th, 2008 at 11:47 pm
Hi H-D,
Thanks for the good common sense advise. Let me know when the next one comes out.
Rudy
December 24th, 2008 at 5:54 pm
Great posting. Drawing from the health care industry and using the concept of wellness and prevention really make this resonate. It’s something all of us need to be comfortable with and I hope you got rid of that financial planner really quickly.
I would also add that financial wellness or at least comfort with one’s finances would have the added benefit of contributing to physical wellness.
August 17th, 2009 at 3:31 pm
Great advice! Good financial advisers are hard to come by.