Personal Financial Liability Needs Professional Treatment, Not Advice
March 8, 2007 4 Comments
I contribute a monthly column to a website frequented by financial advisers, benefits providers and insurance professionals. In an upcoming article I urge these colleagues to take heed of the changing needs of Americans in the 21st century: too many families are depleting their future earnings by buying homes, cars and the latest consumer electronics beyonf their means. Less than a third of us have saved income equal to three months’ income. Think about that and how these families might deal with such emergencies as job loss or a medical crisis.
Using credit cards, home equity loans and student loans to pay for the present while sacrificing financially secure futures and incurring enormous interest charges, families are setting themselves up as victims of a financial dustbowl. All that hard-earned income and equity are being blown away.
People have no trouble consulting an attorney on legal matters, or relying on knowledgeable professionals for their insurance needs. The airwaves are replete with 60s era music accompanying ads for professional financial planning and asset management services directed at baby boomers.
Yet it puzzles me that most folks, even if they are aware their financial liabilities, rarely consult an independent professional to deal with their debt problem in a comprehensive way. Many who are desperate fall prey to quick fix schemes like refinancing and debt consolidation, which only prolong their payback period and negatively impact their credit standing. Others consult “credit counselors” who are agents of the credit industry (a misnomer, since it should be called a “liability” industry). Seemingly your advocates, these firms only want to accelerate repayment since the card issuers have made hefty returns on the interest you already paid them.
Now, it’s true, some individuals are doing all the research and are making progress in their own intensive (and time consuming) commitment to eliminate their personal liabilities. I’ve even visited the blogs of some who are sharing their stories online. I commend them for their resourcefulness.
Still, the average person has neither the time nor the knowledge and experience needed to address personal financial liability as part of a comprehensive system for orchestrating the optimal use of assets and income to methodically eliminate credit card debt, auto loans, mortgages and other obligations.
I’ve done my share of do-it-yourself home repairs. But sometimes you have to ask yourself whether several trips to Home Depot until you figure out the right fitting for a leaky faucet is time well spent, when you can just find an ad in the local paper for a plumber who claims there’s “no job too small”. A leaky faucet is one thing; but managing a liability portfolio that drains away your hard-earned money is not a do-it-yourself job for most people.