Sick Financial Life

Financial problems come from all sorts of sources and can create havoc in quite a few different ways.  I just want to let everyone know about some of the most common and harmful financial situations that we see on a regular basis.

• Too much consumer debt – It has been a very tough 18 months for many people, with lay offs and reduced wages for many households.  Unfortunately, during the boom times, many households were buying vehicles, expensive toys, and going on vacations and did not put much away for a rainy day. 
  Now, during the tough times, that high cost consumer debt is hurting a lot of people and many are having trouble making payments.  Solution – This is a situation that really is better to avoid than try to repair.  If you are deep in debt, make sure you talk with your creditors about how to pay them back.  Create a budget, it may have to be a strict one and you may have to give up some of the toys (cell phone, cable TV, snowmobile…), and then stick to the budget until you have control of your debt.

• Too much mortgage debt – During the good times, a lot of people bought quite large houses and financed them at 95% over 35 years.  During the good times they were able to make the monthly payments no problem, but during the difficult times that mortgage payment feels like a pretty heavy burden.  Was the larger yard worth the extra stress?  Solution – Again, this a situation better to avoid than to repair, but if it is too difficult it may be best to sell and downsize into something more affordable.  This is not usually a quick option, but it can make life much easier in the long run.

• Not creating an official will – We see many families torn apart because parents have passed away without talking to the children about their wishes for their estate.  The money spent on lawyers as siblings fight each other over the parents’ assets (and usually smaller than expected assets) is amazing and sad to see.  Solution – Parents should discuss their wishes with all of their children, and make a will that is updated at least once every 5 years or so.  While fighting over the family’s assets isn’t common, when it happens it is pretty ugly.  Also, make sure you create a legal will.  It is worth the money to use a professional to prevent problems later on.

• Buying from family or friend – It is amazing how many times people regret using their brother the real estate agent for a home sale/purchase, or their cousin the financial planner to invest their life savings.  If anything goes wrong, anything at all, it brings in a variety of emotions that come up every time you see that person at family functions.  Just because they have become an agent doesn’t mean they are the person you want dealing with your finances.  Solution – It is probably best to keep most business transactions with a 3rd party who you won’t see across the Thanksgiving table every year.

• Listening too much to the coffee shop crowd – The number of people that make investment/borrowing decisions based on information they got at the local coffee chop is amazing.  Most (not all) financial institutions’ staff have training to deal with a wide variety of complicated financial matters.  Solution - If you are going to rely on the coffee shop crowd’s advice for building your financial security, you first might want to find out how well they are doing by following their own advice.  A lot of things can sound good in theory, but do you really want to risk your hard earned savings to coffee shop advice?

The financial situations described above are just a few of the most common, harmful situations that we see in the credit union on a regular basis.  Finances are not the be-all-end-all purpose of life, but having a healthy financial life can sure feel better than having a sick one.  Never be afraid of asking trained staff for advice if you have questions on financial decisions.  Jerry