Do We Need Financial Dr. Phils?
| September 29, 2008 | Posted by Roshawn Watson under Uncategorized |
By: Roshawn Watson
With the
Image Credit: greggoconnell
Here are some sobering facts about
Perhaps, you are wondering what we spent all that money on. Well, we purchased a record number of houses and filled our garages with brand-new cars. We tolerated ridiculously high car payments, the national average being $479 according to Kiplinger Magazine (Feb 2007). We financed expensive spending habits, namely “retail therapy” and “rewards for hard work,” on credit. In fact, the average household owes nearly $10,000 in credit card debt with a payment of ~2-2.5% of the debt owed. We ignored cost as a factor for selecting college, and incurred staggering student loan debt with the average monthly payment being over $182. In short, we were out of control.
Bridging the Gap Between Psychological and Financial Needs
A recent article from the New York Times suggests that perhaps our financial problems may be rooted in psychological dysfunction.
These “money disorders” represent several self-destructive behaviors associated with money. Nonetheless, a lot of personal finance IS behavioral. The following represents a compelling list of disruptive financial behaviors identified by psychologists…
“… overspending, underspending (a k a Depression mentality), serial borrowing, financial infidelity (“cheating” on a spouse by spending and lying about it), workaholism, financial incest (lording money over relatives to control them), financial enabling (throwing large sums at, say, adult children who then are not motivated to support themselves), hoarding, and plenty of guilt and shame around poverty and wealth.” (New York Times)
Service Already Provided
Perhaps the biggest criticism of this sub-specialty is that many financial planners are already providing some basic financial counseling informally. For example, many great financial planners have no problem reining in their spendthrift clients. Others will freely offer encouragement and hope to clients struggling to clean up their financial messes. For many, this is all that is necessary because sometimes the causes of poor money habits are superficial.
Common Sense
Additionally, many of the basics are common sense. Even strong advocates of financial counseling and subscribers to the “personal finance is 80% behavior and 20% head knowledge” philosophy freely admit much of their function is to deliver common sense. Just because information is marketed to the masses does not mean it is necessary for the masses.
Cost Prohibitive
Another potential issue is cost. Cost could be a deterrent, especially if one is billed for two professionals instead of one. For example, if workshops cost thousands of dollars, it may be beyond the reach of the very people who need the services the most.
Clearly, there are some cases where clients do need to be referred to psychologists and other professionals, but I agree with the sentiment shared in the article that having Dr. Phil do your financial planning is not entirely necessary for the masses.
Copyright 2008, Roshawn Watson, Pharm.D. All Rights Reserved.
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Many great financial planners have no problem reining in their spendthrift clients. There is definitely more to it, but many people already know the behavior necessary to make smart financial decisions.