Benny and his friend Griffin at Ocean Beach in San Francisco.

Thursday, March 15, 2012

'Knock It Out. Duck.'

"You tap the walls, lightly, everywhere. You know what to listen for. ... There is only one solution, which appalls you, but there it is. Knock it out. Duck."

— Annie Dillard

How many families can do that in their financial lives? Today's families are often starved for time and energy and buried under mental, emotional, physical — and yes — financial clutter. Bank accounts, investments, policies, subscriptions and credit cards surround them, looking so vital and stable and necessary. But are they? Who has the time to tap on all those financial walls to see which ones are safe and useful, and which are dangerous? And once you identify those cracked beams, who has the time and energy to clear them out?

I'm thinking of this because Ron stuck around the house this morning to untangle some financial snarls. Nothing big, we wanted to cancel a credit card, adjust our 401(k) contribution, close a credit union account and cancel an old life insurance policy. All of these were in Ron's name, so I couldn't do it. None of these were big, but to accomplish them he had to take the whole morning off.

Not all families have this luxury, so is it any wonder that such things are often neglected? If Ron hadn't taken the morning off, nothing big would have happened. No nasty letters or credit dings. We just would have had an inadequate 401(k) plan, an unneeded credit card, a neglected credit union account in Michigan and a tiny, unnecessary policy quietly feeding on $22 a month.

But I've been on a crusade over the last few years to clean up our finances. We've paid off our credit cards, switched to a local credit union, streamlined our bill paying, paid off a personal loan and more. At one point we had money in two banks and two credit unions. Now once we're free of the Michigan credit union, we'll bank only at a credit union here in San Francisco.

Ron completed his tasks and then managed to conduct a conference call with some biotech executives before heading out to City Hall in pursuit of another story. Which left me thinking again how tough it is for many families to clear their financial clutter.

After all, most ordinary people don’t make financial decisions in logical order, coached at every step by accountants and tax planners. We make such decisions haphazardly as problems, transitions and opportunities arise, without any clear plan. People's financial lives are cluttered with old credit cards, bank accounts and insurance policies acquired piecemeal over decades. If a family slides into debt, they take riskier steps just to keep their heads above water, with disastrous results.

But even if a family vows to clean out their financial house, it’s not easy. Financial relationships are so easy to fall into: you click a button or sign a form or mail a postcard to open a card, an account, a policy, a subscription. But getting out – ah, therein lies the rub. Those companies don’t make it easy to leave. Canceling anything often requires repeated phone calls, long hold times, special forms by mail, long conversations with customer retention people begging you to stay. Sometimes you go through all this and the company still doesn’t do it, then sends you to collections for not paying more money.

I think four main factors keep families from ruthlessly stripping down their financial lives and living lighter and healthier:

1. Apathy. Modern life is more hectic and complicated then ever, and a small $5 monthly charge for loan protection that you don’t remember signing up for is easy to miss. If something isn’t annoying you, why fix it? The retirement account, the magazine subscriptions, the insurance policies you set up 10 years ago might not be good for you know, but why rock the boat?

2. Fear. People often feel insecure about their financial judgment. They don’t want to think about this stuff. They’re afraid of messing up. It’s all so complicated! Plus, they keep getting all this conflicting information. A person might hold three credit cards he never uses, each one sending blank checks in the mail every month, but he's nervous about canceling the cards because it might hurt his credit score. No, he's not buying a house or car anytime soon, and yes, those cards leave him open to identity theft, but logic doesn’t matter here. Anyway, what if his family needs those cards someday? What if a $10,000-$20,000 line of credit isn’t enough? Let me tell you from experience. Having more than $20K in available unsecured credit is a recipe for disaster. It guarantees that a sudden financial crisis (a job loss, a hospital bill, an unsold home) will haunt you forever in finance charges at 17 percent APR. And if you make one little mistake, one tiny little error, up it goes to 29.99 percent.

3. Frustration. Even if you find a bank mistake or previously unnoticed monthly debit , fixing it means calling a company up, sitting on hold, explaining the problem. A person might carry an envelope containing the info needed to cancel the protection around for months before calling – if he remembers to call at all. Meanwhile, that charge sucks money every month. Since it’s so painful to change, fix or cancel anything with financial companies, is it any wonder that families just eat the costs?

4. Just plain feeling bad. Personal finance often requires a businesslike approach, but it feels so personal, for obvious reasons. Finally seeing a sneaky monthly debit makes you feel stupid you didn’t notice it before. Calling up the company makes you feel stupid, and usually they’re trying to make you feel in the wrong – you don’t want to get rid of this charge, or you should have done that to avoid that charge, or this is the incredibly convoluted justification for the charge ... you understand, don’t you?

Aaargh! And never mind about canceling an account. When I do this, some part of me is transported back 20 years, telling some guy I don’t want to see him anymore. “Why?” they ask. “Let’s talk this out.” And here’s that nice credit card company saying “I’ll change, I’ll lower my APR, I’ll give you more rewards,” or “How will you do without me?” or, more ominously, “You don’t want to do this. If you leave me, I’ll trash your good name and you’ll lose 100 points off your credit score.”

So for someone to clean up their finances, they’ll often have to fight apathy, fear, frustration and bad feelings every single time. Companies know this, and they’ll play on all these feelings to get what they want.

This is tough for people of all ages, but I’m thinking mostly of families because, well, I have a family and know the challenges. Parents are living busy lives, they have children keeping their emotions in constant flux, they spend so much time trying to Do the Right Thing, and that guilt trigger is never far away.

I recently read a blog by a mother torturing herself because, while she was frantically working to prepare her family for a trip one day — with a to-do list a yard long — her 9-year-old daughter wanted to give her a hug. “I brushed her off. I said I didn’t have time to cuddle right now,” the mother confessed. The girl was upset, “You don’t want to hug me?” she asked. Immediately the mother broke down, confessed to the girl that Mommy made a bad choice, but knew forever that the child would be a broken shadow of her former self.

Mind you, this mother didn’t smack the kid or shout “Get the hell away from me!” She just made it clear she couldn’t stop right now. How in God’s name is this little girl going to learn to think of other people’s feelings and understand that if Mommy doesn’t have time to cuddle right now, it’s nothing personal? And how — how — how in God’s name is this mother going to call up Bank of America and take the polite but firm tone necessary to get that unwarranted $50 fee erased?

She probably won’t. She’ll carry around the little Bank of America envelope in her purse for months until she “accidentally” throws it out. A $50 fee isn’t enough to start her on the long, involved process of getting it erased, not to mention the traumatic job of changing banks, painfully teasing out every tiny string that ties this bank to the rest of her life.

Companies know this and they’ll keep trying to play us.

Just like that blogger’s little girl was probably playing her.

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