Monday, November 14, 2011

Financial planners and falling a long way down

Boston Gal linked to the New York Times story about Carl Richards, who lost his home and found himself in financial hot water--made all the more humiliating because he himself is a financial planner.  He has written a book outlining where he went wrong and the very human feats of (il)logic of his that helped him get there, which is one way to bounce back from something like this, I suppose.  It's not unusual to see people who have made a mess of their financial lives straighten out and come back as personal finance pundits--Trent Hamm and Mary Hunt are two such people who've done it.  (I myself veer away from giving chirpy advice because I find it very irritating.  Also, I'm no one's example to follow.)

What Richard's situation seems to have boiled down to was the herd mentality.  Everyone else was doing it so it couldn't be a bad idea, right?  So he and his wife made some spectacularly bad decisions, but they seemed just fine because everyone else was making them and not suffering any bad consequences.  And I remember those years--well-meaning people advised me to walk down that same path, and acted like I was horribly neurotic for not wanting to do so. 

I'm not writing this to berate him--we all screw up, we all make mistakes, and we all make decisions we shouldn't based on what we want to believe rather than on what is actually wise.  But I do think this is a good story to keep in mind the next time a pundit or an advisor or a mortgage broker or a real estate agent or anyone else gives you advice that seems a little reckless to you: it probably is.  Respect that voice of doubt in the back of your head.  These people are not your friends.  They don't care what happens to you after you sign on the dotted line.

Err on the side of caution. The worst that can happen if you're wrong is that you don't have the thing you wanted and you're not in debt that you can manage.  The worst thing that can happen if you're not wrong and do it anyway is that you don't have the thing you wanted and you're in debt you cannot manage. 

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