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Don't let feelings cost you money
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It doesn't matter who is right. Do the right thing.
I won an argument with my girlfriend this weekend.
Yes, it was my first, but I'm not here to gloat. The subject of the argument reminded me of a mistake made by a great many people: we DO NOT make all our financial decisions based on facts.
My friend moved to Durham about 2 years ago and opened banking accounts with Suntrust bank. Their local branch is a beautiful building and is staffed with nice, knowledgeable people. No, my friend did not ask me, a financial professional, where she should do her banking. For the record, I was with Bank of America at the time and was happy with them.
I did not take it personally that my friend did not ask for my advice. These days everyone is a Financial Adviser, and you'd have to live in a Biosphere to not trip over all the free advice spilling out of newspapers, radios, and the Internet. Since she is mature, educated, and can read, I assumed she had researched her choice and made an informed decision.
As the months went by, she stayed with Suntrust and I frequently asked her what her rate of interest was on her savings account. I, meanwhile, left Bank of America for the First National Bank of Omaha (FNBO), in Nebraska. FNBO is an on-line bank that in 2007 was offering a no-fee/no minimum savings account that paid 6 per cent interest. That was four times Bank of America's best rate.
Once I realized FNBO was for real, I ran right to my friend and told her about it. "I like Suntrust" was her response.
We had this conversation at least 6 times in the past year. Now, FNBO is down to 1.5 per cent, but still no strings and no fees. And they are FDIC insured. But when I complained about the reduction of FNBO's interest to 1.5 per cent this past week, my friend asked me this: "You're getting 1.5 per cent interest on any size balance?"
She had finally researched her accounts and learned she had been getting LESS than 1 per cent in interest for years, and her current rate was .75 per cent on a mid-size five digit account. We tried to calculate how much potential earnings she had let slip by, but gave up when she asked me to find her a better place for her money.
My friend made one of the classic mistakes of Financial Planning: she did what she did because she felt "comfortable", despite the facts.
Making financial decisions using "comfort" as the criteria is very common. A client with big losses will look at me and shrug, as if it was fate. When I ask why the client has not talked to a different adviser, he or she will always say this about their current adviser: "I like the guy." My own research with over 200 clients revealed that most did not know anything about what their adviser was doing, the rate of return on their money, or how much they were paying the adviser.
I used to get upset with the advisers about this, but then realized it was the clients fault. Every adviser I talked to had taken the time to explain, but the clients never really understood. They were content enough with being able to "like the guy".
It always comes back to the arcane and convoluted nature of financial dealings, and how much time and effort it takes to research and understand them. All I can say is that it is your money. Do what you want but If you're handling your finances and making decisions based on feelings, you will not be making decisions that are best for you.
Banking, in particular, is complex and you need to watch out for things like fees, minimums, financial liquidity, and ATM access. Websites like Bankrate.com can help pull together some facts and help you get started. Remember, though, that when you find a bank that looks good, go to their own websites to verify the information and get updates before making a big leap to a different bank or financial institution that might be uncomfortable. And if you can, go visit them, it will be worth it. You might even feel comfortable.
I found my friend an account at Coastal Federal Credit Union called "Go Green Checking" that promises 4.05 per cent on a checking account with no minimum balance. Will it be a good account for her?
I'm on my way to find out.
For more info: e-mail me at: ness23456@aol.com
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