The Reasons We Are All Failing Financially

Eleven years ago when I graduated with my master’s degree and went to work for a bank consulting company, my wife handed me the checkbook and said it was my turn to manage our finances.

This was back when people were still writing checks and balancing the account as well.

“We Belong Together” by Mariah Carey was the number one song. Yeah, I had to look it up, too (https://en.wikipedia.org/wiki/We_Belong_Together).

Dinosaurs ruled the earth.

Well, maybe not that last one.

The point is, it was a long time ago.

At the time, I noticed we had $10,000 sitting in a savings account with our local bank. When I dug deeper, I noticed it was only paying us 0.05% interest each year.

That same week at work, we were consulting with a bank in Ohio that was paying 4% interest on their CDs.

Further research showed that ING Direct (later sold to Capital One for those keeping score at home) was paying 4.5% interest with their online savings account.

So, I went down to the local bank to see what they could do for me to make more money. The banker was very helpful in helping me analyze other account options like CDs, High Yield Savings accounts, a Premier Checking with Interest Account, etc. but the best he could do was a 2% CD at the time.

So I moved the money to ING Direct.

And I was a bit pissed.

I was losing $445 in free money by not being more educated about my money and bank. Thus began my mission to educate myself in all things financial.

Now, you’re likely saying, “but you said you worked for a bank consulting company so how the hell didn’t you already know all things financial?”

To that, I’d say, “Whoa, easy with the attitude…this is a friendly blog post.”

Anyway, what I didn’t say was that my Master’s degree was in Creative Writing and that I went to work for the company as a copywriter.

So, essentially, I was just like the average person when it came to financial knowledge. Maybe with slightly better hair.

But I wanted to understand more about how to optimize my money, what the story was behind money in general, and, ultimately, how I could use it to live a better life.

So thus began my experiments with things like delaying my elective medical expenditures until Jan 1st each year, reading Kiplinger’s “How to buy your home without a real estate agent” and then doing just that, prepaying property taxes and itemizing my taxes every other year, refinancing my mortgage a total of five times, and switching my standard retirement savings into a ROTH 401k.

I also got free money from my local and federal government for things like adding insulation, getting a heat pump, and putting in a rain garden.

My obsession with saving money ran so deep, I once called Lowe’s Home Improvement seven months after buying a ceiling fan from them and sweet talked my way into a price adjustment because I noticed it was on sale.

I also may or may not have asked for a price adjustment on $1,200 dollars in cedar fencing from Home Depot and, after being denied, asking if they’d rather I pull the same order down from the lumber area, onto a cart, buy it again now that it was on sale, wheel the cart over to returns, and then have them restock it so I could get the price adjustment that way.

My apologies to Carol at the service desk for that one…but many thanks for making the adjustment just the same.    

During this time I was also moving up in the bank consulting company from Copywriter, to Creative Director, to Vice President, and then Senior Vice President of Sales.

I went from learning how to write in a way that motivated people to move their accounts to our client banks, to understanding the pricing and theory of bank products, to eventually consulting on how digital and tech will change the financial industry forever.

But here we are now in 2016 and not much has changed.

When I refinanced my mortgage for the first time in 2009, I had to do the refinance research and calculations myself on a bank’s website. My mortgage officer wasn’t proactively reaching out to me to tell me that my 6.125% mortgage wasn’t great anymore and that rates were now down to 5%. I had to do that research.

I had to make the call.

I had to set up the appointment.

It’s 2016, and you still have to do that process for yourself. Why? It’s not a technology issue, it’s a profit issue.

Banks – like my first one that held my $10,000 in savings – make more money when people make less than optimal decisions. Each year we left that money in that savings account – a “statement savings account” for the geeks like me out there – the bank made a lot more money off of us.

So it’s not that the technology to sweep my money back and forth between the best accounts or to proactively notify me when my rates were falling behind the market or my peers doesn’t exist, it’s that there wasn’t a profit motive for the bank to do these things.

And there still isn’t motive enough for them now.

And this is the biggest disconnect in the banking industry for me…that we the consumers have to take the time and energy to educate ourselves on what’s best and that comes in the form of “financial literacy.”

Banks and other entities are very happy to provide this literacy in the form of information but what it masks is that this issue is really a technological and philosophical issue.

We as an industry – I still put myself in the banking industry as I have a FinTech (Financial Technology) company – have the technological abilities to solve these consumer finance problems.

It’s easy to imagine a bank or app that will always alert you when your current products, interest rates, or balances aren’t serving YOUR best interest. You could see more detail about why the alert was made, what others like you are doing to optimize their money, the dollars and cents impact a change could have for you, and then allow you to opt in to the best decision with a swipe.

Hell, we have talking/swearing robots, people! 

Yes, an optimal financial future is easy to imagine but it can be hard to achieve within the financial system because it requires banks to cannibalize their current profits for a long-term customer-first view.

Now, some will do so, but it will take longer for this to happen now that bank profits are back to pre-recession highs.

So now you’re asking, “what then must happen for us to get there quicker?”

You have to happen.

You have to do something different if you want a different result.

If you don’t, the status quo will remain.

The largest example of this kind of groundswell against the status quo is what’s happening in politics right now. Agree or disagree, it’s a backlash against something that’s broken.

The problem with financial services, is that most of you – most of us – don’t understand that it is broken.

But, it is broken. It’s broken compared to what it could and should become.

I’ve spent the last two years of my career trying to build software that dances around this issue.

We’ve been moderately successful with some of our apps but it’s been a hard fight from inside the industry so we’re trying an end around…or a Hail Mary…or some other sports analogy…do the kids still do roller derby? If so, then we want to slingshot around the other team’s lead skater and launch a movement to demand change.

It’s called the #FingersUp movement and it launched today on Kickstarter.

This is risky for me and for our company. We may very well burn the bridges we’ve built if our friends in the banking industry believe that it’s better for everyone to maintain the status quo.

Deep down, I don’t believe they feel that this is correct, but I could be wrong and could suffer professionally for that.

But this is more of a personal matter for me. It’s personal because at the end of the day, I still remember what it’s like that first time I had to do all the financial work for myself to find a better savings account. The banker said to me, “Yeah, we should have had you in some other product, huh?”

Yeah, you should have. 

Now we’re not going to let that happen again…not to anyone.

But it will take a groundswell to get there!

Are you in?

Mark Zmarzly is Founder of Hip Pocket, the new Hip Money app, and the #FingersUp movement. Learn more at www.hip.money.