Personal Finance Help Provided By, or Through, Financial Institutions: The State of the Art as of January 2014
If banks, credit unions, and similar institutions provide personal finance help to their members, I find that they do it by either:
In-House Resources: All Eggs in One Basket. Typically, I find that the presupposition underlying in-house solutions designed by banks and credit unions is that their members keep all their eggs in one basket. Institutional budgeting and accounting tools are designed around the accounts members have at that institution.
But if, as they should, members practice any kind of diversification at all, this is the one presupposition that is never true. Consequently, reliance on institutionally-provided budgeting and accounting tools may be depended upon to be incomplete. They don't include the other baskets.
Additionally, I find that in many cases, institutionally-provided budgeting and accounting tools limit memory; that is, they will only archive a short time period of transactions. One well-known financial institution focused on the military community limits transactions on smart phone application to two months, and it limits transactions on their web site application to eighteen months. Considering the importance of long-term memory and long-term goals, I find this memory limit unacceptable. It results in a sort of institutionalized "amnesia" that does not serve its members' best interests.
If banks, credit unions, and similar institutions provide personal finance help to their members, I find that they do it by either:
- developing in-house resources, or
- partnering with large outside contractors.
In-House Resources: All Eggs in One Basket. Typically, I find that the presupposition underlying in-house solutions designed by banks and credit unions is that their members keep all their eggs in one basket. Institutional budgeting and accounting tools are designed around the accounts members have at that institution.
But if, as they should, members practice any kind of diversification at all, this is the one presupposition that is never true. Consequently, reliance on institutionally-provided budgeting and accounting tools may be depended upon to be incomplete. They don't include the other baskets.
Additionally, I find that in many cases, institutionally-provided budgeting and accounting tools limit memory; that is, they will only archive a short time period of transactions. One well-known financial institution focused on the military community limits transactions on smart phone application to two months, and it limits transactions on their web site application to eighteen months. Considering the importance of long-term memory and long-term goals, I find this memory limit unacceptable. It results in a sort of institutionalized "amnesia" that does not serve its members' best interests.
Partnership with Large Outside Contractors: an Impersonal, Cookie Cutter, Square-Peg-in-a-Round-Hole Approach
If financial institutions choose not to develop in-house resources, but they do want to offer their members some kind of personal finance help, their other option is to shop it out. In this case large organizations seem best because it seems like there's safety in large numbers.
But large numbers can also be impersonal, bureaucratic, procedural, and focused more on form and process than on substance and content. Working with them leaves one with the feeling of having been stamped with a cookie cutter, or of being a square peg that has been pounded into a round hole. I know about such experiences because I've listened to my clients' complaints after they became fed up with being treated like a round peg and came to me for more attentive help.
In both cases - in-house and shopped out - much to my dismay, financial institutions are still making many of the mistakes discussed at length here on the Budgeting page, especially:
Solution. Since 1996, I have worked in the trenches of the private sector alongside both individual households and small businesses developing real-world solutions to problems like those mentioned above and a lot more - solutions that may be found on this web site's many pages.
For example when I write a budget, I do not presume the mythical average month. I help my clients work their budgets out month by month. We identify irregular expenses, and we develop short-term savings plans to regulate them, which give them cash flow management strategies that simply "monthifying" irregular expenses on an average monthly budget does not give.
As another example, when I design an accounting system, I design it to be complete. If a client has accounts at several financial instutions, we include all of them in the design; and our records are not hindered by systemic amnesia. They're designed not to forget, but to remember.
Because they're historically complete, they equip people to understand and cope with long-term trends in their economies that are caused by deeply entrenched beliefs and behaviors. I am absolutely certain that, only with such a long-term view of both the past and the future, can people be equipped to enjoy meaningful improvement.
Long-term perspective encourages patience and persistence. It gives people the chance to understand the true magnitude of their challenges, surmount them, and win. And when they win, their financial institutions win too, with solid loans, robust deposits, and stable, growing profits.
That is why I am hereby offering my help to financial institutions interested in using my tools and talents, through both group and individual work, to benefit their members. Please contact me to explore possibilities.
At your service,
Kris Freeberg, Economist
If financial institutions choose not to develop in-house resources, but they do want to offer their members some kind of personal finance help, their other option is to shop it out. In this case large organizations seem best because it seems like there's safety in large numbers.
But large numbers can also be impersonal, bureaucratic, procedural, and focused more on form and process than on substance and content. Working with them leaves one with the feeling of having been stamped with a cookie cutter, or of being a square peg that has been pounded into a round hole. I know about such experiences because I've listened to my clients' complaints after they became fed up with being treated like a round peg and came to me for more attentive help.
In both cases - in-house and shopped out - much to my dismay, financial institutions are still making many of the mistakes discussed at length here on the Budgeting page, especially:
- Beginning the process with actual income instead of finishing it with an income GOAL;
- Presuming the mythical "average month", and
- Ignoring long-term savings or, at best, treating it as an afterthought.
Solution. Since 1996, I have worked in the trenches of the private sector alongside both individual households and small businesses developing real-world solutions to problems like those mentioned above and a lot more - solutions that may be found on this web site's many pages.
For example when I write a budget, I do not presume the mythical average month. I help my clients work their budgets out month by month. We identify irregular expenses, and we develop short-term savings plans to regulate them, which give them cash flow management strategies that simply "monthifying" irregular expenses on an average monthly budget does not give.
As another example, when I design an accounting system, I design it to be complete. If a client has accounts at several financial instutions, we include all of them in the design; and our records are not hindered by systemic amnesia. They're designed not to forget, but to remember.
Because they're historically complete, they equip people to understand and cope with long-term trends in their economies that are caused by deeply entrenched beliefs and behaviors. I am absolutely certain that, only with such a long-term view of both the past and the future, can people be equipped to enjoy meaningful improvement.
Long-term perspective encourages patience and persistence. It gives people the chance to understand the true magnitude of their challenges, surmount them, and win. And when they win, their financial institutions win too, with solid loans, robust deposits, and stable, growing profits.
That is why I am hereby offering my help to financial institutions interested in using my tools and talents, through both group and individual work, to benefit their members. Please contact me to explore possibilities.
At your service,
Kris Freeberg, Economist
