Surviving in the 80 Percent World

2944

I recently attended the WWJ 950 Michigan Money Summit at the Macomb Center for the Performing Arts in Clinton Township. The Summit was made up of an all-star lineup of personal and business finance experts and the discussion topics were both insightful and relevant. At one end of the spectrum there was representation from private wealth management, investing and taxes — for people doing very well. At the other end, there were discussions and resources for individuals who find themselves in overwhelming financial distress — people in trouble. However, there was a glaring hole in the middle of the spectrum — representation for people doing “okay” who want to step up to the next level or not fall into the troubled level.

Within this gap, I see opportunity: If someone were to focus on this middle group with a pro-active, income and expense management solution, they could help a great many people improve their lives. That’s why I started Levanto Financial, a company dedicated to teaching people financial wellness. In the coming months, I’ll be sharing why financial wellness is important to individuals, and to businesses.

In the panel discussions at the Summit, there was unanimous support for the idea that consumers should, in a perfect world, run their households like a good CFO runs a business: paying themselves first (save money for themselves), giving every dollar they earn ‘a name’ (a job), and most importantly, to have a plan — basically a daily, monthly, and annual budget. However, this isn’t a perfect world and most households don’t have time to really study budgeting, historical spending, and cash-flow modeling. Time, or lack thereof, is one of the biggest reasons bad things happen. Expecting households to be run by a good CFO and be successful is like expecting that everyone can prepare their own tax returns; it’s unlikely that people have the time and/or expertise.

Where I’m troubled is the fact that so much time was spent at the Summit addressing financial distress; but my concern wasn’t THAT they addressed this, but instead that they HAD to address it. If I can make a comparison, someone in financial distress is like someone that is morbidly obese: they are 100 lbs. or more overweight, they are having heart, liver, kidney, knee/ankle/hip issues, and are in real trouble. That’s the situation those in financial distress find themselves: $15,000+ in credit card debt, they are late on mortgage, car, and insurance payments. They have no savings, and their credit score is in the low 400s.

In the physical fitness world, we send someone to a doctor who then prescribes a plan. This plan usually involves a trainer, a nutritionist, possibly even a therapist. Americans list their health as their number six biggest worry. Per capita spending on health care in 2008 was $8,300 per household. More than 45 million Americans belong to health clubs, spending some $19 billion per year on memberships. It’s being addressed and some headway is being made.

In the financial world, there really is no guidance in this area. Who do you go to for annual check-ups on your finances? If you are in trouble with your finances, whom do you make an appointment with that can prescribe something?

Let’s look at the gap that I mentioned earlier from the Summit. There are resources for those in the top 10 percent to manage and grow the money they have. There are also resources for those in the bottom 10 percent that are ‘morbidly obese,’ financially speaking. There really isn’t any resource out there for the middle 80 percent, which is very unsettling because Americans listed money as their second biggest worry in the same list that had health as sixth. How much did you spend last year to get your household finances in shape? I bet it was a lot less than $8,300. Better question is, are there resources/companies out there that work in the “80 percent world”? One of the panelists at the Summit mentioned that most families spend more time planning the family vacation than they do planning the family budget…chilling.

Don’t think there’s a need? In April of 2009, the National Foundation for Credit Counseling revealed that 26 percent of Americans (approximately 58 million adults) admitted to not paying all of their bills on time and that more than 33 percent didn’t know their credit score. Those two facts are directly attributable to those households that work in the “80 percent world”.

Arguably, Michigan is at the epicenter of the country’s financial crisis. The automotive industry was so deeply affected, we, as Michiganders, have been the hardest hit. With household and per-capita income well below national levels, income and expense management (budgeting) is more critical than ever for us. We cannot sustain ourselves on credit and expect long-term success. We need to work with experts who have the tools and the resources to help us manage our income and expenses; who will teach us how to save and how to spend; who will coach us as we implement and sustain our plan. We have two choices: build more financial ‘hospitals’ (credit counseling for foreclosure, bankruptcy, debt), or build and join financial wellness programs. We have to get ourselves financially fit. If we don’t, the harsh reality is we will financially ‘die.’

Paul Cloutier is the CEO and president of Troy-based Levanto Financial. Levanto Financial provides financial wellness coaching, bill pay and low-cost sourcing services to clients who want to eliminate financial stress in their lives. The company’s philosophy is to reach clients when they are still financially healthy and make sure they stay that way. Levanto financial coaches work hands-on with their clients to review spending habits, truly define spending needs and develop the discipline to stay on course. For more information or to schedule an initial consultation appointment, please call 248-283-8775 or visit www.levantofinancial.com.

Facebook Comments