Debt and Our Future Well-being
How do we get to Financial Wellness?
Starting with the collapse of our economy in 2008 and over the last several years, I’ve noticed something, and having seen it, I felt morally obligated to do something about it. People are falling apart under the weight of their debts, and indicators are everywhere that this is making us a very unhealthy country.
Financial wellness is beginning to gain traction in our national conversation, and it’s not a moment too soon because I am convinced that millions of us are financially broken and in need of real solutions. Our poor health, as related to our debt, is proving this fact.
Let’s look at the facts.
We’re a country deeply in debt. We have very little saved. We’re under tremendous financial stress. And all this is leading to chronic anxiety, crushing interest payments, not to mention a deep distrust of the financial industry.
There is a significant opportunity to make financial wellness a real part of our lives — reversing the course of crippling financial stress while we rewrite our engagement with a flawed financial system designed to profit from our habits and dependence on debt.
Research conducted by Dr. Galen Buckwalter, my colleague, shows that debt equals stress and that stress is literally killing us. Why? Because we are strung out on debt.
On average, we carry about $16,000 per person in credit card debt and the chronic stress of this is harming us. This needs to change. Finance needs an overhaul to include more humanity with individuals’ financial wellness as the new metric to measure success at its center.
We Need to Talk
Ask almost anyone you know: They will tell you their credit card debt is a painful subject. They’re likely trying to look away from their growing interest payments, while still seeing a future with these bills for perhaps decades to come. This resignation to the problem and the avoidance it can lead to defines our powerlessness.
The debt is ours, but the banks own our future. How can we be entirely well when we have no sense of control over our destiny?
I believe the future well-being of America depends on making profound changes to this relationship with money.
As a nation, we’re plagued with stagnant incomes and gripped by collective overspending, leading to interest burdens never seen before in human history. While the economic engine of our country depends on healthy consumption — and while we excel at spending money — we fall very short where it comes to protecting our futures. This leaves us exceptionally vulnerable to a financial system that does not have our best interest in mind.
Why are we doing this to ourselves?
Your Brain on Money
Well, in part, we know personality is at the heart of decision making and are just now learning about how powerfully our personalities govern our financial lives.
And our financial personalities can vary widely. Some of us are natural savers, thinking of the future and storing our resources. Some of us live for the moment, constantly seeking the next adventure and rarely giving a thought to tomorrow. It seems fairly obvious these two different approaches — among several others — will lead to different financial outcomes, no?
Add to this the constant external pressures to spend, shop, overindulge and relentlessly acquire, in spite of the vulnerable position it may put us.
The Credit Card Conflict
To be fair, not all debt is created equal. This isn’t about mortgages or student loan debt which are about building for the future. It’s about credit cards. Many of us have suffered an emergency that has required us to put everything on our credit cards. In essence, this is what credit was intended for: the rare occurrence when something goes really wrong and people need a loan.
This is not where we are today, though.
Through a combination of constant shopping, cheaper and more abundant consumer goods and opportunities to spend no matter where we are or what we already have, it’s no wonder millions of Americans are drowning in debt and the anxiety that comes with it. It’s what we buy that dictates how our futures will unfold.
Let’s Fix a Problem Banks Created
How can we fix this? It starts with the financial industries committing to aligning the interests of individuals with a focus on well-being.
Look at it this way: Most of us have little understanding of what our personal financial strengths and weaknesses are, which is in direct opposition to the dozens of credit solicitations we receive each year. We’re all different but the current system treats us as exactly the same.
The banking world wants each of us to carry as many credit cards as possible, regardless of how our personalities — not to mention our financial outlooks — differ. This tide of credit is rewarding banks with a tsunami of interest payments that threaten to derail millions of futures, and those in charge need to step back and actually look at the lives of the people they serve.
People deserve to be healthier where money is concerned and need financial services that balance both nature (our personalities and habits) and nurture (our environment). Trust in these businesses is gone, and unless we make radical, wholesale change, it has no reason to come back.
Think about it: If your mechanic repeatedly damages your car in the process of servicing it, would you choose to return each time you needed something? Consumers have no choice — choice being at the core of our entire economy — as to who they entrust with their money, and, for that matter, who they trust with their debt. Though there may be many different banks, the products are all the same and depend on debt, not savings, to keep us engaged.
The Way Out
Where does establishing renewed trust begin? It starts by showing people you have their best interest in mind and by offering a way off the treadmill. It starts by approaching information from a shared perspective, not the black-box approach traditionally used in finance.
There’s a difference between purchased data or data collected from customers without their knowledge, and data people willingly provide. The latter is based on trust and can be used to share insights back to them about their own behavior.
The transparency and utility of that willingness to share has value beyond attracting more consumers. Missing from finance is the drive to work with people to make a better life for themselves, and if we demand it, we can change banking for good.
Changing Banking for Good
The costs of our debt transcends money, and this concern is what has driven my ambition to change financial services for millions of people.
Our Science Team has spent the last two years researching and gathering data on financial personality, the stress levels of consumers in debt and how it’s impacting people’s lives. The resulting data is devastating.
Financially induced stress is leading to an epidemic of mental, emotional and physical health problems, and I don’t see the rest of the financial services industry seeking solutions to this crisis. The costs are being measured in lives spent paying off debt. This is robbing us of opportunities to build for the future, and we must change this now.
The Long-term Benefits
This is the beginning of a conversation about our nation’s financial wellness. Our very economic security and survival depends on it.
Savings, sanity and well-being must be paramount for the businesses we contract to handle our money. It’s not too late to put credit and debt where it belongs and create a way out of these problems.
Consumers have options in terms of what they buy and to who they owe money, and now it’s time to create services that actually encourage savings and wellness. It may mean sacrificing short-term profits, but banks with an enlightened long-term interest will reap great rewards by helping people build wealth, not by just extracting it.