The Dangers of Hands-free Finance

The full-color graphic on the front page of the Kansas City Star was nothing like I expected for a Thanksgiving Day (2009). A tiny, token cartoon turkey sat on the top of the narrow left column. In contrast, a large graphic splattered two-thirds of the front page: a spherical depiction of the northern hemisphere of the earth with the middle part of the earth crumbling and cascading into the southern hemisphere which took on the shape of a box. “What just happened?” the article began. “The first decade of the 2000s—a decade that nobody can agree what to call, but ‘uh-ohs’ has been suggested—is nearing its close. Expectations of 10 years ago have been blown apart, more than once, and re-assembled.”

Quite graphic: “blown apart … and re-assembled.”

Well, so much for a Thanksgiving holiday with inconsequential conversations about football or predictions of when we’ll get the first snow of the season.

The convulsions in our economic system have worked their way into the parsonage. In the past year many pastors took cuts in salary and/or benefits. Some associate pastors were sent to other places of ministry. Moving ministers became landlords, renting the house they left behind to others, since they could not sell it in a timely manner for a reasonable price.

Hey, can we talk about football now?

While recent cataclysmic issues have made an indelible imprint in the financial psyche of Americans, another trend in the past decade may be more detrimental in the long term. At first glance it seems like an innocent advance in the American passion to streamline life, but it has the potential to lull people into a financial stupor that could ultimately prove harmful.

When Personal Finance Goes Paperless

Financial institutions and businesses continue to push customers toward digital statements. I received a notice last month from one company that it will cost $2 per month to continue receiving a paper statement. I’ve already sent checking account information to our utility providers so that the monthly bills are paid automatically—hands-free and without looking. And that’s the problem. I rarely read the details of our phone bill like I used to. Only occasionally do I check the graph on the utility statement which compares this year’s usage with last year’s. Going paperless has changed the level of my attention to detail.

Too many families currently ignore the finer points of their personal finances. Putting more things on autopilot will only increase the probability of tragedy.

Shifting Responsibility—Retirement

The financial system has been shifting responsibility to the individual over the past few decades. For example, employers used to provide a defined-benefit pension plan; now many provide a defined-contribution plan in which the employee is required to make the major decisions. But individuals aren’t doing so well. The Center for Retirement Research at Boston College recently updated the National Retirement Risk Index for 2009. The Center estimates that 51 percent of Americans will not be able to maintain their standard of living in retirement, up from 43 percent just five years earlier. Clearly, more individuals need to seriously consider the details of their financial world.

But that won’t happen to the degree it should through a computer monitor. Using the Internet isn’t the same as reading a paper statement. Studies of eye movement have shown that people surfing the World Wide Web read from left to right for a few lines, then quickly start scanning from top to bottom. So, even if they get around to actually looking at the digital statement, many will merely scan it. Financial stability will come to those intentional about the details, not those who give the quarterly statement a quick once-over.

Shifting Responsibility—Health Insurance

Consider another example of the shift of responsibility: health insurance. As a young pastor, the congregation I served provided health insurance through the district’s plan. Now, most of the young pastors I talk with have to provide their own, either through bi-vocational employment, the spouse’s employment, or a self-purchased insurance policy. Some employers who do provide health insurance have shifted to what is called a Consumer Driven Health Plan (CDHP). In a CDHP, a High Deductible Health Plan (HDHP) is combined with a tax-advantaged Health Savings Account (HSA) (Who knew alphabet soup could be so healthy?) Anyway, the CDHP requires an individual to manage and pay for regular items, with insurance kicking in for catastrophic needs. To make good decisions, the individual will have to be well-informed. Playing with the computer while the plane is on autopilot may cause a person to miss the destination by 150 miles.

So, I carefully read all documents about our health insurance and other financial accounts. This isn’t the most stimulating reading I do, but it is essential. If I don’t understand how something works, I ask someone who does. I’ve surprised a few people when they learn I still do quite a few personal financial tasks by hand. I’m tech savvy and can make the computer do just about anything I need, but for the day-to-day financial tasks like keeping the check register and reconciling the monthly checking account statement, I’ll do it the old-fashioned way. In a time of rapid, discontinuous change, that will slow me down enough to pay attention to the details.

Originally published by Pensions & Benefits USA.