By George M. Smith
Rene Bruer, Co-CEO of Smith Bruer Advisors, was recently featured in an article by WalletHub titled “2018’s Best & Worst Cities at Money Management.” The focus of the article was a survey that scored 2,572 US cities on a 0 to 100 scale using data from TransUnion and Renwood RealtyTrac (as of October 2017). The cities were ranked as a total group and also ranked by city (proper) population size: small cities (less than 100,000), medium cities (100,000 – 300,000), and large cities (more than 300,000). The scoring methodology follows:
Debt Level – Total Points: 50, equally weighted
- Credit-card debt-to-income ratio
- Mortgage debt-to-income ratio
- Car-loan debt-to-income ratio
- Student-loan debt-to-income ratio
- Average percentage of credit used
Financial Behavior – Total points: 50
- Median credit score: Weight (~16.67 points)
- Average number of late payments: Weight (~8.33 points)
- Share of delinquent debtors: Weight (~8.33 points)
- Share of adults with a recent bankruptcy: Weight (~8.33)
- Foreclosure rate: Weight (~8.33)
While Cupertino, California ranked number 1 and Fairburn, Georgia ranked last at 2,572, I was displeased to see that my home town of Tallahassee, Florida ranked 2,096th overall and 195 out of 241 mid-sized cities. However, the more I thought about it, the more I realized that I wasn’t surprised.
Based on my personal observations, and that of my team members, our experience corroborates the findings. There is little to no practical financial education in schools at any level, despite the fact that many careers require the management of money. I applaud the efforts of organizations like Junior Achievement to present courses on budgeting and career planning, which we support through giving our time to teach classes, but it amounts to only 5 to 7 weeks of teaching which isn’t enough time to establish good behaviors.
There is no serious push by the federal government to teach it, and you would think this would be important because having more Americans with a healthy balance sheet and sound financial plan should reduce stress on an already over-strained state and federal budgets, which, needless to say have not proven to be effective models for financial management.
The most egregious failure is the lack of education and positive modeling in the home. Most Americans have little savings, high debt-to-income ratios, and are not adequately prepared for retirement, so it is no wonder that the next generation is starting off on poor footing. You might think that the younger generation would observe their parents financial positions and be motivated to go down a different path, but if that topic of how expensive it can be to live isn’t discuss around the dinner table, in the car going to school or whenever there are a few minutes to talk, how can an accurate perspective be gained? At the point, perception is reality – until reality actually hits.
I would be remiss if I didn’t call out the failures of the broader financial industry. First, most folks in the US do not have a financial advisor. Out of the minority that do, most of the licensed people on which they rely are not true planners. They focus primarily on investment management, and some outperform the others. The truth is that even if you have the best performance in the world, every year, forever, how do you know if you have enough? How do you know if you can hit your goals? Guessing and hoping is a plan – a bad one.
Additionally, many Americans only investment vehicle is their employer’s 401(k) plan which in many cases are overpriced and don’t come with financial education or advice, depriving employees of tools that should be available to them and leading to companies with financially unhealthy staff. The world of financial services can be confusing and ineffective, exacerbated by the fact that not all “professionals” are equally educated and licensed, nor are they all fiduciaries but operate under the suitability standard. In other words they charge commissions.
The good news is that not all is lost. We encourage people that are serious about their financial future to seek out a fee-only fiduciary financial planner. You can find one by searching on www.napfa.org. A fee-only planner is required to work for you and is not in the business of sales. They look at your entire picture, help you determine where you are strong and where you are deficient. They document recommendations to help you get and stay on track. If more Americans took the time to get financially stable then what we saw in the WalletHub survey would likely improve. If this survey was done for individuals, where do you think you would score?
If you would like to see the entire article click here, https://wallethub.com/edu/best-cities-at-money-management/19256/