Caution: Simple Reminders Can Improve Finances

Originally published 8/23/2010 at the Financial Planning Assocation®'s All Things Financial Planning Blog

My post this week is inspired by the book Remove Child Before Folding: The 101 Stupidest, Silliest, and Wackiest Warning Labels Ever by Bob Dorigo Jones. In his book Mr. Jones makes light of the use of labels in our society. Labels, the book proclaims, are often overused, unhelpful, and outright bizarre.

The title refers for a folding baby stroller which sports a label making sure parents don’t pack away the baby with the stroller. Other crazy label examples include a go-cart with warning “this product moves when used” and a heavy-duty washing machine that advises “do not put any person in this washer.”

One has to agree with the author when reading the above examples that the amount of labeling is often excessive and silly (does a lacrosse helmet need to let the user know they are participating in a rough sport?).

As I often do, I thought about how the topic could relate to personal finance. In my world I wonder if we haven’t missed the boat on the best use for labels – pointing out the inefficient and ineffective ways we sometimes treat our finances and planning.

For example, would clearer labels (or, reminders really) help us avoid behaviors we know are harmful in times our will or nerves are a little less than sturdy?

As I am not above tricks to help improve our clients finances, I pondered – should financial products or planning come with labels?

What if all credit cards came in a carrying sleeve with the reminder, ‘Warning – Earn Money before Spending.’

Or for those with their savings all on the sidelines in the bank savings account because of fear of investing in today’s markets… ‘Caution – Savings Accounts Do Not Increase At the Same Pace as Your Living Costs!’ (Of course, most banks will courteously let you know when they feel your accounts have too much cash they could invest for you so this reminder isn’t altogether missed).

My dream label however would be a scrolling reminder on the business news channel that the opinions of the guests were just that – opinions – and their ideas may not be useful for your personal investment plan, or a good predictor of the future of the economy. Their stories for the ‘Top Mutual Fund You Need to Own Today’ in my world would have the disclaimer, “The top mutual funds you need to own may not be suitable for your asset allocation, risk tolerance, or financial plan. Owning these funds may not be necessary to meet your dreams and financial goals.”

While my dreams of labeling our investment statements and financial products may not be practical (or I admit we may become used to seeing them and lose their effectiveness), there are tricks you can use as reminders for whatever your personal financial issues are.

In the past I have used a photo of a 3¢ postage stamp from the 1930s to remind clients about the nature of inflation and why sitting in cash was not helpful to their long-term ability to grow enough to help them meet future spending needs.

A few ideas for making the easy act of charging your purchases I’ve come across in the past include wrapping your cards in paper that you must open at the register in order to use, or creating a sleeve for your cards with your own reminder label about how this purchase may not be necessary. An extreme measure some have used is to freeze their cards in ice, requiring time to consider a purchase while the ice melts (though this method may cause damage to the actual card).

Don’t feel below reminders or tricks to help yourself make more prudent financial decisions. Just like forgetting to remove the baby from the stroller, financial mistakes cause actual harm. The difference being the harm isn’t always obvious or noticeable immediately so it is easier to rationalize or minimize.

Are there any tips you have for helping your finances through reminders or trickery? Feel free to add them to the comments below.

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online fee-only fiduciary financial advisor blog robert schmansky
online fee-only fiduciary financial advisor blog robert schmansky
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