If you had to take a guess, what would be the worst financial advice ever?
I’ve gotten a lot of questionable financial advice.
- Car payments are just a fact of life.
- Don’t worry too much about low mutual fund fees. You get what you pay for.
- Buy the biggest house you can afford.
- Always withhold extra in your taxes. That way you get a big refund.
- Buy Seadrill.(SDRL)
Some I thankfully ignored, some I followed. Fortunately, none of it was too disastrous or had long term, life changing consequences.
I was watching something on TV and saw someone give the worst financial advice ever.
Unfortunately, I can’t give you an exact quote, because I didn’t record the commercial (or even remember the name of the person who ran it.) The basic message though was
“Do you want to start the New Year by getting out of debt? Declare bankruptcy!”
Yes, he literally called bankruptcy a way to get out of debt. (Headdesk. Headdesk).
It was the first time I’d seen bankruptcy presented as a New Year’s resolution. If it wasn’t the absolute worst financial advice ever, it had to be in the top 10
Getting Some Thoughts Out of the Way Before I Start My Rant
I will start with the admission that TV commercials are probably not a good source of financial advice. “It’s your money, use it when you need it!” comes to mind as another questionable suggestion.
Occasionally, you can find good advice from commercials, like the one that inspired Jon to begin his investing journal. That’s….probably not the norm.
A commercial is selling a good or service. The advertiser tries to frame that good or service in the best possible light to get more customers, who may or may not need the what the advertiser is selling. Good advertising, though, doesn’t have to mislead about the basic benefits of what it wants you to buy..
Coke may be horrible for your health, but Coke’s commercials and ads haven’t advertise health benefits in about a century. Coke ads are selling
- A tasty and/or refreshing drink
You may avoid Coca Cola or soft drinks in general and still recognize that Coke does actually deliver those qualities to many consumers, along with an unhealthy dose of sugar/high fructose corn syrup and artificial ingredients.
I also don’t want to bash lawyers. I come from a family of them. My dad just celebrated his 50th year of practicing law, my brother practices law, and my grandad and great uncle were both lawyers.
I grew up believing that a good honest lawyer is the little guy’s best chance against the sometimes unfeeling tide of big institutions, whether that be big government, big business, or big money.
The guy on this ad was why lawyers sometimes get a bad name. He was giving what I perceive as clearly misleading information about a very serious legal and financial decision.
The Problem with Selling Bankruptcy
Bankruptcy might possibly be a solution to big problems, but it’s not an easy solution and not how to think about “getting out of debt for the New Year.” Bankruptcy is a last resort after all other options to reduce and repay debt have been tried and exhausted.
If you are in really deep financial trouble, bankruptcy might help make your life better. Maybe. But it better be about to lose your home, collections calling every day, no way out type of trouble.
Bankruptcy does wipe out debts, but not all debt. If you owe child support or alimony, bankruptcy doesn’t help. It doesn’t help make most back taxes or student loans go away.
Like Diamonds, Student Loans are Forever…unless you pay them off.
Bankruptcy is also a time-consuming and expensive process that leaves your credit (and possibly job prospects) wrecked. It can leave a huge social and emotional toll as well.
The bankruptcy may stay on your credit report 7 to 10 years (depending on the type you file), but the scars may last much longer.
Dude, change your pitch. Declaring Bankruptcy to Get Out of Debt for the New Year is terrible, terrible financial advice. It is quite possibly the worst financial advice ever.
Sell your services. Tell people how good you are at helping them manage a difficult and exhausting legal process with your expertise and compassion.
But stop selling bankruptcy.
What’s the worst financial advice you’ve ever seen or been given?
Top Image courtesy of David Castillo Dominici at FreeDigitalPhotos.net