Money Merge Accounts: Software Breeding Financial Illiteracy

by Florida's #1 Mortgage Planner on November 2, 2008

Money Merge Accounts:  Software Breeding Financial Illiteracy As anyone who has read my articles and blog posts over the years knows, I am not a proponent of mortgage acceleration programs, not one, and for just reasons.  What those whom write against me fail to understand, despite my repeated attempts, is that I never mention the programs do not work, not even once have I said that.  Rather, I do not like them because there are better options, and maybe even more importantly, they breed what I call “financial illiteracy.”

Comparing what we all know regarding the term illiteracy, which is not being able to read, write, and/or speak one’s primary language, let’s look at what I mean.  Simply put, “financial illiteracy” means that one does not understand ones own finances, whether in part or in whole.  Considering the state of financial crisis many Americans, if not most, are in, “financial illiteracy” is a plague that is causing chaos throughout the United States, breaking families apart.  It is only getting worse each day and not just because of the credit crunch or current state of the economy.

Our lack of understanding comes from the lack of genuine education on the subject.  There are personal finance “gurus” all around that can tell you how to budget, invest, save, even spend.  Each are competing for your hard earned money.  You can buy books, tapes, videos, and even attend seminars on the subject to learn all about finances.  Or you can buy software that does it for you these days, one of which is the program called a Money Merge Account, though itself is nothing more than a financial software program that tells you what to do, and when.  Any mortgage acceleration program sold to you involves the same thing, but they leave out a lot of important details, of course.

While I have talked about many of the omissions, even the distortion of facts in their presentations, that is not the subject of this piece, rather it is to talk about how we, as a society, are letting automation rule our lives and becoming more and more illiterate each day as a result, especially when it comes to finances.

As I typically do, I will use my airline pilot experience as an example.  Why?  Because when your life depends on it, it is the best transfer of understanding I can provide.

Let’s assume I am the current generation, one that has grown up with automated cockpits all my life.  I learn how to fly mostly by programming a computer that then flies the airplane.  In my hundreds of hours of training to get my commercial license, I may not actually hand fly a lot and will be focused more on what the airplanes computer is telling me I should do.  After all, the plane flies itself, right?

One day I am flying along and we lose all electrical systems on the airplane and the computer fails.  What do I have to fall back on?  Now picture we are in the middle of the Atlantic Ocean when it happens?  What now?  Would you be happy with a computer programmer, or even a pilot with only basic knowledge and experience at the controls?  I am guessing the answer would be a resounding no.

Instead, when I go to training, I spend countless hours studying even the most intricate parts of the airplane and how they work.  I even study the stuff I cannot fix in flight.  Why?  Because when the crap hits the fan, the more I know about the airplane, the better off you are, your life depends on it.  If I rely solely on the airplane, it will be the death of hundreds of people, period.

Now, when it comes to finances, I apply the same principles to my studies.  I want to know everything I can about personal finances, taxes, investing, mortgages, leverage, strategies, the list is virtually endless, so much so that I never stop learning about how money works.  As a result, I can handle virtually any crisis and I don’t panic when the Dow Jones Industrial Average drops to 7,000.

I know that it takes time to gain this knowledge and not everyone has time available, but you can do it in just 1 hour a week, and know how money works as a result and why a computer program is telling you to “move money.”  Don’t get me wrong, I use software to make my life easier, but I know why and how it gives me the results that it does.  It also lets me know when the program gives me the wrong results.

Huh, software will tell you the wrong thing?  Blasphemy!!!

Believe me, it does and will repeatedly and that is where knowledge will protect you from making costly mistakes.  You see, there are several problems with software.  One, it is only designed for one purpose and that is based on who programmed it.  It cannot just reprogram itself because “life happens.” 

Another problem is that it is only as good as the inputs it receives.  That means that if you do not know what to input, or make a wrong input, the results are garbage.  If it does not know how to compare strategies, or even allow a strategy comparison, what good is it when it comes to truly deciding what is in your best interests?  That is a major flaw with Money Merge Accounts and other mortgage acceleration programs, they omit legitimate comparisons that typically are even better than their own program.

Now, everywhere we look, we can see software taking over our lives and assisting us to do things better.  For the most part, that is a huge benefit.  However, when it comes to finances, not to mention flying airplanes, knowledge cannot be omitted or you could face disaster.  Using software to accelerate your mortgage without fully understanding what it does can lead to you simply doing its recommendations, which may be the exact opposite of what you should be doing right now, it cannot tell the difference.  That, my dear readers, is “financial illiteracy” and will lead to the financial deaths of many Americans.

{ 2 comments… read them below or add one }

Stacey Derbinshire November 2, 2008 at 8:45 pm

You know, I have to tell you, I really enjoy this blog and the insight from everyone who participates. I find it to be refreshing and very informative. I wish there were more blogs like it. Anyway, I felt it was about time I posted, I’ve spent most of my time here just lurking and reading, but today for some reason I just felt compelled to say this.

Dave Shafer November 6, 2008 at 4:40 pm

Yes, you are so right. People won’t take the time to learn about finance. They want it automatically. And then because they don’t understand they make huge mistakes, like pay off their mortgage when taxes are bound to go up or sell their equity mutual funds in a bear market. Only education and a mentor will help folks, but it takes time.

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