“UNBROKE,” the television special on ABC, just aired. The one-hour program was designed to reach out to Americans and explain some basic economics concepts, stocks, bonds, 401(k)s, and debt. On the whole, the program was good as a primer to get people motivated to get up and do something about their financial problems. The trouble is, though, the advice they give doesn’t always pass muster. If you caught the show, here’s some of the content seen through the “DebtGoal” filter:
- The UNBROKE host tells the audience to think about housing as an investment. Really? Calling housing an investment would be slightly more compelling if there was guaranteed income to swing mortgage payments, but in our current economic environment, income insecurity is a major factor in the risk part of the home ownership equation. Housing historically hasn’t even been the top competitor with other forms of investment, all corollary costs of ownership included. It is much more accurate and helpful to treat housing as an expense in one’s budget.
- The UNBROKE host makes an unforgettable quip about retirement: counting on social security checks alone to fund one’s retirement places them at the poverty income level.
- And Seth Green? Lots of entertainment, but little commentary on the specifics to his decision-making process on the right moment to buy a home, invest for retirement, or money management. The best part of his presentation is his admitted modesty when it comes to housing.
My most glaring issue with the presentation is that they encourage a target audience that may carry substantial non-mortgage, non-educational debt, like balances on their credit cards, to invest in stocks right now. This is hands down a bad idea: credit card debt, auto debt, and any other high interest loans should be prioritized for elimination before investing in the stock market, especially in a non-retirement account for which there is no immediate or future tax advantage or matching employer contribution. This is not to say that one should liquidate one’s existing retirement accounts — an action that comes with penalties — but rather completely stop making additional contributions to retirement and non-retirement investment accounts and instead funnel cash into high interest debt reduction as soon as possible. This advice holds even for those who are at high risk of defaulting on their mortgage — the potential gain from buying stocks and bonds right now is unlikely to be justified when faced with the foreclosure and loss of one’s home.
Raj Patel writes for DebtGoal.com, a do-it-yourself system for getting out of debt and lowering your interest costs. DebtGoal.com incorporates all of the techniques discussed in this post and can help users understand and get visibility to and manage their debt finances.
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