The ability to make smart decisions in daily life includes making smart financial choices, according to researchers at the National Foundation for Credit Counseling (NFCC). Making good financial decisions, in turn, requires consumers to have a fair degree of financial competence. Yet, just 8% of respondents to a recent online poll conducted by the NFCC felt that they had a good grip on their personal finances.
“Personal finance can be complicated, thus there is no shame in admitting difficulty understanding how to best manage money,” says Gail Cunningham, spokesperson for the NFCC.
Consumers may be hesitant to reach out for help due to misconceptions about financial counseling, the poll results suggest. Some of the most common false beliefs around financial advice that consumers admitted in the NFCC Financial Literacy Survey include the following:
- “Financial counseling costs too much.” NFCC researchers say this trepidation is unfounded because many sources of free and affordable advice exist—including the NRCC itself. The organization says one of the requirements for membership in the NFCC is that no service will be denied to clients based on an inability to pay.
- “It is embarrassing to discuss difficult personal financial situations.”Researchers say it is highly likely that the trained and certified financial professional individual savers and investors consult with has already encountered similar financial problems. People across all income levels and walks of life face financial difficulties at one time or another.
- “Credit counseling agencies only offer advice, not real solutions.” Although financial education is critical to financial success, when a person has debt beyond what he or she can responsibly manage, a debt management program may be appropriate, according to the NFCC. Such a program allows consumers to continue repaying their debt in full, but often with a more affordable monthly payment, a lower interest rate, and reduced fees.
- “Seeking credit counseling might damage credit scores.” Credit counseling is not reported to the credit bureau, researchers explain, so counseling could not have a negative impact on a person’s credit report or score. In fact, graduates of debt management programs often emerge with improved credit scores due to having paid off the debt through consistent monthly payments.
- “Debt settlement or bankruptcy seems like better solutions.” Both debt settlement and bankruptcy are serious financial decisions which can negatively impact a person’s credit report and score for years, the NFCC says. Before opting for either, a person should first rule out all other alternatives.
The NFCC survey revealed that 73% of consumers would benefit from answers to everyday financial questions from a professional. To be automatically connected to a NFCC member agency, dial 800-388-2227, or find an agency online at www.NFCC.org.