Tuesday, July 15, 2008

GMA's Lousy Financial Advice

ABC's Good Morning America has made a point in recent weeks of emphasizing just how bad things are financially. Whether or not you agree with that point, following some of the advice they give is not only unhelpful but potentially quite harmful. For example, consider comments made this morning by financial contributor Mellody Hobson in a segment called, somewhat inauspiciously, "Borrowing 101". Now, some of the worst ideas somehow didn't make it into the article, but you can always watch the video, which is also available on the GMA site.

Now, with a title like that, they weren't exactly singing my tune anyway, but things went from bad to worse when Ms. Hobson said that people having difficulty getting an auto loan should consider a lease. Sure, that's a great idea if you want to spend even more money for the car, and don't forget you either lose the car after three years or have a balloon payment. Hey, how about driving the old car a few more years!

But Snowed, I get 4 miles per gallon, and gas is expensive!

Okay, and how much extra will you be spending if you add a big new car payment, even with the lower fill-up costs?

Here's another phenomenally bad idea (as a "worst resort", according to Ms. Hobson): ask a friend to cosign a loan for you! That's a great idea if you want to lose a friend, but not a smart idea otherwise.

And this idea, in the same vein, did make it to the article:
It may sound crazy, but now may be good time to entertain a loan from friends or family. That's an option you should leave on the table. If you do that, it's extraordinarily important to document it, because that protects both parties and helps preserve the relationship in the event of a problem.
Yes, Ms. Hobson said this should only be done "in a pinch", but even with everything documented, you have the loan hanging over your head. It will change your family dynamic, and not in a good way.

Hey Snowed, you sound like
Dave Ramsey!

Fine by me...he says this stuff better than I do.

(By the way, the segment just before on the same show was entitled "How to Keep Your Money Safe". Here's my advice: don't watch "Good Morning America".)

EDIT: That didn't take long...they changed the title to "Panicking? See How to Protect Your Money". Well, for starters, stop borrowing it from other people!