Sometimes it’s just all a bit too hard, isn’t it? Working, shopping, cooking, cleaning… at the end of it all, you’re exhausted and you deserve a treat. You don’t want to worry about your money and all this budgeting and austerity stuff seems too much hassle.
The notion of somebody else, such as a company designed to manage your finances for you, taking over and doing it all for you is often tempting but is it really worth it?
How it works
The premise of these companies is that they take over your financial situation for you and the only way to do that is to literally take total control. The company becomes the legal owner of your money but they hold it on trust for you. This means legally speaking, they aren’t allowed to misuse or profit off your money.
If they did (and you found out) the court could order they repay you every illegally acquired cent.
While the company is managing your money, they set up a bank account for you into which all your income is deposited. They then negotiate repayment plans with creditors and manage these and other bills on your behalf.
You are given a remaining amount on which you are to live on (obviously, this needs to be decided on together) and it is issued to you much like pocket money.
The obvious benefit is that the risk of temptation is removed. If you are the type who is likely to go out for a quiet beer and end up spending $300, this might be a good idea. If you are painfully shy, fearful or just overwhelmed by too many debts, this kind of system can help alleviate some of the pressure.
In fact, this arrangement is what the government uses to protect mentally disabled or ill people who are unable to manage their own affairs, the only difference being their money is either managed by a family member or the public trustee.
First of all, there’s the fees. No business can survive without charging enough to cover the costs of their employees’ wages, their property, utilities, supplies and insurance. That’s actually quite a lot of money, do you really want to part with it?
The second problem is that many of the so called “financial planners” who assist you to set up your budget are in fact not trained in finance at all. While they are qualified enough to pay your bills for you, don’t expect them to help you plan your retirement.
The biggest concern however is that while these companies may help you get sorted in the short term, what’s to stop you getting yourself into money troubles again? Just like the diet plan that provides your food, yes you lose weight (or in this case, debt) but you don’t learn the life skills to manage it in the future.
Now that you know what the companies do, why not have a go at doing it yourself? You’ll save the fees and you’ll have an achievement to be proud of. Better than losing a kilo, I promise!