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Is it a Good Idea to Take Financial Advice from the Consumer Financial Protection Bureau?

By now, just about everyone has heard of the Consumer Financial Protection Bureau (CFPB.) This bureau has been given the task to help protect United States consumers from illegal financial dealings and other misdoings. However, the CFPB has been on a bit of a roll lately. With a nearly limitless budget and the backing of the Obama administration, it seems that this agency is out to spread its influence as much as it can. Case in point – the CFPB recently put together a tool that they plan on using to help measure the financial standing of Americans. They say that they will then be able to better assist Americans with their finances.

According to the head of the CFPB, Richard Cordray, “A key part of our mission is providing resources that aid and empower people to lead stable and healthy financial lives. Our financial well-being tool will give financial educators an important means by which to evaluate and support consumers’ financial health.”

Earlier this month, the CFPB put out a report that defines their idea of financial well-being. This report draws on information that was obtained via consumer interviews, in-house research and consulting sessions with financial educators.  According to the report financial well-being is, “a state of being wherein a person can fully meet current and ongoing financial obligations, can feel secure in their financial future, and is able to make choices that allow them to enjoy life.”

The CFPB’s tool includes a list of 10 questions that can be used by financial educators when they are working with clients. According to the CFPB, the way that people answer these questions indicates how well off they are financially. The CFPB has created a scale that includes four essential elements that comprise financial well-being. Here are the four elements that are used in the scale:

Present day financial security – This is the element that is focused on whether or not people feel like they are in control of their daily and monthly finances.

Future financial security – This element is based upon how consumers feel about their ability to deal with unexpected financial issues

Present day freedom of choices for finances – This element is all about whether or not consumers feel like they have the power to make choices that will allow them to enjoy their lives.

Future financial freedom of choice – This element is focused on whether or not people feel like they are doing the right things to meet their long term financial goals.

There is certainly nothing wrong with the CFPB putting this sort of tool together. But let’s be honest – most consumers can get by without the bureau spoon-feeding them advice on how to best take care of their finances. Considering that the CFPB has been on a witch hunt to take out alternative financial providers – the types of companies that millions of consumers depend on for loans, cash checking and other financial services – it is obvious that the CFPB has its own agenda for the creation of these types of tools. In other words, the bureau has already proven that it doesn’t care about people having access to real choices when it comes to their finances, so why on earth would any reasonable person want to rely on a tool that has been created by this agency?

It’s better to do what you can to save and plan for your future, using what you already know or what unbiased financial educators can teach you; not relying on the CFPB to point you in the right direction.



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