Solvency statute

We have a ritual in my household.

Every time a credit card company sends one of those sets of blank cheques and a letter promising the opportunity to buy anything our hearts desire, we do an impromptu dramatic reading.

One of us will hold up the letter and recite, “Dear Mr. Porado, it has come to our attention that you are not in enough debt. What is wrong with you? Don’t you understand consumers are the engine of our economy? Don’t you realize we’re counting on you to buy stuff you can’t afford? You need to rack up some loan servicing charges so we can cover our bonuses. We’re counting on you, so spend, spend, spend!”

While this joke’s been in play at our house for the better part of a decade, these come-ons seem particularly imprudent today. Easy credit is a big part of what got the world’s economies into this current mess. Nobody wanted to believe they couldn’t afford life’s luxuries, little or big. Media outlets didn’t help, pumping out hour-long product placements disguised as light drama—and somehow convincing the latest generation of young women that someone on a journalist’s salary can afford to eat out so often that her oven is better used as a shoe rack.

Frugality fell dangerously out of fashion, victim of a lengthy economic expansion and creation of lending vehicles that helped consumers feel they’d never need return to early ’90s-style belt tightening. Mercifully, that may be ending. Recent magazine covers and TV segments have touted the joys of minimalism—along with the ecological and social merits of planting one’s own vegetables and raising urban livestock.

For the first time in nearly two decades, the idea of setting cash aside for a rainy day is gaining traction. But advisors must help keep the bus on the road. Use the shift in economic climate to get errant clients on track. Turn the calamity into an advantage.

You can accuse me of being a silver-lining Pollyanna, but I truly see opportunity here. Preach the joys of solvency, and the evils of too-easy credit. Show clients why it was a bad idea to spend into oblivion in the first place. Use this chance to teach crucial lessons and ultimately gain a closer understanding of those investors’ full financial pictures. Your clients will thank you.