THE COLOR OF MONEY
Complexity of society shortchanges consumers
By Michelle Singletary
George Orwell said at 50, everyone has the face he deserves.
Can the same be said about one's personal finances?
AARP recently explored this question and other consumer finance issues in its fourth annual "Beyond 50: A Report to the Nation on Consumers in the Marketplace."
This year AARP wanted to look at the consumer choices older people make. What the nonprofit found is a group of people with money to spend but who are overwhelmed by the complexity of their choices.
As of 2001, those 45 and over were responsible for a majority of consumer spending. Using the most recent federal data available, AARP found that those over 45 shelled out $2.28 trillion of the total $4.36 trillion that consumers spent in the United States.
Older consumers held a majority of the market share in the key categories of food, housing, health care, transportation, personal insurance and pension investing.
That amounts to a lot of consumer clout.
But in its report, AARP asks an important question: Is the spending power all these people have always resulting in the purchase of quality goods and services at the best prices?
The answer, not surprisingly, is no.
AARP also looked at Federal Reserve data and found that consumers over age 65 were more likely than others to be "lost" financial managers.
People are feeling lost because they face more choices, said John Rother, policy director for AARP.
"The marketplace today demands a higher level of sophistication and information than it used to," Rother said.
Actually, it's not just older folks who are confused. For example, consider how complicated long distance telephone plans have become.
As the AARP reports notes, "an increasing proportion of the goods and services consumers buy are 'experience' goods — banking and insurance products, health care, investments — whose quality is difficult to assess without extensive research. Old rules of thumb, such as 'you get what you pay for,' are often not applicable in today's marketplace, and consumers who use them are often short-changed."
How true that is.
AARP has developed an interactive feature on its Web site designed to allow consumers to evaluate and upgrade their money management skills.
A consumer quiz, www.aarp.org/money, contains questions about budgeting, credit, savings and investing. As you go through the quiz, you'll get consumer tips, often with links to other informative Web sites.
AARP is also offering a CD-ROM titled "10 Steps to a Better Financial Future." It features interactive exercises and personal financial worksheets tailored to people aged 40 to 60 with little or no knowledge of basic financial planning. Since the program maintains your data on your computer, you avoid the privacy risk in saving information on a Web site.
To order the CD (there is a $4.50 charge for shipping), go to www.aarp.org/financialcd or call 1-800-233-0723. The CD will work on a PC or a Macintosh. For the PC, Windows 98 or higher is recommended (although it will work on Windows 95); for Macintosh, OS 8.1 or higher.
Ultimately, I don't completely agree with Orwell or others who think you always get what you deserve. You don't always get what you deserve if there are outside forces that make your life harder than it should be.
The fact is there's more profit in confusion. But you can get closer to what you deserve by educating yourself before you spend your money.
