Money Lessons Learned from Merrill Lynch

This past week MSNBC published an article about the former major financial institution Merrill Lynch titled “How Merrill Lynch bankers helped blow up their firm”. It is never good business for our economy when a major financial institution falls from the top of the stock market into the financial black hole.  When companies shut down, employees lose their jobs and investors lose their money.

Merrill Lynch tried to pull themself out of a financial crisis by paying investors to buy into their new securities. These new securities were offered by a newly created division of the major financial institution.  Some people may call it a bonus, but some other people may call it bribery. Bribery, as we know, is definitely an illegal act in both the financial and business worlds.

The major financial institution was paying out money to investors even if their securities were not making any money.  Merrill Lynch’s stock prices once dominated the stock market, but they fell to be worth only pennies.  The company was eventually bought by the Bank of America.

Here are some Money Lessons that we can learn from Merrill Lynch:

Don’t spend money that we don’t have. This is the number one money lesson that we all need to learn.  Hopefully we learned it young.  If we don’t have the money now to pay for something, we probably won’t have the money later.  There will always be a next deal to make, and another offer to buy. Debt will be the financial downfall of every good financial decision.

Don’t repay debt with other debts. This is not helping anything because our debt is not being repaid, it is just being moved around.  This is the downfall of credit card balance transfers.  A balance transfer can offer a temporary lower interest rate for our credit card debt.  However, this is not a long term solution since our debt is not being repaid.  The long term solution is to pay off our debt. A lower interest rate will help us repay our debt faster, but we need to have a plan.

People will do anything for money.  As a financial services employee, I can confirm that banks are an ocean with hungry sharks, I mean employees, swimming around inside Everyone wants to make their next quarterly bonus, and most people will do anything to earn it, even if that includes hurting their clients and coworkers.

We all need to have some financial integrity. Did I really put financial and integrity in the same sentence? That doesn’t sound right! As a Personal Financial Planner and I always try to do what I feel is in my client’s best interest.  However, every now and then a little dollar sign devil pops onto my left shoulder and whispers something else in my ear.  I never give into temptation because my job stability over the next 30 years is more important to me than my next quarterly bonus.

“Creative Accounting” is not profitable. Numbers don’t lie, but people do.  Behind every number there is an accountant who crunched those numbers.  If a situation is less than profitable, we should make a plan to make it better. We should definitely not lie about it.  Eventually, the truth will come out.