Should I pay off the credit card or work on my emergency fund? Should I save for retirement or for my kids’ college education? How can I manage my tax situation? Do I really need life insurance at this age? What do you think of the 0% interest on the new car purchase? It is usually a financial dilemma that causes you to seek out the advice of others. Good idea, but be cautious about where you find your advice. Here are a few people I would steer clear from.
The social media friend or peer – The younger you are, the more likely this seems to happen. Surely my vast Facebook or Twitter network can answer my simple question? Good idea for seeking advice on where to vacation…. personal finance, probably not so much.
Your co-workers – Who better to give you advice than the person you work with all day and are comfortable talking to, right? These people may be in worse financial shape than you. I don’t give dental, air conditioning repair, or auto advice. I know your co-worker sounds confident when they speak, but they probably have no financial credentials and don’t do it for a living. Several months ago, I was visiting a company I manage a retirement plan for and overheard one of the opinion leaders giving advice to another worker on some strategies around saving for college. He went on and on. What the co-worker didn’t know was that the state 529 plan had changed their rules a few years back and his advice was no longer accurate.
Your neighbors – A bigger home and luxury car don’t make one an expert in finances. They may be drowning in debt for all you know. I once had a neighbor who was an engineer. It was funny how his math degree made him an expert in financial planning and anything else that could be quantified. After all, it is just numbers right? After a few conversations, I realized he would be great at helping my son with his 8th grade math homework, but he actually knew very little about personal finance.
That one family member – You know the one! I don’t even need to describe them. They constantly demonstrate their superior knowledge on all subjects. Like your co-worker, they read an article online and even a book once on the subject. No they don’t have any certification, designation or formal training, but they can help you out. Lots of people can sound smart, but actually knowing what you are talking about is often completely different. A large amount of investment fraud and financial elder abuse actually starts or occurs inside the family.
Financial “Experts” with no certification or a bad reputation – Again, a few books and a 2 day seminar don’t make one an expert. Checking online with the regulating bodies and professional organizations is a good start. You can often see what licenses and credentials are held, and if an advisor is in good standing. Some financial designations have higher ethical and financial fitness standards that are required of their professionals. I’m sure you wouldn’t want to begin taking advice from someone who has declared bankruptcy twice and has several formal complaints against them. Asking a few trusted peers or friends if they have any good referrals is also a good starting point.
This article is meant to be general in nature and should not be construed as investment or financial advice related to your personal situation. Please consult your tax, legal or other financial advisors prior to making financial decisions. Investing involves risk and the potential to lose principal. 03/19