How to tell when money advice is bad


Sara Rathner of NerdWallet

AP – There are a lot of people who want to tell you what to do with your money.

The problem is, only a few of them know what they are talking about.

Whether it’s a friend with hot investment advice, a relative dismissing outdated guidelines on how it “should” be done, or a social media influencer promoting a trendy financial product, money advice can be right.

You can filter the useful tips and leave the rest, but for that, you need to know how to evaluate which tips you can trust.

CONSIDER THE SOURCE

Certified financial planners, financial coaches, or nonprofit credit counseling agencies can provide you with advice tailored to your unique circumstances.

Look for professionals who do not earn commissions when you agree to follow their advice using the recommended solutions.

That way, you know you’re getting unbiased guidance.

Travelers cross a corridor at the World Trade Center Transportation Hub in New York. Whether it’s a friend with hot investment advice, a relative dismissing outdated directives on how it “should” be done, or a social media influencer promoting a trendy financial product, money advice can be right. PHOTO: AP

As an added bonus, you’ll also get a solid explanation of how different financial products work, which is knowledge that can serve you for years.

“Financial matters are often complex, and I think that’s why it’s so important that people like me have education as an important part of what we do,” said Durriya Pierce, a financial services company, certified financial planner and expert in financial advice. .

A friend or family member who has achieved a similar financial goal may also have practical tips for sharing. You can rely on them as a source of emotional support while working on your own goal.

There may even be some nuggets of wisdom in obsolete advice in which previous generations relied.

The next time you have a talk about how cars cost a dime in your day, instead of making fun of you in disbelief, ask open-ended questions. How much did your grandfather pay for his first job outside of school? How much did your parents’ first home cost? This can open up a conversation about how wages, housing costs, and other money issues have changed over time, so that both can understand where someone else is coming from.

“At some point, it becomes less that they share tips and more that they share their story,” said Phuong Luong, a Massachusetts-based certified financial planner and founder of Just Wealth.

THINK HOW WEAK THE ADVICE IS FOR YOU

Money advice is like clothes. It’s designed to fit a person, but that person may not be you. Some money-making practices don’t work for everyone’s situation.

“We often ignore the context that people are going through. Financial advisors don’t bring context and it’s really harmful when you don’t,” Luong said. “It perpetuates the myth that we can do it alone and we can’t.”

She cites the 50/30/20 budget, which is often discussed, in which you apply 50 percent of your salary for “needs” (such as housing, utilities, and transportation), and 30 percent for “you want” (such as hobbies and travel). ) and 20 percent to savings and debt repayment, for example. In high-cost areas, he points out, only rent can consume half of your salary.

Bad money advice can also oversimplify a complex decision. With more people working remotely, for example, a friend may suggest that you simply move to a lower-cost city to save money. Pierce, who lives in a high-cost area in New Jersey and has no plans to leave, said this advice does not take into account the non-monetary benefits of staying, such as being close to an established community of family and friends.

BEWARE OF ADVICE THAT IS TOO GOOD TO BE TRUE

The internet and social media are full of money-related clickbaits that promise near-instant success. Influencers sell access to expensive courses that claim to make you a millionaire.

The acquaintances of the institute send you direct messages without hesitation, asking you if you want to “be your own boss” by joining a multilevel marketing program. Many of these quick enrichment schemes are a waste of time and money.

“If you require me to put money in advance, that would be a red flag for me,” Luong said.

She recommends taking a look at these offers to find out everything you can about them, including seeking feedback before spending money.

Reliable money guidance will not make empty votes on guaranteed wealth. Seek advice that suits you, but offers realistic expectations and some alternative courses of action.

“Beware of any financial advice that looks black and white,” Pierce said. “Because it’s a very gray practice.”



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