If you find yourself in a financial bind, you might be anxious to seek advice for how to manage your money. However, it’s important to be careful about where you get your advice. Don’t let desperation lead you down the wrong path. Bad advice could cause you to make a financial decision that puts you in a worse situation. Here are seven people you should never take financial advice from.
1. Your broke friends
Your friends might mean well, but if they never seem to have money, do you really want to take advice from them? Your best bet is to get advice from a financial professional. Steer clear of taking advice from anyone who is in worse financial shape than you are. The only lessons you should take away from them are what not to do with your money.
William S. Matthews, author of Everything I Needed to Know About Money I Learned from My Broke A$$ Friends, said learning from other people’s money mistakes can help you stay on course with your finances. “After countless discussions with friends, I was amazed and saddened by the money decisions many were making. The majority were living paycheck-to-paycheck,” Matthews told The Cheat Sheet. “Money management is about choice — choosing how to spend and save your money. Often, people’s material needs meet or exceed their income. Don’t shackle yourself with golden handcuffs (a luxury car, designer labels, and enormous debt).”
2. Financial ‘experts’ without any type of certification
Some people claiming to be financial experts have good advice. However, you should be leery of taking advice from anyone who is not certified or who hasn’t had any formal training. Books and seminars are not enough when it comes to giving solid money advice.
If you’re looking for advice on developing a comprehensive financial plan, you’ll want to start by seeking the services of a certified financial planner. The Certified Financial Planner Board of Standards has an online directory of certified planners. And if you’re in need of credit advice and help with debt management, a certified credit counselor can help steer you in the right direction. Check out the National Foundation for Credit Counseling website for more information on how to find a counselor.
3. Financial professionals with a bad reputation
While certification is important, it’s also wise to make sure whomever you hire is in good standing. Barbara A. Friedberg, a former investment portfolio manager, said it’s important not to be blinded by fancy titles. “Don’t be swayed by pedigree. The adviser garners total trust because of their impressive educational background. There are unscrupulous advisors with degrees from prestigious universities. There may also be scammers in your church, alumni organization, or neighborhood group,” Friedberg told Investopedia.
Do your research. For example, if you plan to hire a broker, you can check for more information on the Financial Industry Regulatory Authority’s BrokerCheck website. This site will tell you whether a broker or brokerage firm is registered, what type of information was given to regulators, the broker’s experience, and what the broker is qualified to do.
4. Certain family members
You know who they are. There are certain members of your family who think they know everything, but they’re just good at sounding like they do. There’s a big difference between sounding smart and actually knowing what you’re talking about. Stay away from know-it-all family members who might steer you in the wrong direction.
Be very cautious when members of your family try to give you investment advice. A survey by the Financial Industry Regulatory Authority found 70% of victims of investment fraud purchased an investment because it was recommended by a friend or relative.
5. Random people on social media
Taking advice from people on social media is usually not such a good idea, especially when it comes to personal finance. Surprisingly — or maybe not so surprisingly — millennials are most likely to take advice from people on social media platforms.
A survey from the American Institute of CPAs and the Ad Council revealed three-quarters of 25- to-34-year-olds are more likely to seek financial advice from peers and social media than from professionals. This advice doesn’t seem to be helping much. Among the survey respondents, 28% said a bill collector has contacted them in the past 12 months.
6. Your co-workers
Unless you work in the financial industry, you don’t want to take money advice from co-workers. You might be comfortable with the people you work with, but that doesn’t mean you know everything about their financial situation. They could be in worse financial shape than you. No matter how confident a co-worker seems, don’t follow the advice unless there are legitimate financial credentials that can back it up.
7. Your neighbors
Just like with your co-workers, your neighbor is unlikely to offer sound financial advice unless he or she is a financial professional. Big homes, fancy cars, and the latest clothes don’t necessarily mean your neighbors are doing well financially. They could be living a borrowed lifestyle by charging most of their purchases. Don’t let money envy cause you to blindly take advice from neighbors who could be faking the good life.