I’m the type of person that has to research everything before I make a decision. That includes anything to do with finance. Even if my wife is telling me something I’ll have to look it up for myself to figure out what I think from the information that I find. It drives her crazy. It’s not that I don’t trust her, but rather that I have this habit of always checking everything out myself before making a decision.
Thankfully, for the most part this type of behavior is ok with most things. This is especially true when it comes to finance. Some people are not like that though. They’ll get advice from someone somewhere and take it as good advice without diving deeper into it. Sometimes that’s ok, but other times it can be downright dangerous, and especially so when it has to do with your money. Here are the top 3 red flags that you might be getting bad financial advice.
1- Did you ask for the advice or was it just given to you?
If you’re asking for advice then it’s one thing, but if someone is finding you to give you unsolicited advice then there should be some red flags going off in your head. The problem is that people don’t always think about money advice in that sense. Usually people are eager to hear about a possible solution to their money problem. It doesn’t matter who it’s coming from because it’s free information and who doesn’t want free?
Now, if you’re at a gathering and you happen to get into a conversation about something to do with money then you shouldn’t automatically think that they’re out to get you. They very well might be giving you the best advice possible. It’s also possible though that they’re giving you wrong advice and they don’t even know it. It would be best if you did your own research yourself later on to figure out whether or not the advice was any good.
When it comes to other situations, like maybe an unsolicited email or phone call. Or possible something that you see on tv. Then that’s just random unsolicited advice, and they are only doing it for one reason. They are trying to gain from giving you that advice in some way, shape or form. It might be a scammer trying to send you phishing emails, or it might be a con artist trying to steal your identity. These might be extreme cases, but they do happen and you should always be on your best guard when your money is involved.
Just go by the rule that if someone is giving you financial advice then it’s likely because there’s something in it for them. Otherwise, why are they doing it? It’s better to be paranoid than to being scammed out of your money. Even this post that I’m writing right now that is giving you advice on money is being written so that I can hopefully benefit from it in some way.
Maybe you’ll click on one of my ads or maybe you’ll purchase something from my site that I may have for sale. Although I do want to teach you the best way to stock your money I also want you to be very aware of where you’re getting that money advice. Only YOU will be looking out for your best interests.
2- Did they tell you what’s in it for them?
I just talked about how I’m writing this post in hopes that you’ll find my site and read some of my stuff, and then in turn you might click on some of my ads on my site so that I will get paid. If someone is giving you financial advice and they’re not letting you know what’s in it for them then you should see a bunch of red flags up from this behavior. People that give financial advice almost always doing it because they will benefit from you in some way. To keep it simple, just assume that it’s always the case. It might sound a bit harsh, but don’t trust a soul. And ask as many questions as possible.
A great way to evaluate the character of financial adviser you’re thinking about using for your finances is to ask them how they’re getting paid. A good and honest financial adviser will be more than happy to share this information with you so that it’s clear. If you come across one that seems a bit hesitant to fill you in on this information then I suggest you find someone else. A good financial adviser would be ready for a question like this from a potential client, and shouldn’t feel ashamed to let you know how they’re getting paid for their services.
3- Do you understand the financial advice?
Financial advice can seem confusing some of the time. For some people it can seem almost too confusing where you feel that there is no way you’re ever going to figure out what something means or how something works. You shouldn’t feel that way. Although some parts of finance can be confusing a person that’s looking for your best interests will help you understand the advice their giving you.
As I said before, you should always do your own research before making a financial decision, and part of that research includes asking the right questions. When you’re getting financial advice from someone you should ask them to help you with anything that is difficult for you to understand. If they’re looking out for your best interest then they’ll explain it to you.
You should feel confident enough that you know what is going on with your money. To be honest, there’s very little in finance that is at all “confusing” per se. Some things might be harder to grasp, but a solid financial plan is pretty straight forward. There are no secrets really. There are no magic solutions. If the person giving you the advice really wants you to benefit then they also really want you to understand the advice that they’re giving you because it’s sincerely good advice. If you don’t get it, just keep asking questions until you do. If they can’t explain it to you then find someone else that can.