6 Questions To Ask Before You Heed That Financial Advice

A financial advice is something that you can really benefit from. However, even the most sincere advice from the best experts should not be followed blindly. You should always trust your judgment before you act on any advice.

It is true that there is a specific money advice for every generation. They all have various backgrounds and experiences growing up. In a way, this will affect how each of them will accept or filter the advice that they will receive about their finances. For instance, you cannot force a Millennial to get multiple credit cards when they have a lot of student loans to deal with. Not only that, they witnessed how these cards destroyed the finances of their parents and grandparents. You can understand why they will turn their back on anyone saying that these cards will help them improve their finances through their credit score. Each of the generations would react differently to any advice given to them.

But regardless of the generation that you belong to, it is important to realize the value of approaching a financial adviser – especially if you are confused about your money. According to an article published on USNews.com, people overlook the importance of having a financial planner – or adviser. This was the observation of Ian Kutner, one of the first certified financial planners in the country. With more than 40 years of experience, he said that consumers misunderstand the value of a financial planner when it comes to improving their personal finances.

6 questions that will validate a financial suggestion

If you doubt the value of a financial expert, then you need to read this: a lot of the financially successful people in the country have approached a professional to help them. An article published on Forbes.com discussed the results of their interview with 19 of the most influential finance and wealth experts. 60% of these people revealed that they rely on the financial advice of professionals when they are making investment decisions. If the successful people are doing it, then we should probably do the same.

While you are encouraged to listen to the financial advice of experts when it is needed, you still have to exert caution before you follow it. When you receive an advice – regardless of who gave it to you, make sure you ask the following questions before you commit to anything.

Is this advice clear or confusing?

Before you follow anything, make sure that you fully understand what it is all about. You have to know what the advice will ask you to do and what its effects will be on your finances. If there is anything that is not clear to you, then you need to stop and slow things down. Whoever is giving you the advice should slow down to explain it to you. If they cannot explain it to you in a way that you can understand, then do not heed the financial advice.

Will the person giving this advice gain something if I agree?

If the person providing you with the advice is being vague about their explanation, you need to ask yourself this question. Sometimes, if the adviser’s only intention is their own personal gain, they will say anything just to get you to agree to their advice. If they are rushing to explain, they cannot give you a straight answer, and it is obvious that they have something to gain, then you know that the financial advice is not sincere. If the advice is not sincere, then you need to doubt if it will really benefit your finances.

Does it seem like this is my only option?

This question is also in relation to how the financial advice is being delivered to you. If it is being presented like it is your only option, but you know that you should have other choices, then you should also question the sincerity of the advice.

Will this advice bring be closer to my financial goals?

If you want to be a smart money manager, you need to start by setting financial goals. In case you do not have one, it is important that you set one. It will help give you direction when it comes to your financial decisions. That being said, it will also help you understand if a particular financial advice will be beneficial to you or not. If that advice will bring you closer to your goals, then you should consider following it. If not, then ignore it.

What are the short-term and long-term effects of this advice?

When analyzing the benefits of the advice, it might be a good idea to consider both the short and long-term effects. You might think that it will have a bad effect on the short-term but once you consider the long-term, things might be beneficial after all. For instance, your financial goal is to improve your credit score. The advice given to you is to use your credit card. Now borrowing money could lower your credit score because you will have a high balance to limit ratio. That means for the short-term effect, you have something negative. But as you pay off that credit card balance diligently, you can increase your score. That means the short-term may be ugly, but the long-term will benefit your finances.

Does it sound too good to be true?

Finally, you need to ask yourself if the financial advice is too good to be true. If it is, then you may be right. It might not be true. Remember that an advice that seems too good will always have a catch. Make sure you do not let your desperation cloud your judgment. If you are in too deep in your debt and someone comes along offering a fast relief, most of the time, there is a catch in that. For instance, debt settlement can help you reduce the amount that you will pay towards your debts but it is usually at the cost of your credit score.

All of these questions will help you determine if an advice is really good for you or not. In case you have doubts, ask these so you can analyze the sincerity and the effectiveness of the financial advice that is being given to you.

5 popular money advice that does not always work

According to the 2015 Financial Literacy Survey published on NFCC.org, three out of four respondents say that they agree that they will benefit from the advice of a professional. In fact, one out of four says that they “strongly agree” that it is beneficial to listen to a financial expert. While this may be true, there are certain advice that you need to consider if they will do you good or not. Most of these advice actually makes sense – but on a case to case basis.

• Credit cards are bad. Let us clarify one thing: credit cards are not bad – it is the way we use them that makes it bad. If you know how to use it properly, you can actually benefit from it. But if not, it can damage your finances really bad.
• Buying a house will improve your finances. This is true – at some point. A house can increase your net worth – as long as its value stays bigger than the amount that you paid for it. If you buy a house while the prices are skyrocketing, then it might not be a good investment afterall. Make sure you know the right time to buy so it can really benefit your personal wealth.
• Get a life insurance. This makes sense right? The only way to secure your financial standing is to get an insurance. But the type of insurance that you will get should depend on your status in life. Remember that a life insurance will benefit those that you will leave behind – or your beneficiaries. If you are single, it does not make sense to get a life insurance. A health insurance may be more practical.
• Be frugal with your entertainment expenses. This is true – but do not deprive yourself. Make sure that you allot in your budget some money for your entertainment. That will make you happy and motivated. If you deprive yourself, you might end up like those who go on a crash diet only to break at the end and eat a lot. This can be catastrophic when applied to your finances.
• Use your home equity to get out of debt. Finally, you need to think twice before using the equity of your home to help you pay off your debts. Unless you have a concrete plan to pay back the home equity loan, do not push through with it. You might end up compromising your home if you cannot pay it back.

Listening to a financial advice is a good idea but following it blindly is not. Make sure that you know what you are getting yourself into before you really commit to an advice.