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We will discuss sources of both bad and good money advice.
Unfortunately, bad financial advice is far more prevalent than good financial advice.
Although some bad advice comes from well-meaning people, others come from those who are simply trying to take advantage of you.
Some examples of Bad Money Advice:
Get rich quick
This stock is guaranteed to go up
This investment has no risk
You just need to pay a fee to learn about this special money-making system.
You can make passive income
We have secret information that no one else has access to
You can make great money by being a secret shopper, completing surveys, or stuffing envelopes
Purchasing an annuity or whole/permanent life insurance policy (1)
The U.S. economy / monetary system is going to crash, and you must move all your money into: Gold / Coins / Crypto / Beanie Babies / etc.
You can make money in the stock market by day trading or with options
A banker, life insurance agent, or stockbroker stating they are a financial advisor and can help you invest your savings or retirement funds (2)
Most financial advice from friends or family
Almost all financial advice you find on the internet, the radio, or especially on social media channels
Good financial advice is usually neither exciting nor complicated. In fact, the advice that works best is often simple, practical, and repeatable. It focuses on everyday habits rather than quick fixes or get-rich-quick ideas.
Some examples of Good Money Advice:
Live on less than you make, even if the difference is small
Create a budget and use it to guide your spending
Build an emergency fund to handle unexpected expenses
Automate your savings by having a portion of every paycheck directly deposited into a separate savings or investment account.
Avoid unnecessary debt and use credit wisely but sparingly.
Invest simply and consistently. Even small amounts add up over time
Set short-, medium-, and long-term goals and make a plan to reach them
Use insurance to protect yourself from significant financial risks.
Continually look for new opportunities to increase your income or ways to reduce your expenses further.
Invest in yourself through education, skills, and knowledge.
Consider advice from licensed Accountants (CPAs) and Certified Financial Planners (CFPs), as well as those that are federally registered fiduciaries.
Delayed Gratification:
Research shows that delayed gratification - waiting instead of spending immediately - is strongly associated with better saving habits, lower debt, and financial success.
Small Choices Add-Up:
Small choices can have a profound impact on your financial stability, especially when made repeatedly and consistently over the long term.
Bad money advice is much more common than good advice.
Good money advice is usually not exciting or complicated.