Common investing questions: where do you get financial advice?

Common investing questions: where do you get financial advice?

Photo by Gabrielle Henderson on Unsplash

Financial advice and education is some of the most important education you can get in your life. But not all sources of financial education are created equal. Personal experiences and things you see may not really be the best practices that you should implement for your own finances. So lets look at 3 of the most common sources of personal finance education and analyze their strengths and weaknesses.

1. Parents

Pros: Can have a better understanding of the emotional factors of personal finance, provides a easy to access example, can help challenge you

Cons: If they are not implementing best practices it could be teaching you bad habits, communication challenges

Parents tend to be the first source of our personal finance education. They teach us how money and saving/spending works. They can be excellent teachers for personal finance when they themselves have a strong financial education. Part of why they can be the best teachers is that they have a strong understanding of their own children as well as the subject they are teaching. Many people under-rate the importance of emotions when it comes to personal finance, but being able to emotionally regulate yourself and understand your triggers is one of the most important aspects. Consider you have a tough week, work is stressful and life at home is challenging. To cope with this you go out for dinner and lunch more often; as you do this the groceries that you’ve bought start to go bad. The following week you assume you still have food because you bought groceries and by this time they’ve gone bad, leading you to go out to buy food from restaurants until you can buy new groceries. If we look at this example we can see that what was supposed to happen a few times at most, doubled in the amount of money spent. At the heart of this your emotions drove how you spent. Consider, if your parents had shared with you a toolkit to hep understand how to find healthy ways to deal with stress you could have found lower cost ways to manage your stress. In this way parents can serve as helpful role models, demonstrating what you should do. Parents also hold the responsibility of raising and guiding their own children so they can challenge and step in to raise concern when their kids are doing something wrong. However, not everyone is in a position to accept such critiques and not every parent knows how to deliver this. When it is done incorrectly it can do more harm than good. But when done correctly can catch mistakes and pitfalls before they happen.

2. Personal finance books

Pros: can have very useful information and templates, tailored language for ,certain demographics

Cons: Spend money to save money

Personal finance books are a very useful source of education. More often than not, the authors tend to be people who are successful in their own personal finances or have advanced education on the topic. Another helpful aspect of personal finance books is that they are tailored for different populations and level of education. So you can find information that is tailored to where you are. Then as you grow your knowledge you may learn about more advanced subjects. The one drawback to this is that you will likely be spending money to buy the books to try to save money. This can be avoided by using resources such as a library or borrowing from a friend, but it isn’t always reliable.

3. Friends

Pros: Can say things that parents say, can empathize with life situations if they are close to the same age or had a similar experience, can share what they know whether they know if its right or wrong

Cons: Have things they can’t say, may not always be the most informed

Friends can be a source of financial information and education. The main problem with friends being your main source of education is that they themselves may not be the best informed or educated people. If they are not than it may do more harm than good to get education from them. There are also many things that friends can empathize with you on especially if they are close in age or have shared experiences. This can provide a more grounded perspective. On the otherhand there are many things that friends can’t say that a parent or professional can which can really short change your ability to know what needs to change.

Your financial sources of information are extremely important because they will guide much of the actions that you will take and have a profound influence over the finances that will dictate many aspects of your life.