Ok, so most of us didn’t learn about personal finance in school. Now what? Do we learn the hard way: by trial and error? I’m not very enthusiastic about that idea. Making mistakes with money is costly and I don’t know about you, but I don’t have an unlimited money supply to play with.
The obvious alternative: Get advice from other people. My grandmother learned everything she knows about money from her father. My friend with a looming student loan talks to her other friends with student loans. I go to my bank once a year where the cheerful but forceful lady behind the desk tells me what I should be doing with my money.
Family, friends, and finance professionals can certainly be helpful. It’s nice to get help from someone who’s been there, done that. I prefer learning from other people’s mistakes over my own! I'm not a finance expert and could use some professional guidance. But have you ever gotten bad money advice? I’ve learned to always take it with a grain of salt, no matter where it comes from.
Here are some things I try to keep in mind:
- If the person giving me advice is from a different generation, how might that affect the way they view money?
- Are they very wealthy or in a lower income bracket? Someone with a lot of money may see it as something to invest, while someone who never has much may see it as something to spend right away.
- If they are a friend or relative, how much experience do they have? Would I take advice from them on another topic?
- If my adviser is a professional, how are they paid? Do they receive commission to suggest certain investment options to me?
- If they are a bank employee, consider that they are limited to what that bank offers. They aren’t going to advise I try the savings account at the bank down the road, even if it has a better rate.
It’s important to be able to tell the good financial advice from the bad. That’s not always obvious, especially if you don’t have a lot of knowledge on the subject. How many of us know enough of the ins and outs of mortgages and credit ratings to tell good counsel from bad? I certainly don’t, but last year I made it a goal to improve my financial literacy. I realized advice would only get me so far, and might even set me back if it wasn’t right for me. So I’ve been trying to teach myself enough about personal finance to make informed decisions. I'll let you know how that's going!
Anna is an aspiring editor and writer with a background in accounting. She actually finds personal finance and the issue of financial literacy very interesting. She grew up on a hobby farm south of Ottawa and enjoys animals, reading, and the weird and wonderful world of the internet.