People still turn to friends and family for financial advice all the time.
But, generally speaking, it’s a terrible idea for a few different reasons.
One is that your family and friends are unlikely to know the full details of your financial situation, and without the complete picture, it’s super easy for their tips to be misguided or even harmful, or focused on all the wrong things.
A second, related reason, is that their advice is almost always going to be autobiographical. That is, based on their personal experience which may not resemble yours at all. The real estate market is different today than it was thirty years ago. So are the investment options available. And the tax laws. And on and on like that. Things change, yet people’s knowledge often remains stuck in the past.
A third reason is that even if the person in question has been successful financially, that might not have anything at all to do with making good financial decisions or investing wisely.
Luck plays a huge role in individual outcomes. Lots of people do well by finding themselves in the right places at the right times. With jobs in sectors that happened to take off, or as the recipients of large inheritances, or with homes in places where real estate prices skyrocketed over the past twenty years.
Or maybe they just had a high-paying job, a good pension, and saved a bunch along the way, but they still may have not taken advantage of tax-advantaged accounts, regularly underperformed the market with their investments, kept a bank account with high fees and a near-zero interest rate, and never got properly insured but just happened to stay healthy.
Either way, just because someone has money doesn’t mean they know anything or are a good person to turn to for reliable financial advice.
Even worse, if their advice leads to a bad outcome—low returns, a total loss of capital, a huge tax bill, or whatever else—it can put a ton of strain and stress on your relationship.
At Tallkirk Financial Group, we do believe that talking about money is a good thing. It shouldn’t be taboo like it is today. And if you’re talking about things like comparing your mortgage rate or interest rate on your savings account, that’s great and totally fine. It’s good to get different perspectives and talking about money can help you set some benchmarks and get a better sense of how you’re doing.
But financial professionals exist for a reason. Talking to your friend about the weird pain in your side is no substitute for going to a doctor.
The same is true of financial advice. Relying on friends and family is dangerous, and in the long run, is likely to be far more expensive than you think.