Personal finance is like a snowflake, from far away each situation looks relatively the same; however, a closer inspection reveals that each personal financial situation is unique. And while personal finance applies to everyone, not all financial advice is applicable to your particular financial situation. It is important to remember that your financial situation is unique and advice to that effect should be approached with a selective mindset.
Financial advice is everywhere, television, magazines, the Internet, even friends and family can expresses their opinions and ideas on personal finance. The noise from all the different sources can be deafening. The more concerning point however is that many of these sources can be wrong in both principle and practice. There are websites and articles that defend placing your entire retirement savings into an annuity and others that encourage you to place your savings into risky stocks. The basic principles of personal finance dictates that these strategies are not for everyone and the advice they offer should be filtered carefully.
How do you “filter” through the noise? The best place to start is your own personal income statement. Never made one? That is ok. Simply take a piece of paper and on one side put all your income sources – on the other side place your expenditures. Then take your income minus your expenditures. What is your net result? Hopefully it is positive. Whether the result is positive or negative you are studying your personal financial situation to see what you need.
What did you discover when you studied your income statement? Is your net result positive? Are you maximizing your retirement contributions? Are your credit card payments taking over your income? Whatever the result is now you now have part of your filter. If your credit cards are taking over your income it may be best to filter out advice on stock investments and focus on debt reduction advice. If you are maximizing your retirement contributions, it may be best to filter out debt reduction advice and focus on investment costs and portfolio construction.
Once you have decided on a filter and focus now you have to find who and what to trust. There are Google ads designed to direct traffic to certain sites and large print articles selling advice. It is best to avoid taking advice from advertisements. The idea is that you choose only a few reputable sources that align with your personal finance needs and goals. Some choose particular magazines or newspapers. However, websites should be chosen with an extra level of scrutiny because anyone can place anything on the Internet. Additionally, be cautious with “company” websites and publications. While financial institutions can publish some educational information, in the end most are designed to attract your business and put their company in the best light, even when it may not be the best for you.
It is important to note that this filter exercise is not a one-time evaluation. Each year during your personal financial review you should study your income statement and see if your situation fits the sources you are using. Always be on the look out for new sources, but keep in mind your objectives in needing or using your advice sources. Understand your financial needs, filter your sources, and review your finances on an annual basis.
Jonathon Rowles Captain, USMC (Ret.)
Disclaimer: (have to do it) – This blog should not be considered financial, investment, legal or tax advice. Consult your licensed financial professional, tax advisor or legal counsel. This blog is for educational purposes only.