Why You Should Never Take Financial Advice From Friends

We all get advice from our friends, whether we want it or not. When it comes to financial advice from your friends, take it with caution.

The do it yourselfers

Many people are Do-It-Yourselfers when it comes to their finances. As a financial professional, I’ve seen people who are pretty good at it. I generally meet them when they come to see me for a sanity check. There’s always something I can recommend that they didn’t think of and they appreciate it. But some Do-It-Yourselfers are a mess – and the mess is compounded by the fact that they don’t know that they’re a mess. So your buddy who makes all his own financial decisions through reading (which may be giving him bad information) or his own brand of logic (which may be illogical) may be unintentionally giving you bad advice.

Friends are not created equal

Another pitfall of friendly advice is that your friend’s situation may be different from yours. So what your BFF from college is doing may be perfect for her, but doesn’t fit you. Perhaps she has more money than you, or less money that you. Maybe you have the same saved in investments, but her tax situation is much more complex than yours, which impacts everything else she does with her money. Several years ago I was proposing a tax credit to a prospective client. It was pretty complicated and at some point as he was struggling with whether or not to get involved in the credit, I told him I owned this same tax credit. That gave him lots of comfort, but I felt like it gave him a little too much comfort, so I told him that I was also wearing a red dress, but that the red dress wouldn’t look good on him. Financial advice isn’t “one size fits all”.

So take the advice of your friends with caution. Get advice from a professional who’s looking out for you – without their own agenda clouding that advice.

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About the author

Linda Y. Leitz, CFP®, EA, CDFA

Linda Y. Leitz is a fee-only Certified Financial Planner™ and has been in the financial industry since 1979. She is also enrolled to practice before the Internal Revenue Service. Before becoming a financial professional, Linda held several executive positions in the banking industry. She began her career as a bank examiner. Linda has a BBA in Business Administration from Principia College and an MBA from Southern Methodist University.
As a fee-only financial planner Linda is a member of the National Association of Personal Financial Advisors, the Financial Planning Association, the National Association of Tax Professionals and the Alliance of Cambridge Advisors. As a leader in the financial planning industry, Linda is the author of the book titled "The Ultimate Parenting Map to Money Smart Kids". She has been quoted in several national publications including the Wall Street Journal, U.S. News and World Report, and Morningstar Advisor and she has appeared on CSNBC. She also works as a volunteer instructor to new financial advisors with the Alliance of Cambridge Advisors.

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  • Nice post! Fantastic!!! Bookmarked this web page that has this striking guidance. Will arrive back to see if there are any updates. You, the author, are a master. Many thanks.

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