How Well Do You Follow Financial Advice?
October 27, 2007
Have you ever half-followed the financial advice? What kind of results have you seen?
Health Advice
I’ve had the pleasure of living with a sinus infection for the last 5 days and have been using the doctor-prescribed antibiotics with only mixed success. The symptoms got to the point where I actually went to bed early two nights in a row, something that hasn’t happened in a year or two. I finally broke down and tried an unpleasant treatment that my physician recommended but I had been avoiding. Time will tell if this new step will help but it got me thinking about the effects of only following some of the advice we get from “financial doctors”.
Financial Advice
If you get financial advice from a book, magazine, website, or advisor and only follow some of it, are you really helping to cure your financial illness? The many areas of personal finance such as income, debt, expenses, insurance, taxes, and investments can all influence one another and you aren’t really financially healthy unless you manage every area. For example:
Start investing but don’t pay down debt.
If you’re earning 10% on your investments but paying higher rates on credit card debt you’re losing more than you’re earning.
Start an emergency fund but don’t buy insurance.
Having an emergency fund is great but without insurance an unexpected event could end up costing you far more than you have saved in your backup fund.
Working to increase income but not to reduce taxes.
You’re working so hard to earn more money but the more you make, the more taxes you pay. Taking the time to do some tax planning could help you keep more of what you worked so hard to earn.
Decisions, Decisions
Trying to keep track of every part of your financial life is difficult since there are so many things to consider and all the options can be a bit overwhelming. Make sure you don’t get bogged down and take no action since you don’t know where to start; that would be the worst thing to do. Instead choose one area, get it straight, and then move on to the next.
Getting Started
Trying to keep track of every part of your financial life is difficult since a 75% solution for each area than a 100% in one or two and no solution in the others. Once you get a plan in place for each part of your financial life you can always go back and make changes as you see fit. Don’t know where to start? Why not checkout a basic personal finance book online or from the library to get you rolling?
I like this post, this is an important issue to address. My parents are in the boat where they invest but don’t pay down debt. I don’t know why but they have more than enough to pay off their credit cards but did not do so for a while until I found out. Their excuse was that they wanted cash on hand. I made them pay them off
I think a major problem nowadays with everyone trying to make an extra buck quickly, is that people focus on making more income, but not reducing expenses. As a matter of fact it’s quite the opposite. When income increases, lifestyle inflation takes over and all of a sudden expenses increase. If you ask 10 people how to get rich, chances are they will say make more money, no one considers saving more money as a means to personal finance success.
Very nice blog, chalk me up as a new regular reader.
I run an Australian finance blog over at http://www.pineapplewatch.com, feel free to have a look over and perhaps comment
Regards,
Colin
Nice article, I like your 3 lines financial advice..
Start investing but don’t pay down debt, Start an emergency fund but don’t buy insurance, Working to increase income but not to reduce taxes..
The equation in the advice may be common, but actually getting them in pair like investment rate & card interest, is good to help explaining financial direction..
J.C. Carvill
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