Advice and opinions are like belly buttons, everybody’s got one.
What’s more, some believe that their (often unsolicited) input is as valid and helpful as that of an expert, thanks to the Dunning–Kruger effect.
Getting an earful of eyebrow-raising relationship advice from your roommate might be harmless.
Being offered an outdated career tip (“invest in high quality resume paper”) by a parent probably leads to nothing more than a suppressed eye roll.
But when it comes to financial advice, you got to make sure that you’re getting it from someone who actually knows what they’re talking about and walks the walk.
And that someone is not the same for everyone. For example, Warren Buffet is the epitome of financial success, but he is not the ideal person to counsel you if your chief concern is racking up air miles. Jeff Bezos sure knows a thing or two about scaling up a global business, but he’d be the last person you go to for house hacking tips.
The person that’s best suited to give you money pointers depends on where you are in your wealth building journey — the information needs of a new grad opening their first savings account are not the same as those of someone who has already gotten a taste of the freedom that financial security provides.
Here are some situations you might find yourself in, and the type of people whose money advice you should take seriously in each case.
Situation 1: You’re Young and Starting Out
Maybe you’re still in college, dreaming up a bright future. Maybe you’ve been at your first job for a year or two, exploring new possibilities.
In any case, congratulations. The desire to learn how money works is an important first step, and you’re already ahead of the pack.
At this stage, the sky’s the limit. A solid piece of advice could completely change your mindset, propel you forward and impact your life in ways that you never imagine possible.
The problem is, finding the right mentor, especially online, isn’t so straight-forward. There are way too many “financial gurus” (often under the guise of “forex traders”, “options traders”, “day traders”, “eCommerce kings”) lurking on the Internet preying on impressionable young people with clickbait videos (“How to Turn $100 Into $1,000,000 in a Year”) and manipulative sales pitches that promise everything for nothing.
Their end goal is almost always to sell you an expensive course that only contains content that’s freely available elsewhere on the web, followed by endless upselling (“exclusive” conferences, “special” workshops, one-on-one coaching, etc).
At best, you spend a couple hundred bucks on basic knowledge. At worse, you could part ways with tens of thousands of dollars and be forced to play financial catch-up for years to come.
All things considered, you’re better off getting advice from a trusted source, like an aunt or uncle that has done well for themself or a godparent who has retired early. This must be someone that you’ve known for a long time — and you have first-hand proof of their success — not a random person on TikTok claiming to be rich without ever backing up their claims with actual evidence.
If you don’t know anyone like that, no worries. Explore the vast expanse of free personal finance resources at your disposal — books, podcasts, blogs, reddit and financial literacy courses from accredited universities (like this one). Just be sure to keep your BS detector on and cranked up to the max.
If something seems too good to be true, it often is.
Situation 2: You’re Trying to Get Out of Debt
Debt is nothing to feel embarrass about. It happens to the best of us.
If you have debts, don’t panic. Draw on your mental fortitude, confront the debt load, and seek support however you can.
Your best source of financial wisdom comes from someone who has recently gotten out of a similar amount of debt. They would be the most sympathetic to your plight (not judge you for having made a couple of mistakes), and offer tips that are actually applicable (not pie-in-the-sky solutions).
This could be a friend, a family member, or even a blogger/Instagram influencer who shares their debt free journey with compassion and honesty.
Digging yourself out of debt is an arduous and emotionally draining process. So that added layer of understanding and support is crucial.
Digging yourself out of debt is an arduous and emotionally draining process. So be kind to yourself.
Simultaneously, I would avoid talking about money with anyone who is much further ahead on their financial journey, until you get out of debt. The last thing you need when you’re in the red is to compare yourself to others, feel discouraged and lose momentum.
Situation 3: You’re Trying to Build Wealth
You make decent money. You’re current on your bills. You’re debt free (for the most part). You’ve been piling money into retirement accounts and practicing healthy money habits.
You’re ready to start adding digits to your net worth.
This is an exciting place to be in — with each passing day, you’re becoming a little richer.
Still, you need guidance to accelerate the process of going from $10,000 to $100,000 to $1,000,000 and beyond.
Who should be giving you advice? Someone who enjoys similar privileges as you (or the lack thereof), had the same financial starting point, and made steady progress over the years. Their net worth is 3 to 5 times yours.
If you don’t yet know someone who fits the bill, there’s nothing wrong with expanding your social circle by making new connections. Professional networking events, money related meetups, and even Facebook groups are all great places to meet financially successful folks. Just make sure to bring something to the table in every relationship you build.
Want to meet financially successful and like-minded folks? Try personal finance meetups, networking events, and even Facebook groups.
If all else fails, you can always count on personal finance sites (like the one you’re on) to fill the knowledge gap. More and more personal finance bloggers are coming clean about their net worths, income streams, and expenses. One of them is bound to be a good fit.
You might be thinking, why can’t I just ask the richest person I know for advice?
Well, it depends. If the richest person you know happens to be a long-time accredited investor (i.e. they have at least $1,000,000 of investable assets, not counting their primary residence), they have access to investment opportunities (commercial real estate, venture capital, etc) that the rest of us don’t, not to mention more resources and reputational capital. That means their best advice might not be immediately useful to you.
More importantly, they might’ve forgotten what it is like to shop around for the cheapest phone plan, cut trips to Starbucks and Maui in order to maintain a high savings rate, and deal with the lasting effects of the scarcity mindset. And ideally, you’d want the person giving you advice to be able to relate to the struggles you’re currently facing.
Ideally, the person giving you financial advice should be able to relate to the struggles you’re currently facing.
Forward and Onward
Finding a reliable financial mentor or role model is important in more ways than one — they can be a pivotal source of financial knowledge, wisdom and motivation. If you find the right one, consider yourself very lucky.
Once you’ve achieved your goal, whether that’s getting out of debt or joining the double comma club, make an effort to pay it forward and nudge others into the right financial direction, so they too can have a chance at success.