Do you receive proper financial advice on a regular basis? Do you source your advice from multiple outlets? Professionals? Media? Friends and family?
If you think about good financial advice the same way you would think about good medical advice, you’ll see why relying on one source of advice might be a problem. If you’re young and free of ailments, you might be perceived as having less risk and therefore not need as much medical advice as someone with more years under their belt. The same goes for financial advice: if you’re young and relatively debt free, you might not need as much financial advice as someone with multiple assets, investments, and a generally more complex, and thus more risky, financial situation.
When we sent out a survey some weeks ago about how self-employed people manage their finances, we were astounded to see how many different sources people turned to for financial advice. These sources included the obvious financial advisers, but there was an outstanding number of self-employed people who consulted internet research, friends and family, and news outlets for financial advice. Some people even told us that they get their financial advice from subreddits and other online forums. Wherever you might find your financial advice, it’s important to maintain a “balanced diet” of professional and curated information. Just like your health, your finances are integral to your life: make sure the financial advice you receive is not all coming from your crazy uncle or /r/personalfinancenz.
If you’re seeking medical advice, would you seek it out from strangers on the internet? You might get lots of interesting ideas (“do this, don’t do this, this is how I did it”) but you might also just get misdiagnosed over and over again without actually getting much actual help.
With the kind of feedback we got on our survey, it’s obvious that there’s a sharp split for self-employed people: some can afford a financial adviser to give them insights, but an overwhelming number of people either cannot afford professional advice, don’t have the time, or don’t see that kind of advice as a necessary cost for the work they do. Rather, they can get advice – for free – from people they know and from strangers on the internet.
This is a risky game to play. For one thing, the advice you get from the internet and relatives is not necessarily tailored to your own experience. Instead, this is advice that may have “worked” for those particular people. What’s more is that with the sheer amount of information (some of it perfectly viable) out there on the internet, it can be hard to get financial advice that is worthwhile, relevant, and accurate for your situation.
What Is Good Financial Advice?
Finding the right financial advice can be tough, but knowing what you need is a good place to start. That way you can know exactly where to turn for answers.
Here are our tips for thinking about what kind of financial advice you might need:
- Don’t overextend your finances, instead focus on what’s achievable. Are you looking to set up a business? Buy a house? Do you need investment insights? Just general financial advice? Knowing what you need ahead of time can help steer you in the right direction.
- Make a list of your top priorities for the next five years. What financial areas do you want to work on or continue to work on? Long-term savings, house deposit, holiday savings, emergency savings, retirement – these are all viable places to start.
- Think about how you currently manage your finances. Do you consider yourself good with money? What do you want to see change? This will help you assess your level of need.
- Analyse your risk levels. What level of risk are you comfortable with and what sort of advice are you looking for?
If your situation is such that you actually need a professional financial adviser (much like if you had a serious ailment, you’d go see a doctor rather than consult WebMD), then get in contact with a registered expert.
Advice at What Cost?
With most knowledge out there, you often get what you pay for. If you can afford them and know you need them, there are some great paid resources out there. Most financial advisers often take a commission (though some advisers charge per hour). Costs will vary based on the firm’s network and their standing in the market: the number of clients they have means their time is valuable, but this also means they might be able to connect you to a large network of resources. Always be sure to get recommendations from reliable sources and do your research before consulting a financial adviser.
If you can’t afford professional financial advice, there are also some certified (and free) resources out there that can help educate and empower you to handle your self-employed finances:
- MBIE has some great online content on how to choose the right financial adviser for you
- Read up on the potential dangers of financial advisers and know what to look for.
- Banks tend not to charge for appointments they make with their clients and can offer some great advice on how to manage your finances.
- Sorted’s free Budget Planner is a great resource for budgeting and financial insights: check out their to see where you can balance your spending and investments.
Think Twice, It’s Alright
The point here is to think about where your financial advice is coming from and review each source. Free advice can be useful, but it can also be dodgy and based on one person’s particular experience. Don’t be afraid to ask friends or family, or consult the internet, but don’t rely solely on the help of non-professionals. Like a balanced diet, a balanced array of financial advice will keep the financial headache away.