How A Little Knowledge Can Break Your Financial Bank

Physical and financial health and wellness are two of the top concerns of many Americans, and in many cases linked, through a variety of benefit packages, and investment options. Television, print media and the internet have become global classrooms with no shortage of students looking for the fast and easy way to become armchair experts in these two areas of interest. Every month an estimated eighty million people visit the most popular medical website, WebMD, and a great many of them self-diagnose based on symptoms they read about and map out sometimes life-threatening treatment regimens. In other cases, by the time the feeling of impending doom drives them to see their physician, their conditions may be too advanced to do much more than palliative care.

This analogy can also be applied to the millions and millions of people who tune in to shows hosted by two very popular financial gurus who bill themselves as financial planners and the like, who claim they can revolutionize the way you handle your financial health. They don’t have credentials, just the ability to provide a seemingly never-ending litany of financially related information; just enough so that it makes their followers believe that they themselves can manage complex decisions about financial products and their financial health. But before you embark on that DIY plan to manage your money, here are a few things you might want to consider.

The old adage about a little knowledge being a dangerous thing was never more relevant when it comes to mapping out a successful lifelong financial plan. Gleaning bits of information from the internet or social media does not an expert make. What it can and oftentimes does do is create the terribly flawed notion of why pay someone to do something you think you can do yourself. To put this in perspective, imagine taking a sewing course in Home Economics when you were thirteen and then after having never sewn since, twenty or thirty years later you start watching a sewing show and think you can make a wedding gown for a relative. You buy a pattern (never noticing the level of expertise required), fabric, thread and all, and dust off that old sewing machine. You check out the guide sheet and even though there are parts you don’t understand, you go forward, pinning and cutting. You decide to skip marking the darts or notches and remove the pattern pieces. You know you are in over your head, so you decide to revisit the sewing show where it all looks so easy. No matter what you try nothing works and you end with a mess on your hands, lots of money wasted and you still must come up with a dress that you can’t pay for.

When it comes to money management, financial literacy happens with baby steps-learning the language along with an introduction to various financial products. The financial gurus on television or the internet have more than a basic understanding of the products and their applicability, but their information is flawed and falls short in many respects. First, there are no “experts” when it comes to financial planning, but rather resolute individuals who although trained and knowledgeable on money management, continue to avail themselves of the most up to date information to teach, clarify and help you make wise financial decisions. There is a very long laundry list of financial sub-topics that can easily boggle the mind and without professional guidance can spell disaster for a do-it yourselfer,

The onscreen gurus speak in generalities. They have no idea who you are or what your financial picture looks like. A certified financial planner meets with you and learns all the intimate details of your financial life and lifestyle. The woman on the sewing show has no idea what your skill level is. She presents information with the assumption that you know the basics and beyond, not with the assumption that you are going to watch the show a few times and open a dress shop. The on-screen financial guru is more interested in promoting a persona and/or a product, than providing you with enough information to formulate questions about your personal financial picture because once again they do not know what your situation is.

Consider this scenario:  You watch the show a few times, listen intently, take copious notes on stock market investing, and then make side notes to yourself to find a way to do this by yourself. After all, now you have the introduction and a little extra info. The gurus oftentimes don’t spend a lot of time discussing the pitfalls on what could be a very risky undertaking, but you are thinking how hard can it be?   At this point your real financial picture has been blurred by the “What if I won the lottery” thinking. Mentally you have already decided how your life is going to change with the windfall from your investment, never mind the fact that your income could be rather unstable (independent contractor, varying work schedule, or unpaid time off)  Life is a gamble so by jumping right in and managing your own financial planning you think it would give you an opportunity to make enough money to address the debt you have and boost that unstable income.  You could buy more food, clothes, a car etc.

Now consider this outcome:  You have Googled a way to become a day trader (a term you are totally unfamiliar but heard about in one of the shows. It really sounds doable, so you go about collecting every spare dime you have including your sock money and find a way to enter the marketplace. Your first effort is less than you expected but you didn’t lose anything, so you decide to try again. Now the cycle has begun. It doesn’t take long for reality to set in and for you to realize the little change you have on hand isn’t nearly enough for you to make some real money, so you revisit online guru who advises cutting out all the little feel-good things like the morning gourmet coffee, lunches and dining out. You consider buying a couple of their books which have been mentioned several times on their shows. The books arrive, and they are like that pattern guide sheet-virtually useless, because they are above your level of comprehension. But you remain undeterred and try your hand at it again. In essence you are trying to get a degree without ever attending college, and in the process, you have managed to lose what little money you had, and maybe even some you didn’t have. Unlike the do it yourself dress that didn’t turn out right but could be replaced, disastrous outcomes from do-it-yourself financial decisions can have far reaching ripple effects that may be difficult, if not impossible to bounce back from.

Complex programs require professional assistance and to ensure a good outcome a little humility can go a long way towards preventing loss. In the case of the “I can do this-no problem wannabe” seamstress, consulting an experienced customer service representative at the fabric store for guidance could have saved time, money, and angst. The money for that project could have then been used towards buying a dress which most likely would have cut the expense by half.

In the case of the do-it-yourself stock investor, failure to plan spells disaster for any type of financial program. The Internet has become a global classroom filled with a plethora of information, hints, tips and the like but in no way should it replace sitting down with a professional financial planner and creating a comprehensive financial plan that includes goals, objectives and a complete analysis based on your current financial situation. Healthcare benefits, retirement, insurance, estate planning is all a part of mapping out a strategy for your particular needs. Taking this step will go a long way towards keeping you off financial life-support and allow you to enjoy seeing the bride in her lovely gifted dress.

©Marsha Walker Eastwood

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