Life would be much easier if it came with a manual — although let’s face it, most of us wouldn’t get round to reading it. At the very least, when faced with big financial decisions, sometimes we just want someone to tell us what to do.
At these moments, financial advice can be invaluable, but if that’s not in your budget, you might turn to someone you consider to be a financial expert instead, such as a friend or family member or a social media influencer.
If you get help from the right place, this is a brilliant shortcut to making great decisions. Someone else may have the knowledge and understanding and have built enough experience for you to benefit from. Getting this kind of support also means you’re less likely to be baffled to a standstill.
However, this approach doesn’t always work. The people you choose may not know what’s right for you, or they may not have as much knowledge as you think. It means you need to take care when you’re following a financial influencer.
Read more: 10 finance decisions you should avoid before the autumn budget
Here are five sensible questions to ask:
1. Is your expert actually an expert?
If you’re looking for an expert on social media, you’ll find plenty of people working for regulated businesses, or as independent professionals offering really useful tips.
However, there are also plenty of others who are inexperienced, and not regulated or qualified. So start by checking whether they’re really an expert at all.
It also pays to bear in mind that being good at making content is very different from being a financial whizz. If someone is funny and clever, and has huge numbers of followers, it means they’re good at social media. It doesn’t say anything about their financial expertise. Some experts online have huge, well-deserved followings. However, so do reality stars selling payday loans.
2. Are their tips too good to be true?
It can feel like a social media influencer, operating outside the traditional financial services industry, has uncovered a hack that breaks all the rules of finances to give you a head start. They may, for example, say they’ve found a way of making huge returns without taking a big risk.
However, it’s far more likely they have misunderstood something or are deliberately misleading you. The same basic rules apply to us all — higher potential rewards always come with a higher risk of loss.
3. If you’re going to listen to family or friends, what did they base their decision on?
Someone in your life might recommend a something that worked for them, but ask yourself if they understand your needs.
They might, for example, have plenty of cash, be happy with taking risks, and not be worried about losses in the same way as someone on a more modest budget, with a more moderate approach to investment.
What’s right for them…
Read More: Should you take financial advice from social media influencers?
