Financial Advice from Friends and Family

Posted by Mike Smith :: December 20, 2007 @ 5:42 am

On our journey to a better financial place, there are many roadblocks and opportunities for accelerated progress. Those around you will have a significant influence on your propensity for success.

Your friends and family can have a significant influence on your financial successes and failures. The reason is that everyone needs help with their finances from time to time. Whether it’s to actually ask for advice, or simply to bounce an idea off of someone, the people around you are the most likely candidates for such discussions. Also, difficult financial decisions will require a support group to help you through the potentially difficult times that result.

In most cases where we want to improve ourselves, we look for professional help or expert advice. If you were training for an upcoming road race, you’d probably spend the most time with friends who had completed such an event previously. Perhaps because discussing money is a more private affair, it is generally only done with the closest of friends and family. With such a limited group of potential discussion candidates, you are much less likely to find someone who is professionally qualified to dispense such advice.

Would you be better off discussing your investment options with your best friends, if they themselves were not successful investors, or with a more distant acquaintance with more experience? While you may be able to talk more openly with close friends, the value of their contributions is much less than what a narrower discussion with a more qualified person would yield. Someone with knowledge of new investment methods, such as P2P loan portfolios on Lending Club, may be able to inform you about low risk options that most people are unaware of.

We all have friends and family members who have varying degrees of financial experience. It’s important to keep the financial situation of these people in mind when we solicit their advice. The fact that someone is a good friend doesn’t necessarily mean that we should listen to his or her financial advice. All discussions of personal finance have the ability to increase our knowledge of the subject, but some will clearly be more worthy of our consideration than others.