Posted by Mike Smith :: March 9, 2009 @ 9:00 amAll of the big name financial gurus have their loyal followers. If you were to look at those who believe most reverently in a particular advisor’s philosophies, you’d see a trend emerge. Those readers who fit the author’s assumptions and model criteria most closely will likely have success with that particular author’s method. That means that the best source for financial advice is from someone who is most closely addressing your needs, concerns, and situation.
Take Dave Ramsey, for example. There’s been a huge buzz surrounding him in the past few years as his “Debt Snowball” approach sweeps through the personal finance community. With the level of debt in our country, it’s no surprise that an advisor with a practical debt reduction strategy is finding such success. I have nothing against Dave Ramsey or the advice he’s giving, but I also haven’t taken the time to investigate his debt reduction methods for the simple reason that I have no outstanding debt other than my mortgage. Even my mortgage debt is quickly being paid down. So the best debt reduction advice in the world isn’t going to help me, since it simply doesn’t apply to my situation.
One of the marvelous features of the blogosphere is that so many niche topics can be covered. As noted in The Long Tail, it isn’t that these topics are uninteresting or lacking in demand, just that coverage isn’t viable through traditional media. The low cost and diverse nature of blogs has changed the paradigm. Even within the realm of personal finance, thousands of niches have emerged. From coverage of P2P lending to budgeting for stay at home moms, alternative income streams to complex tax matters, and of course the Debt Snowball philosophy, there are blogs dedicated to these topics and many more.
I’m not suggesting that advice from blogs is better than that found through traditional media or a face-to-face meeting with a financial advisor. But even average advice from a community dedicated to your particular situation or interest is probably better than great advice from a trusted and reviewed source that doesn’t apply. As I said in The One Personal Finance Book You Need to Read, unless you’ve found the advisor that seems to be speaking directly to you and whose assumptions match your situation perfectly, a combination of sources to address all of your concerns is the most prudent strategy.
Do you live and die by the financial advice of a single financial guru, or do you rely on a combination of sources to guide you?
5 Comments
I've always just read about what I need to know financially from newspapers or the web. The result is I am out of debt and have plenty of savings. Most of finance is common sense and keeping as much out of debt as possible. If you try a new venture just dabble with a little money at first until you gain more understanding.
Personal financial management comes down to two things – common sense and sacrifice. No matter what any one tells you about personal finance – if you are not willing to follow their advice and not willing to put in the efforts to improve your situation – their advice will not work.
Common sense: If you bring in $1,000 per month in income and spend $1,500 on your lifestyle – you will incur debt. Until you get your level of spending under control – your debt will continue to rise. To properly use debt, you can leverage your income for items that you need. E.g. to buy a house – you can leverage a small portion of your monthly income – say up to 28% - to pay for a place to live. The common sense thing about this type of debt is that it starts at a high fixed amount and comes down over time without putting huge burdens on your income. Credit card debt on the other hand – is usually used for non-needed items (items that have no longer value) and balances start low and go higher as you spend, spend, spend.
Thus, sacrifice. It you cannot pay for something with cash (cash you have in your checking account) you should not buy it. Charging hundreds of dollars on your credit cards each month for $5 coffees – but not having enough money to pay rent/mortgage or utilities – is not smart. You have to sacrifice to get your personal finance under control. Then once under control – you can step up and pay cash for non-need items as long as you stay within your income. As your income rises – so can these items.
Could you provide a few of the blogs that focus on p2p lending? Thanks in advance.
@Mike: P2P No Bank is a great place to find p2p lending blog posts. That site aggregates content from other blogs that cover p2p lending.
Dave Ramsey is much more than just the "debt snowball." In your situation he would just recommend paying a payment and a half towards your mortgage to get it paid off as quickly as possible. All of his advice is aimed towards reaching a debt-free life. (I'm not a salesman, just an avid listener of his)
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