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A pro’s financial advice trumps friend’s every time

An excellent article by Peter Dunn on the importance of getting professional advice as you plan and implement that plan for your financial future.

Steve ======================================

I’ve noticed an especially interesting phenomenon in the past 15 years in the financial world. People are just as likely to take financial advice from their co-workers, friends, and family members as they are to take financial advice from a professional financial adviser.

Sometimes the advice is good, and sometimes the advice is absolutely great — for the person giving it. Unfortunately, unprofessional advice has its faults.

Here are a few examples:

• “My buddy Darren said he switched his 401(k) around to all international funds, and he made a ton of money. I just switched mine over to what he is using, yesterday.”

• “My sister, Kim, bought a car with a home equity line of credit, and is writing off the interest on her taxes. She said I should do the same.”

While I have no reason to think that Darren and Kim aren’t lovely people, their financial lives have different math than your financial life. You likely don’t have the same family structure, income, debt levels, emergency fund, life insurance, knowledge, and risk tolerance as they do.

When you speak to a good financial adviser, their job is to do the math that your friends don’t know: this person’s risk tolerance + his or her age + debt + income = this advice. That’s what your friend can’t do.

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