Making Sense of Financial Advice

With all of the advice that is offered these days to help people manage their debt and personal finances, it can all be quite confusing.  A well known financial advisor urges people to pay off their smallest debt first, working their way up to the bigger debts.  In contrast, many financial bloggers say this is illogical, that the highest interest rate debt should be paid first.  Similarly, another personal finance book guides readers to invest only in bonds, while others say you should always have a large portion in stocks.  How is someone supposed to make sense of the info, and how to find a plan that is practical.  Here are some thoughts:

–No one size fits all — the same as with diets, every individual is different.  Keep in mind that financial advisors tend to aim their advice at what they perceive will be the average person.  It may or may not be useful for you.

–What will help you succeed– with respect to which debt to extinguish first, my own take is that it depends on what will succeed, and what plan will keep you on track.  In other words, if you are just starting out and have had minimal success in trying to tame your debts or begin saving, setting very small achievable early steps will be good.  As you build your confidence, you can then increase your goals accordingly.   Interestingly, I have observed that many financial bloggers are fairly analytical and disciplined, and may have difficulty understanding the challenges that people with a different personality profile face.

--Understand your own personal hang-ups — is there something that you won’t compromise on? Or something that has sabotaged your plans in the past. It’s important to acknowledge that a long-term plan cannot be successful unless it’s one that you can work with everyday.

–Don’t be afraid to discuss your concerns — or to reach out for help, including help consolidating your debts.  Often times, success comes from creating an environment that is supportive and encouraging.

shared at Frugal Friday