“Never trust the advice of a man in difficulties.”
Most people nowadays turn to the Internet for financial advice on a score of subjects. Want to know how long to grill a salmon? Do situps really get you a ripped six-pack? Does my dog have fleas? How much money do I need to retire? You can ask the great Google (and its lesser minions Bing and Yahoo) these questions and you can usually find some credible information in return.
Because there’s an enormous volume of information on the Internet, it’s very possible to think that all information should be free. It was a state that the author Chris Anderson talked about in his book Free: How Today’s Smartest Businesses Profit by Giving Something for Nothing. It’s very easy for Monkey Brain to fall into the trap that we should never pay for personalized information, since, after all, all of this information is just sitting there waiting for us to consume and consume until we’ve surfed to the end of the Internet.
It’s all well and good to find free advice out there. I do it all the time. I am a voracious consumer of information. However, there are times when, to me, it’s worth paying money for services and information. Here are some of the reasons that I’ll dole out shekels.
- I don’t want to do it myself. I could go out there and mow the lawn and spend a couple of hours a week making the grass look pristine, but, let’s face it, I don’t really have the inclination to do so. I’m willing to trade money to someone whose expertise is making lawns look lush in exchange for the time I don’t have to spend cutting the lawn. I could spend that time working or in leisure activities which have more value to me. Now that I’m, according to the actuaries, about halfway through my life, time is my most precious asset.
- The information is specialized. Let’s take the example of Derek Halpern of Social Triggers. He puts out good information about the psychology of marketing. However, if you want to learn his truly secret sauce, you’re going to have to pay for his course. As he says, he gives away 99% of the information, but if you want the best 1%, you’re going to have to pay for it.
- I want something personalized to my situation. A good example that I can think of for this is if I wanted to get my body down below 10%. I’ve tried to do it before and didn’t succeed. About the lowest I’ve been is in the 11-12% range, and I couldn’t crack the barrier. If I really wanted to get down below the 10% level, then it would be worth it, to me, to spend money on a nutritionist who would design a diet specifically for my metabolism and a personal trainer to design a program specific to me (even though I used to be an Army Master Fitness Trainer, that and a nickel will buy me a hot steaming cup of jack squat) to raise my base metabolic rate to increase fat burning. I might even invest in someone to actually pre-cook meals for me based on the meal plan that the nutritionist made for me. It’s a matter of priorities and allocating resources to those priorities.
Now, before you lump me into the camp who says that free information is worthless, let me tell you that free is my favorite price! A friend of mine once said that I had a “Spartan spending habit.” I took that as a compliment. However, it is possible to overvalue free things.
But first, I’ll share what I think are perfectly acceptable situations to find free information and things.
- It doesn’t take much time to find. We are sometimes willing to sacrifice a ton of time and effort to get something just because the price tag is $0.00. However, if whatever you’re looking for is readily available with just a few keystrokes, then go for it!
- The outcome won’t have a drastic impact on your life. If I want to know what spices to try on chicken when I grill it, I’m hitting the Internet. If what I cook winds up not fit for human consumption, so be it. It’s not like I’ll be taking a huge loss somehow because the Internet served up a recipe of sugar, cinnamon, vinegar, and castor oil.
- The source is credible. If I want to find out whether or not I can eat Thai food for lunch while on a slow carb diet, if I can find the answer on Tim Ferriss’s website, then I’m going to trust that answer is right, because Tim has done a ton of scientific research and engaged hundreds of scientists and nutritionists to validate his work. He has a ton of credibility to me (some of you may disagree, which you’re well within your rights to do), so if he says that I can eat certain Thai meals at lunch and stick within the slow carb diet, then I’m going to trust him.
I’ll reiterate again that there are a lot of people who don’t need a financial planner. Anyone who tells you that everyone should get financial planning is trying to get a bunch of people to pay them to hand the planner their watch and tell them what time it is. It’s unnecessary. If you’ve got a handle on where everything is in your life and where it’s going and you wouldn’t listen to what a planner has to say anyway, then they’re not for you. If you’re up to your neck in debt, don’t pay for a planner! Go borrow The Total Money Makeover (#aff) from the library and read it and act on it, although once you get your nose above water, I have some serious disagreements with Mr. Ramsey’s investing and retirement funding advice. Need inspiration for getting out of debt? Go read any one of the gazillion “My personal finance journey from $50,000 in credit card debt to being debt free” personal finance blogs. You need the assurance to know that people have been there before you and survived. It’s OK. When I was paying off my mortgage, I read some of those blogs too, just to see what it was like afterwards. Heck, I even tell some stories (like this and this).
There are times when it’s perfectly acceptable to pay for a financial planner, though. I cannot stress enough how strongly I feel about getting someone who’s not going to milk you for a bunch of commissions and who is acting in your best interest. Let’s look at some of the times when you should engage a financial planner:
- You’re beginning your retirement investing. You want to make sure that you’re a) investing enough, and b) investing intelligently. Sure, it’ll be great to start that investing, but if the first thing you buy is the triple leveraged S&P contrarian ETF and the market shoots up, you’re going to soil yourself and then completely change your strategy.
- Your family situation changes. That could be marriage, kids, divorce, or having to support your parents in their later age (though, hopefully, they have long-term care insurance).
- You get a windfall. This could be inheritance or a large gift, but it could also be the sale of your company or a significant promotion at work. If you get a package where you get a ton of ISOs (incentive stock options), you might want some help in figuring out how to value them. If you have a lot of net unrealized appreciation (NUA) in a 401k plan, that’s something you’re probably not going to want to go it alone for.
- You need reassurance. This is commonly posed as “do I have enough money to retire?” or “am I saving enough to retire?” or “how much do I need to retire?”
- You have some other unique situation. The one that most commonly comes to my mind when I think of unique situations is where a parent needs to create a special needs trust for a child. In this situation, you’d want to engage both your financial planner and a qualified attorney to guide you through the process.
I think it’s great that there are a ton of personal finance blogs out there. I’m one of them. For some, it’s a cathartic experience to share the journey. For others, it’s a source of income. However, don’t let the abundance of free information fool you into thinking that everything should be free. Know when to be wise about spending money to get personalized information and don’t fall into the trap of thinking that everything should be free.