Opinion: Skip these “free” sources of financial advice – they will cost you dearly

For free is great marketing – four letters that attract more attention and sell more products than any other word. But free isn’t a great source of solid financial information. Free in the financial world is fraught with problems.

your own assumptions. “We always thought…” and “I believed…” are dangerous financial perceptions that often show a person doesn’t know what they don’t know.

Each time you sign or co-sign a loan, you are responsible for paying it back. One businessman confided in me, “I never thought my daughters’ college loans would show up on my credit report.” Due to a misunderstanding, she had to delay expanding her business because she couldn’t get the credit she needed.

Marriage is as much a legal contract as a promise of love. However, marriage does not automatically provide legal documents for health care, financial powers of attorney and wills.

A happily married couple mistakenly believed that all of their wealth would pass to the other. Since they each had children from previous marriages, this was not the case. Instead, state law dictated where assets went after someone died because they didn’t have a will.

Read: Avoid these 3 estate planning mistakes and make inheritance cheaper and easier for your loved ones

Rules change and hearsay and our belief systems get in the way. Find out today’s facts. Check your assumptions.

A seller with a personal interest. Many investment professionals make their money through commissions or as a percentage of your assets under management. There are professionals who will do a good job for you no matter how much they charge. However, there are others who care more about their wallets than yours.

Be wary of people telling you “these investments are a safe bet,” or when investment advisors claim, “I can make you more money in the stock market than you have right now.” They may want you to defer your retirement money or invest through them. Then they charge 1% or more of your money every year as a management fee. They cannot guarantee that you will make more money. Nobody can do that, especially not in the short term.

A new client told me she didn’t want to pay money for financial advice. After all, she had already received it as a gift from a “very nice, helpful gentleman”. Then she showed me the annuity she bought through him. The Commission? Well over $10,000. Because she didn’t give him a check, she thought it was free.

Friends with free time may spend retirement learning personal finance tips at free seminars that include lunch. People of a certain age in every state, including sparsely populated Vermont, receive these invitations. Most likely an investment firm bought your name from a mailing list. They want to sell you investments or a pension.

If you are so compelled and strong enough to say “no” to anything that is offered, by all means go and learn something. Otherwise spend some money to pay for your own lunch. You will most likely save a lot of money on commissions, unnecessary fees and that “once in a lifetime opportunity”.

Read: My grandson says my financial advisor is misdirecting me and charging me twice

Well meaning family and friends. You don’t know all of your personal financial situation or needs. Why? Because over decades of my experience, no customer was exactly like the other. Their situations and fortunes all had detailed nuances. Any opinion offered from personal experience without knowing the whole situation can cause problems in the future.

A relative once learned that “you can give $15,000 a year tax-free to individuals”—which is true. She encouraged her mother to do this so Medicaid could pay her bills. Had my client done this and not consulted me first, this elderly woman would have been financially vulnerable and unable to qualify for Medicaid when she needed it.

Medicaid has a tracing rule about where your assets went; in most states it is five years. The advice the daughter was given was about her situation, not her mother’s.

Don’t underestimate the bad information out there – from newsletters, from “experts” on the internet and TV. You are there to do a job and to take care of your overall personal situation is not.

The power of example. My dad (or aunt or friend) did it and it worked for her. The world has changed, and so have tax regulations and investment opportunities. What worked in the past may or may not work for the future. What matters is what is best for you today.

In my father’s day, there was only one type of mortgage (fixed rate), two types of life insurance (full-term and term), and IRAs didn’t come into play until I was a teenager and he was about to retire. Times have changed and there are many opportunities.

A 50-year-old customer kept her $5,000 lifetime insurance policy, which cost $180 a year. She didn’t want to make a change because her father said it was a good policy when he gave it to her at the age of 21. She could have gotten $100,000 life insurance for a few dollars more a year.

Sure, take dear old dad’s path or Aunt Suzy’s as a guide. But apply today’s rules, regulations, and your personal goals as an overlay to find the best decision for you.

Columns like this address many concerns, but shouldn’t be your exclusive source of information. I therefore ask you to seek personal advice. Ask questions and understand your situation. Make decisions based on what you (and your partner) need. Understand the full implications of every decision.

Ensure your financial decisions are made based on your full financial picture with objective advice. Leave “free” to the marketing world.

CD Moriarty, CFP, is a MarketWatch columnist and speaker, author and personal finance coach. She blogs at MoneyPeace. You can ask questions that can be published by clicking here.

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