When it comes to dealing with the recession, the best advice is your own advice, with one huge and important footnote-you have to know what you’re talking about. It is sometimes said that in a court of law a person who chooses to represent themselves has a fool for a lawyer. Because of the complexities of the law, and the extensive schooling required to obtain a license to practice it, serving as your own lawyer doesn’t make much sense. You’re not really qualified to do it, and the outcome is almost invariably disastrous.
Financial advice on the other hand is much different. Although some financial advisers operate on a straight fee basis, more often than not a financial adviser is paid a commission. They profit from anything that you buy based on their recommendations. The more they get you to invest, the more money they make. The potential conflict of interest that this creates is clearly obvious.
The problems that this sort of relationship creates come into stark focus when considering personal financial security in the face of a thundering recession. Many people have lost millions of dollars of wealth over the past several years as the recession has caused the economy to crumble around us. Unfortunately, very few financial professionals, including investment advisers, saw this coming. Consequently, many people were caught short with bad investments that ultimately lost value.
A study of financial professionals shows that less than 5% of people who use a professional adviser have a written financial plan in place. We’re not talking here about the general thoughts and advice of the adviser, but instead about a written document that defines a detailed and actionable financial plan. This is an astounding statistic because the very first step in creating long-term financial security is to build a solid financial foundation. And the very first step of building that foundation is to craft a comprehensive plan.
This is why in planning for your financial future, the best advice is your own advice. Nobody cares about you like you do. Obtain a financial education that enables you to understand how money works, and the best investment strategies for use during a recession. Only when you are able to make your own investment decisions, will you be able to realize true and absolute financial security. Once you know what you’re doing, start giving yourself good advice.