How terrible advice from a financial advisor led me to my dream career
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At the risk of stating the painfully obvious, most people turn to financial planners for good advice on what to do with their money. You expect a finance expert to be able to point out the best steps to take, especially when you are a beginner yourself and need some guidance on how to get started in what seems like the hard world to figure out. of investment.
But it was not my first experience with a financial advisor. The worst investment advice I have ever received actually came from a financial professional I contacted when I knew I wanted to start growing my assets, but I felt overwhelmed. by the way of doing it.
I was 21 and when I asked this advisor what I could do to put my money to work and achieve my goals, the only response I got was, “Just maximize your Roth IRA every year. That’s really all you need to worry about until you’re in your 50s. At this point we’ll need to do some more planning. “
As someone who has gone from a clueless 20s to being a professional in the financial industry herself, let me tell you right away: this is really bad advice. Here’s why.
Investing is important, but you can’t do it without context
When investing, there are a few key things you need to understand about yourself first.
The first is to have the sense of Why you are looking to invest in the first place. If you don’t understand why you are investing or the purpose of the money you want to invest, it is very difficult to understand whether this investment is right for you or not.
Knowing the purpose will also help you define things like your time horizon or how long you are willing to leave the money in place without accessing the funds.
As part of this, you also need to understand both your risk tolerance and your ability to take risks. Generally speaking, your risk tolerance is the extent to which you can handle risk from an emotional standpoint.
If you are extremely risk-averse, you will likely need to stick with more conservative investments. If you feel more comfortable with the risk, perhaps something more aggressive where you face a greater chance of loss is acceptable.
But you also need to understand your risk capacity. It doesn’t matter if you feel comfortable with taking a massive loss as long as there is a chance of hitting a home run. If you literally can’t to afford to realize this loss, then you can not take the risk.
Finally, you need to understand how an investment fits into the larger framework of your overall financial life. This is why it is important to engage in financial planning first, and then Determine what type of investment strategy is best for you given your current situation, your needs and challenges, and how much you want to accomplish with your money in the short and long term.
This is the main reason why the advice to contribute to one account and do nothing else was so bad. There was no context. This advisor didn’t know anything about me, my life, or my goals – and clearly wasn’t interested in learning.
Getting terrible investing advice at an early age inspired me to help others manage their money
Make no mistake: maximizing a Roth IRA is a awesome step to take. But this is far from the only action to consider to help you reach your goals.
Back then, the idea that I would just maximize a Roth IRA for my entire working career and “don’t worry” about doing any extra planning until I was 50 – 30 years later! – seemed a bit sketchy at best. Now with more experience it seems downright criminal.
Because these tips didn’t seem enough to me, I decided to dig in and try to learn more on my own, which set me on the path to learning about investing through forums. DIY like Bogelheads, immersing myself in the FIRE movement, and ultimately changing my entire career path to working in financial planning.
In my research, I learned that not all finance professionals are created equal. It was important for me to work in the industry sector that put the best interests of customers first and focused on advice rather than selling products.
(Pro tip: If you’re looking to hire someone for financial advice, look for a certified, 100% fiduciary, pay-only financial planner who puts financial planning first!)
After receiving such bad advice for someone who presented themselves as a financial expert, I felt passionate about helping other people with their money in a way that I had not been supported. .
I was able to do it, and improve my own financial life along the way. I ended up maximizing this Roth IRA, but I also opened a taxable brokerage account, worked to increase my income, and pushed my savings rate to 30% or more of my income on a consistent basis.
In a way, my first bad experience with someone giving me professional financial advice was also the better something that could have happened to me. It inspired me to learn and be proactive with my money.
Not only am I more educated and more informed today than I would have been if I had never had this bad advice, but I also get to help other people find their financial power.