There are plenty of life events in our individual and collective futures over which we may well feel entirely powerless – unexpected job loss, disabling auto accident, house fire, loved one’s early death, surprise divorce. Life is by nature a series of events getting in the way of our plans. We can plan for emergencies – we just do not know which one will actually hit, or when.
Even confessing surprise at the twists and turns of a “normal” life, there are still plenty of things we can do or avoid doing in order to inoculate ourselves against some obvious financial mistakes.
For instance:
- We should never buy any financial product (please note that I did not use the word “investment”) that we do not completely understand, demanding instead clear explanations responsive to concerns such as getting money back out in an emergency or if circumstances change, costs associated with early termination, guaranties provided to back up marketing promises, commissions paid by and to whom. This is all especially concerning when a salesperson is trying to sell us an annuity. If the salesperson hems and haws for even a moment, run – don’t walk – away.
- We should never buy a life insurance product that the salesperson is marketing as an “investment”. Insurance is insurance and investments are investments. Each serves a distinct and differentiated function in our financial lives. We should be especially cautious about buying any sort of exotic insurance product from a person who has a financial interest in getting us to make a specific decision.
- We should never buy a financial product from any person who claims not to know how much she will be paid for selling this particular product, or if she acts offended, hurt or argumentative when we inquire. Can you ever REALLY believe she does not know how much this particular sale is worth?
- We should absolutely never buy anything promoted to us as any sort of “tip”. If think this sort of action constitutes sound financial planning, then lottery tickets make excellent investments. Here’s a tip: the real insiders are not going to share their sure things with US.
- We should never rely upon financial planning advice from someone who really has only one thing to SELL us – that is, we go to an insurance person to buy insurance, not financial planning. Every problem we bring to an insurance person seems miraculously to be solved by buying some sort of insurance (or mutual fund branded by her particular company). We go to a lawyer for an estate plan, not for holistic financial advice. Oddly enough, every financial problem we take to a lawyer appears to be solvable by us paying for a trust. And so forth and so on.
New years’ resolution – I shall be alert to the apparent or obvious conflict of interest when I seek financial planning from ANYONE.
Happy 2013, all.