A Roadmap for Social Media Advice
Did you realize that nearly 80% of Millennials and Gen Zers have turned to social media for financial advice? This doesn't come as a surprise considering that a significant 69% of individuals surveyed by Forbes Advisor encounter financial advice on social media at least once a week. For a substantial 25%, this is a daily occurrence.
In this era of information overload, navigating financial advice on social media can be a complex task. With numerous influencers and self-proclaimed experts competing for your attention, it's vital to approach online financial guidance with a discerning eye. Here are five valuable tips to help you effectively navigate the digital landscape of financial advice.
Information > Advice
The first thing to remember is that the best financial advice you’ll find online isn't advice at all — it's information. Don't quickly follow specific social media recommendations without considering your unique financial circumstances. For example, if you are juggling student loans and a mortgage, you will need a different financial plan than if you’re debt-free and about to welcome a new addition to your family.
Consider the Lens of the Advice
Giver Understanding the lens and context through which an advice giver views the world is essential. Socioeconomic background, ethnicity, age, life stage, and other factors influence financial perspectives. What might be suitable advice for a U.S. citizen nearing retirement may not align with the financial goals of a recent college graduate. When consuming social media financial content, remember the context of the advice giver and how it may or may not align with your circumstances.
Volume ≠ Validity
A high follower count does not automatically translate to financial expertise. In the online realm, the loudest duck isn't always correct or the best source of advice. Be cautious when following self-proclaimed financial "gurus" who lack credible experience or credentials. While their personal success stories can be inspiring, remember that their experiences might not be universally applicable. Always exercise discretion and critical thinking when evaluating financial advice, regardless of the social media influencer's popularity.
Trust, But Verify
Before implementing any financial advice, take the time to verify it against reputable information sources. Mistakes happen, and financial landscapes can change rapidly. To ensure that advice aligns with your goals and is up-to-date, cross-reference it with trusted sources. A little extra due diligence can save you from costly missteps. This is especially true for financial advice from social media. The CFP Board Consumer Sentiment Survey — Trust, But Verify found that investors demonstrate more confidence in advice from social media after they’ve vetted that advice with a financial planner. Once financial advice from social media has been verified by a financial planner, 46% of investors are comfortable acting on it — compared to only 26% of investors who are comfortable acting on advice without verifying it with a financial planner.
Proficiency > Public Opinion
While online resources and forums can provide valuable insights, they can't replace a competent professional's expertise and personalized guidance. It may seem convenient to post your specific personal finance questions and seek advice from groups of strangers on the internet, whether in Facebook groups or Reddit forums, but it comes with inherent risks. Remember that someone's interest in a topic does not equate to expertise.
While social media can be a treasure trove of financial information, it's essential to approach it with a critical and perceptive mindset. By following these five tips and consulting a financial advisor for additional support, you can make the most of online financial guidance while safeguarding your financial well-being and ensuring you're on the path to a financially secure future.