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Something has been gnawing at me for the past couple of days and if I don’t let it out I’m going to burst. So bare with me here.

 

 

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A few weeks ago, one of my coaching clients went to their bank after our first coaching session to renegotiate some of their banking terms, mortgage and account fees.

 

One of the things I encourage people to do is to start giving their money purpose. I do this by getting them to assign every dollar into various accounts. To do this you need to have several separate accounts (or sub-accounts).

 

Banker Tale #1

So my client goes and negotiates a new mortgage with a better rate and gets lower fees (so far so good).

Then they (him and his wife) tell the banker, let’s call him Mork,  that they would like to start a separate account so that they can beginning putting aside extra amounts for their mortgage payments, in order to pay it down quicker.

 

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Some of the Worse Advice Ever!

Mork the banker tells them that he does something like this with their credit card.

Mork goes on to say and I quote:

 

“I have an automatic transfer of $100 to my credit card every month. That way I always make sure I have put some money down on my balance. So I don’t have to think about it”

 

ARE YOU FREAKING KIDDING ME!!!!

 

Do you see what’s wrong with this?

 

Telling anyone to pay the minimum balance is like giving someone permission to wreck their financial situation.

 

BTW the correct advice is: “Pay off your credit card in full every month.”

 

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Two BankersThe worse part of all of this is that this person is giving out this advice thinking it’s “good” advice.

 

They actually think that making the minimum payment is good money management. (IMO The only time the minimum payment is smart, is when you compare it to not making any payment.)

 

Now, my clients knew better than to listen to this garbage. (I’m keeping my language clean on this site because one day my kids will read this). Because this manure-labeled advice is absolute nonsense.

 

The worse part is this person is giving “advice” (and I’m using that term sooooo loosely here guys) to people about their money. If you didn’t know any better you would think this is great advice.

 

…And it would cost you thousands of dollars, and your credit score. Not to mention sleepless nights and the stress that would come from eventually having to pay off all of the interest.

 

All because you put your trust in someone you believed “knew better than you”.

 

Here’s What’s Really Bugging Me About This

The real issue that’s grinding my gears on this is the premise of the whole thing. If  you are 18 and this is your banker, it would be hard to fault you for listening to them, because you didn’t know better.

Here is this person with what appears to be an authority figure. They have the right credentials, they are someone older,  who works in the industry and has for years.

Even on the surface: “Make sure to always make the minimum payment”,   is good advice, but it leaves you thinking that making your minimum payment is all you need to do.

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This is not an attack on banks or bankers.

There are some great ones out there.

This is about taking in any information you get and accepting it as gospel.

It’s About Thinking for Yourself.

Whether you are reading something on my site, or anyone else’s, or just out there in the non-digital world (I think we call that real life).

You are responsible for what you believe.

Saying “I didn’t know any better” doesn’t cut it.

The expression “The buck stops here” applies to you and your money. Make sure you think through what someone else is saying before you automatically believe it.

Banker Tale #2

Contrast this experience with my old banker Mindy (she’s moved on to a different position now). (Total sidetone: Mork and Mindy had a cartoon!)

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When we were applying for a builder mortgage we wanted to make sure we could have enough. We applied for a builder loan of  $350,000. I called up Mindy to see if we could get that much and she said:

“Oh yeah we can do that easily, can do more if you want.”

Me, relieved and curious “Great!…. So how much could you approve me for?”

Banker: (long pause..then hesitantly)” Well I can approve you for an extra $200,000 over that amount. BUT! I don’t know how you eat if you use that money.

Me: “We are good with the original amount, I was just curious.”

Do you see the difference here? That honesty has probably saved hundreds or even thousands of people money over the past decade.

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Here’s the point I’m trying to make

Both of these people are in a position of authority. When we talk to people with authority it’s understandable that we trust what they are telling us. We have been ingrained to listen to the bigger people (a.k.a. authority figures) in our lives. That’s how we survived as kids.

While I believe that both Mork and Mindy were being helpful, only one set of advice was what I would consider being “good advice”.

The other was financial napalm.

When it comes to your money, you have the last say.

It’s your money don’t delegate the thinking to someone else.

Be careful who you take advice from, and always remember to think for yourself.

 

What about you? Have you ever been given bad advice from someone? Share it in the comments below so no one else has to suffer from it. 🙂 

 

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12 comments

  1. Reply

    Well said Andrew. As always, do your own research, shop around, compare advice, and don’t be afraid to cross-check what you’re being told/sold. At the end of the day, it’s you who will wear the mistake. Great post.

    • Reply

      Thanks Martin! I find I have to take a step back when someone tells me something and consider the source and also their motives for the advice. It definitely helps to think about the advice you are willing to absorb.

  2. Reply

    This is a good story. It really does illustrate that bad advice can do some serious harm, even if done in the spirit of helpfulness. I suspect we would differ our opinions of credit cards, but I know we can agree that just paying the minimum balance each month is the recipe for a financial disaster.

    Don’t worry. I’m guilty of these rants..I mean posts, too. 🙂

    • Reply

      Thanks Andrew! Great name btw 😉 I’ve seen so many times where people automatically believe the strongest voice in the room even when the advice their giving is dead wrong. I think we can definitely agree on minimum payments are deadly.

  3. Reply

    First off, I have to say that I love that you used the names Mork and Mindy. I need to use more creativity when making up names for future illustrations. 🙂

    Second, I share in your disgust for those “financial professionals” who willingly take advantage of the trust which others place in them. Like you said, if Mork didn’t have you (or the sense to stop and think), he likely would have made a huge mistake with long-term ramifications.

    • Reply

      Thanks! It’s not a disgust of financial professionals I just want people to see that not all advice from professionals can be good advice. It always helps to think for yourself because you are ultimately responsible for your life.

  4. Reply

    This is an excellent example as to why advice should be carefully examined. Even those giving advice with the best of intentions may not be giving the best advice, but you might not know that until you look.

    Finances are a tricky subject area, with some much depending on the specifics of a person’s situation. It’s nice to know that there are professionals out there like “Mindy” who will look at an entire situation and be honest about the realities it contains.

    • Reply

      Welcome Cathy! You are absolutely right, everyone has a specific situation and it’s important to realize that the person who is giving you advice probably doesn’t know you exact situation as well as you do. There are some great people out there wanting to help improve others financial situation, it’s just a matter of finding the good ones! 🙂

  5. Reply

    Great stories. It’s important to choose for financial advisor wisely. FA’s are like hair dressers, when you get a good one, you stick with them….for life, if you can help it. Its all about sales and commissions now a days. I wonder how much of it is really “advice” sometimes. Then there are the one’s that have the heart of teacher, are good with their money and want to see the same for others. They are rare, but they are there.
    Financial advice is important and there are some great advisors out there, but its important where you get your information from.

    • Reply

      I agree with you on the whole “heart of a teacher” aspect. There are some really good people out there trying to make a difference and help people. It’s all about thinking for yourself and being aware.

  6. Graeme

    Reply

    +1 for Pamela’s comment. Banks are sales organizations and the employees’ bonuses, performance reviews and their very jobs depend on selling product. Just like any other business. That doesn’t mean they don’t give good advice – often they do – but you have to go in with your critical thinking engaged to weed out the useful nuggets from the sales garbage. In addition, many bank employees are neither particularly well-educated nor well-trained. They are in the job because they are good sales people. As in all things, “caveat emptor”.

    • Reply

      I agree. Critical thinking a necessity when it comes to dealing with the banks. I agree with Pamela too. There are good ones out there. I was lucky enough to experience one. Absolutely when you walk into the bank it’s buyer beware.

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