Financial Planning
July 18, 2022

Social Media Financial Information

The good, the bad and the misleading
Stewart Willis
Co-Founder & Co-Owner Asset Preservation Tax & Retirement

Many of us pass the time scrolling on social media or surfing the web. An estimated seven in ten Americans use social media to interact with friends and family. However, 38% of people work with financial advisors, and there are many more of us on social media than seeking financial guidance.

People turn to social media for everything from organization tips to new recipes to financial advice, but not everything you get from social media is factual and quality advice. From poor investing advice to get-rich-quick schemes, misleading information is dangerous to our financial health. Let's look at some common social media financial advice and what you need to watchout for.

Bad Social Media Advice: Investing Is Easy

Understanding how to invest in the stock market can be difficult, but people on social media are telling users the opposite. Social media members promoting day trading, telling you what stocks to invest in and saying investing is easy are called influence investors. Influence investors are making and promoting misleading posts and videos. Those who begin investing learn quickly that you cannot predict what the stock market will do.

When you begin investing, you need to understand your risk tolerance. This is the risk you are comfortable taking with your money and investments. The risk you are taking with your money should be appropriate for your age and how close you are to retirement. People who are younger have a longer time to recover from a loss and can be more comfortable taking greater risks than those who are older. When you make the decision to start investing, it is important to have a balanced portfolio of investments. Don’t rely too heavily on one type of investment or one sector of the market.

Bad Social Media Advice: Living Off Debt Is Fine

Credit cards can provide great perks when you start using them and help you establish a good credit rating if used correctly. It seems that many financial influencers on social media only focus on the credit card perks and not the risks. Racking up credit card charges and always carrying a balance can escalate into a problem quickly. Once you have put yourself in debt with credit cards, it can be very hard to reach any financial goals. Large outstanding credit card debt or a low credit score can prevent you from securing a mortgage or a car loan. Hefty monthly payments leave you with very little money to put towards savings, investments or an emergency fund.

You can use credit cards responsibly if you only charge what you can afford to pay off each month. To make this work, track your charges like you would if you were using a checkbook. Try making a budget and sticking with it. Whether money is going to bills or entertainment, you need to understand how much is coming in and going out to avoid overspending.

Bad Social Media Advice: Sharing Get-Rich-Quick Schemes

Get-rich-quick schemes have always been popular, but they have grown exponentially with social media. Pyramid schemes, surveys and long-lost rich relatives are all examples of get-rich-quick schemes to watch out for. Scammers will promise to make you a millionaire if you give them money first.

The number one rule to follow when trying to avoid these schemes is that if it sounds too good to be true, it probably is. Instead of looking for ways to make money quickly, focus on aspects of your finances that you know you can control. Focus on paying off debt and putting money into retirement savings. You might not make money as quickly, but it is a lot safer.

While much of the advice on social media can be dangerous, you can still find good financial advice from reputable sources. As a fiduciary, the information we share on Asset Preservation Wealth & Tax's social media pages is purposefully educational and thought-provoking. Before taking any advice from social media, consult with a financial advisor who will look at your retirement plan holistically and offer recommendations based on your goals and dreams.

Stewart Willis is the founder and president of Asset Preservation Wealth & Tax, a financial planning firm in Phoenix, Arizona. Investment advisory services offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.

The commentary on this blog reflects the personal opinions, viewpoints and analyses of the author, Stewart Willis, providing such comments, and should not be regarded as a description of advisory services provided by Foundations Investment Advisors, LLC (“Foundations”), an SEC registered investment adviser or performance returns of any Foundations client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment, legal or tax advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Personal investment advice can only be rendered after the engagement of Foundations for services, execution of required documentation, including receipt of required disclosures. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Foundations manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Any statistical data or information obtained from or prepared by third party sources that Foundations deems reliable but in no way does Foundations guarantee the accuracy or completeness. Rates and Guarantees provided by insurance products and annuities are subject to the financial strength of the issuing insurance company; not guaranteed by any bank or the FDIC. Investments in securities involve the risk of loss. Any past performance is no guarantee of future results. Advisory services are only offered to clients or prospective clients where Foundations and its advisors are properly licensed or exempted. For more information, please go to https://adviserinfo.sec.gov and search by our firm name or by our CRD # 175083.

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