The Pitfalls of Financial Writers' Advice

Much of what they say is helpful, but there are four reasons you ought to take a skeptical view.
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Take your favorite personal finance writer's advice with a grain of salt.

The current financial turmoil has prompted people to spend more time on their personal finances. A place they turn to is financial writers and their bestsellingbooks. Some read personal finance columns, while others follow Web sites or blogs. These can be excellent places to begin a journey to get one's personal finances in order.

A big mistake is blindly following a favored financial writer. While personal finance reporters are certainly not writing with the intent to give readers inappropriate information, the problem is that nobody who writes about personal finance will be 100% correct when it comes to each individual. There are just too many variables. With this is mind, here are four reasons you should never blindly follow the advice of a financial writer.

Financial writers assume you view money a certain way. But when it comes to personal finance, some people are emotional about money, and others are analytical. There are shades of gray in between.

If you tend to be emotional about money and are trying to reduce debt,it's often better that you try to

snowball your debt

by paying off those with the lowest balances first, since this gives you a positive feeling. On the other hand, it's often recommended that you pay off debts with the highest interest rates -- the analytical approach.

Financial writers often leave out exceptions. Limited space usually makes itimpossible to address all points on a topic. For example, when personal financewriters make a general statement that it's bad to have a large amountof credit card debt, this might not be true if you are paying 0% interest with an introductory special for six months while your savings are earning 5%. There are usually a number of exceptions to every rule.

Financial reporters write for beginners and focus onbasics. They try to get across general information that will make the biggest impact and help the most number of readers. That means their advice may be good for the majority of readers, but there may be ways for those with more advanced knowledge to do even better.

For instance, personal finance writers often recommend that individualsplace their savings in online banks, which earn more interest than a typical brick-and-mortar bank. This is true, but banks and credit unions sometimes offer promotions to gain deposits that can beat online bank rates. Chasing these promotions takes more work than the average person is willing to expend, but can mean an overall higher interest rate on your savings.

Financial writers don't know your financial goals. They're not privy to important details, which determine the best course of action. A personal finance writer would likely give you a different recommendation of where you should focus your efforts if she knew your main goal was to buy a house and not to save for retirement.

This does not mean you should ignore personal finance writers. Many issues they write about will apply to your situation. It simply means that for every piece of advice you read, consider if it makes sense in your situation and weigh themerits to your particular needs.

Jeffrey Strain has been a freelance personal finance writer for the past 10 years helping people save money and get their finances in order. He currently owns and runs