Mr Know It All

It's always hard to know who to take financial advice from. Who do you trust? Who really knows what they're talking about. One thing I did in the past was to listen to advice from friends who were not proven financial experts. Now I'm a bit more financially intelligent, I realise that just because somebody is your friend it does not mean they know anything about money. Your own research and due diligence is always the most important thing to do.

One of my friends is a real Mr Know it all. He's OK with money, in a well paid job, and has saved up an impressive £40k over many years, but does not seem to know what to do with it. Over the past few years, he has asked me to enter joint property deals with him, but I have always turned him down because I know that he is too arrogant to research things properly. He thinks he knows it all when it comes to money or anything else, and never bothers to check things out properly.

I was talking to him the other day, and he suddenly started giving me financial advice. He said that UK bank's  FSCS compensation scheme, only protects a saver's money to a maximum of 30k. From my own prior due diligence, I knew he was wrong, the FSCS actually covers 50k per person. He claimed that he was getting  a 6% return on his savings account with his bank. I was pretty sure he was wrong, as I knew that the highest rate for all banks (instant access savings accounts) is currently is around 3.3%. Rather than let him ramble on, I said I would like to invest my savings with his bank, and got him to immediately check the details on his computer. It turned out that his bank was really paying him 0.25% on his savings!! This shows that you always have to keep abreast of current financial matters. The world of finance is always moving and you will never know it all.

Some people might seem to have a good track record with finances, but when you dig a bit deeper by doing your own research, it's amazing how many holes you can find. By getting knowledgeable about finance, it gets easier to tell when somebody is talking financial B.S.

The book Richest Man in Babylon says that anyone can give advice, and that advice is given freely, but make sure you only take what is worth having. If you become a Mr Know It All, then your knowledge is actually out of date. You need to keep learning, and keep increasing your financial intelligence.

In Chapter 2 of The Richest Man in Babylon, The rich man Algamish, Arkad's mentor, gave him 3 pieces of advice: 1. Live on less than you earn, 2. Seek advice from those who are competent through their own experiences to give it, 3. Make your gold work for you. My friend Mr Know It All practices the first piece of advice, but little else. I would never take his advice seriously.

I'm currently increasing my financial knowledge by reading 2 books. The first is I Will Teach You to be Rich by Ramit Sethi, and the other is Multiple Streams of Income by the controversial guru Robert Allen (he was criticised by John T Reed, but I want to see what the fuss is about this particular book). How is it possible to read all of these books, and do all of this financial research? The answer is to learn speed reading, and you'll get things done in no time. I will never be a know it all, I will make sure I am always learning.