"Watch what you read and who you follow when looking at personal finances"
By: Allan R Kirby
I believe that there are many authentic people on social media who, with little or no formal education, provide very informative personal finance advice as a result of their real life experiences. When done properly, such people can bring a wealth of information to readers and help them become successful in reaching their financial goals without being overly complicated and technical. This cannot be said for the major banks, who have not always done a good job in helping their customers become successful with their finances. Worse, there is still ongoing issues of trust with the major banks. The recent Wells Fargo fake account and insurance scandals show they are still making mistakes and looking at profits instead of the interests of their customers.
“So if there is good advice, how can Social Media lead to financial problems?"
I have learned two things from social media about Personal Finance. First, there is an incredible amount of financial information available and second, just about anyone can pass themselves off as an expert. This, of course, is dangerous because the financial information that is being provided:
Can be very superficial with no real clear detailed explanation on how to achieve the stated objectives (e.g. “how to retire by 30 years old in three easy steps”).
Is using complex investment strategies and assuming its simple and easy to following, skipping the tax, risks and regulatory issues (e.g. “Invest in a drone business and earn big profits in weeks”; “Invest in Bitcoin and retire young”).
Is to promote products and services that the individuals are not fully familiar with nor have any intention of using.
The rapid growth of social media has meant that brands regardless of size are increasingly using these platforms as a venue to get visibility into their products and services. Leveraging celebrities, social media influencers and “Youtubers” to reach target audiences and increase sales is a great idea but it comes with risks. The problems are twofold. Firstly, influencers can push products, services and even advice that is misguided; based on no practical experience and/or designed just to increase a following to obtain endorsements. Secondly, when social media influencers/celebrities are paid, the relationship between the brand and the individuals is not always clearly distinguishable from an authentic endorsement or simply being a paid advertisement.
There is a growing concern, not just in the financial field but other fields such as health and medicine where people take advice from these influencers/celebrities even if it flies in the face of conventional wisdom. Their influence and ability to provide what is perceived to be sound advice could in fact be detrimental to you your finances. Additionally, someone else’s success does not guarantee that a similar methodology will work for you. No matter how much you disagree with me, you may not be successful or have the same desired results as the influencer. One of the more visible examples was the online Fyre Festival, which — billed as an event with “first-class culinary experiences and a luxury atmosphere” — was hyped with the help of flashy promotional videos and celebrities.” It turned out to be anything but a success. It was a disaster and people lost out financially along with some pride, but it showed how influencers/celebrities endorsed without any due diligence. This scenario is likely being played out regularly on a smaller scale affecting many people for which we have no insight into, one example is myself. I receive messages weekly on a number of questionable trading practices from so called “Experts”. Doing my own diligence, I did some digging and found that in some cases the stated products were in fact either illegal or in a legal grey zone. I did not accept but who is to say someone else did not?
“Social influencers can push products and services for endorsements with no thought of the consequences of their viewers ?"
It’s not just influencers, it can be your friends and acquaintances
Finally, time and time again, I have talked to people who seem to be frustrated with their friends and acquaintances on social media. The reason is that they are envious of the people they see on Facebook, whom they see as leading the perfect life, taking vacations, never stressing about money and always seem to have everything they want and need. This creates a vicious cycle where you want to have what the others have so you in turn feel compelled to buy the same or similar items as seen on other social media sites. In fact you may even go as far as being compelled to have the same or better selfie while on that exotic trip. However, all this can lead to possible overspending and additional stress for buying things just to present the appearance of an ideal life. Truth be known, most people are likely leading a much different life, which you simply do not know about. This was more than evident from my experience. I have known people showing an ideal life when in fact it was a mess, but perception is everything online. Unlike the real world, you can paint a picture perfect world on social media even if it’s not the case. So be careful of who you following. You never know what is truly happening behind the scenes.
As noted by Alice G. Walton of Forbes “We’ve all felt Facebook-inspired pangs of jealousy when we flip through the pictures of friends lounging on the beach when we’ve just trudged through the snow to the office. These feelings of jealousy or envy have to do with the comparisons that we implicitly make between ourselves and our “friends,” or in many cases, our distant online acquaintances.”
Make your own decisions
Trying to keep up with friends and acquaintances or taking advice from social media influencers has the potential of causing you to get into financial trouble by overspending and losing money on risky investments. By all means go buy something from your influencers but just keep it moderated. You never know what the motivations are behind the influencers and you can never really tell what the true financial situation is with your online friends. For some it is not easy, but remember we can never truly know what is really going on behind the social media account. As a result I am one who takes a much more cautious approach when dealing with people on social media when it comes to finances.
This is a MySmallBank.com blog written by Allan Kirby, who writes and produces Personal Finance and Money Management articles and videos along with My Success Magazine.
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