Beware of advisors preaching doom

The other day, while strolling around a bookstore at Oliver Tambo Airport in Johannesburg, I tumbled across a personal finance book with a very sparkling cover.

As expected, I was immediately drawn to it. However, the title on the book did not appetise me to delve much into it. It was more or less in the lines of portraying a sad picture of the global financial crisis on people’s personal finances. It was like telling people that Dooms Day was coming.

To me, books such as this one aren’t delivering personal finance advice, they’re selling fear. It is not unusual to go on the Internet and find personal finance books with words such as apocalypse, meltdown and collapse—talking as though these events are imminent and they will be catastrophic to your life in many ways and you had better act now on whatever advice they’re selling or else you’ll be in deep, deep trouble.

Although these topics are pitched as personal finance, the ideas they deliver to you really don’t have much to do with personal finance at all. This is about one thing and one thing alone: causing you to fear the unknown events that the future holds so that you make decisions that aren’t fully rational.

From my perspective, personal finance is about hope. It’s about a sense that if you make strong choices with your life, things will get better and you can put yourself in a better place.

Yes, broad economic issues such as demand slowdown and likelihood of unemployment due to shrinking world economy are worth talking about. But those should be viewed as part of life’s challenging real issues that should build your positive attitude and help you tap on the best of you to move from today to a better tomorrow.

These books take a different tactic, stating that tomorrow will be far worse than today and here is how you can minimise the damage from this specific crisis. Another worrisome attribute of such apocalyptic visions is that they usually end up with a recommendation of one specific investment vehicle as the holy-grail for keeping you safe.

This is senseless. There can never be one solution to managing your personal finances amidst a complex set of economic ills. The best thing you can do to prepare yourself for financial strength in any situation is to work on constantly improving yourself.

Learn as much as you can about everything. Focus on teaching yourself new skills. Learn how to live as frugally as you can so that you’re not helpless in the event of a financial crisis. Doing these things will benefit you no matter what the future holds, but are particularly useful if things hit a major rough patch.

There is no “magic bullet” solution for any future crisis. We do not know what the future holds, and to buy an investment based on the recommendation of someone that preaches fear is dangerous. If you buy into theories that shout “the sky is falling,” perhaps it’s time to tuck away that tinfoil hat and look for things you can do right now to improve yourself—no matter what the future holds.

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