How to tell when money advice is bad and who to trust

There are a lot of people out there who want to tell you what to do with your money.

Whether it’s a friend with a hot investment tip, a relative spouting off outdated directives about the way it “should” be done or a social media influencer touting a trendy financial product, money advice can be hit or miss. You can filter out the useful tidbits and leave the rest, but to do that, you have to know how to evaluate which pieces of advice you can trust.

Consider the source

Certified financial planners, financial coaches or nonprofit credit counseling agencies can all supply you with advice that’s tailored to your unique circumstances.

Look for professionals who don’t earn a commission when you agree to follow their advice by using recommended solutions. That way, you know you’re getting unbiased guidance.

A friend or relative who accomplished a similar financial goal could also have actionable tips to share. You might be able to lean on them as a source of emotional support while you work toward your own goal.

There may even be some nuggets of wisdom in outdated advice that previous generations relied on. The next time you’re treated to a lecture about how cars cost a nickel back in the day, instead of scoffing in disbelief, ask open-ended questions. How much was your grandfather paid at his first job out of school? How much did your parents’ first house cost? That can open up a conversation about how salaries, housing costs and other money issues have changed over time so you can both understand where the other person is coming from.

Think about how feasible the advice is for you

Money advice is like clothing. It’s designed to fit a person, but that person might not be you. Certain money best practices don’t work for everyone’s situation.

“So often we ignore the context of what people are going through. Financial advice-givers don’t bring in the context and it’s really harmful when you don’t,” says Phuong Luong, a Massachusetts-based certified financial planner and founder of Just Wealth. “It perpetuates the myth that we can do this on our own and we cannot.”

She cites the oft-discussed 50/30/20 budget — where you apply 50 percent of your take-home pay to “needs” (like housing, utilities and transportation), 30 percent to “wants” (like hobbies and travel) and 20 percent to savings and debt payments — as an example.

In high-cost areas, she notes, rent alone might eat up half of your take-home pay.

Bad money advice can also oversimplify a complex decision.

Be wary of advice that’s too good to be true

The internet and social media are rife with money-related clickbait that promises near-instant success. Influencers sell access to expensive courses that claim they’ll make you a millionaire. High school acquaintances send you direct messages out of the blue, asking if you want to “be your own boss” by joining a multilevel marketing program. Many of these get-rich-quick schemes are a waste of time and money.

“If it requires you to put money upfront first, that would be a red flag for me,” Luong says. She recommends taking a hard look at these offers by finding out as much as you can about them — including looking up reviews — before you fork over any money.

Trustworthy money guidance isn’t going to make empty vows about guaranteed wealth. Look for advice that fits you, but gives you realistic expectations and a few alternative courses of action.

“Be wary of any financial advice that seems like it’s black and white,” Pierce says. “Because it’s very much a gray practice.”