Think Before You Click: Navigating Financial Advice on Social Media

Well, hello everybody.

This is certified financial planner David Chudick.

And welcome to episode number 203 of the weekly Wealth Podcast.

It still blows my mind that we've put out over 200 episodes of the show today.

I want to talk about some things that are happening on social media with regard to financial advice and influencers and.

And maybe about what some of the motivations of the influencers are and what you can avoid so that you don't make bad financial decisions based on a 30 second TikTok video.

Ironically, there might even be a few clips of this show ending up on social media, but hey, that's just the way life goes.

Hope that you enjoy this episode and I hope that it might be able to prevent you from making some bad financial decisions.

Welcome to the weekly Wealth Podcast.

I am certified financial planner David Chudick.

This podcast and my wealth management practice are both designed to help the mass affluent to live better lives by how they handle their money.

We talk about financial strategies, prosperous mindsets, and simply how to build true wealth.

So come on and let's enjoy this journey together.

Welcome to the episode.

Before we get started, please make sure to do all of the things.

Make sure to share this episode and the podcast with your friends and your family.

Make sure to like and subscribe and make sure to follow us on social media.

Yeah, kind of ironic that I'm telling you to follow us on social media during the episode where I am going to talk about some financial advice that may not be so great that you might be seeing on social media.

So if you're like me, you scroll maybe a little bit too much on social media.

And I wanted to give some warnings or at least help some of our listeners to know what you should be looking for on social media and what you should not be looking for.

Okay, so a lot of our listeners to the weekly wealth podcast are age 50 and above.

And let's talk a little bit about social media use and people age 50 up.

So Facebook remains the most utilized platform among this demographic.

71% of individuals age 50 and older report using Facebook this year, and that's up from 68% the previous year.

YouTube is second most popular with 51% of those age 50 reporting usage.

And then of course there's LinkedIn, which about 24% of people age 50 to 59 have a LinkedIn profile, Instagram and Snapchat.

A little bit less popular with the 50 plus group, much more popular with the younger people.

And then TikTok, we all heard about that TikTok ban that I think took what that last about a day.

But TikTok is growing and TikTok usage in 2023 Pew Research study found that TikTok usage among 50 to 64 year olds had doubled since 2021.

So TikTok is growing.

Tend to get a lot of information from social media.

Some of it's good, some of it may be not so financially sound.

So if I happen to be on social media and I see a post that happens to be about money or some money situation, being who I am and being a geek, I start looking at them and saying like what is this person's motivation?

And is this a post that actually has sound financial principles behind it?

A lot of times I'll see people and they claim to be financial experts and I don't know what their credentials are, I don't know what their licensing is.

But there are a lot of people who talk about how a 401k is not a way that wealthy people get their wealth.

They'll give some statistics on how much of your 401k will be taxed on the way out and typically there'll be some sort of a message in there saying but if you buy a indexed universal life insurance policy, you'll get your money tax free out.

Nothing against indexed universal life insurance policies.

I actually own one of them myself for myself as part of my financial plan.

But I can poke a lot of holes into the theory that 401ks are not good places to put your money.

So number one, most 401ks have a match.

So if you have a 3% contribution and a 3% match, you've literally just doubled your money.

And I don't know of any way you can make that into a bad thing.

There are a lot of the so called financial experts or influencers that will say that your 401k money will be taxed on the way out.

And yes, that is true unless you choose the Roth option inside of your 401k.

And not all 401ks but almost all of them have a Roth option.

So you can put after tax Money in your 401k and then take it out tax free, which they conveniently forget to mention because that that goes against their narrative that you should only buy permanent life insurance as a way to get tax free money later on in retirement.

So when you see any of these 401s are not a way to build wealth, just think about do you really think it's a bad thing to make a systematic contribution to a retirement plan through your Paycheck where there's typically some sort of a match from your employer.

And you'll also have the ability most of the time, not all the time, but most of the time, to choose a Roth option which will not give you a tax break on the front end, but it'll give you tax free distributions on the back end.

Or you can choose to get a tax break up front and then have your money coming out as a taxable event on the way out.

And with a 401k, honestly, you can choose a combination of both.

So that's one of the first things that I see is that there are financial experts and yes, I'm using the air quotes because I don't believe in a lot of cases these people are experts who will say that a 401k is not a great way to build wealth.

So here's one that I'm looking at right now.

This is an Instagram post and it says most popular, almost never equals best example, Roth IRA and 401k plans.

When you add up the amount of taxes you'll have to pay on them, you better have your chamomile tea within reach.

There are better options that often fly under the radar, example life insurance policies and HSAs.

So that guy clearly has as a goal the goal of selling life insurance.

And again, I don't know that having indexed universal life insurance is a bad thing.

I have it myself, but I don't think it is the end all, be all for everybody scenario.

So the first one that you'll see a lot of on social media are experts who are claiming that 401ks are not great places to put your money and not great methods by which to build wealth.

And typically they are looking to sell you indexed universal life or some sort of a whole life insurance policy.

All right, let's move on to some influencers on social media.

Media that try to maybe make big statements to get to get notice.

So you may have heard of Grant Cardone and last year he had his YouTube video came out that said if I made 400 grand a year, I would be embarrassed with myself as a husband, a father, basically as a human being.

400 grand.

How do you make sense of 35,000amonth?

You guys haven't done the math.

You have not done the math because you cannot live on 400 grand on 400 grand per year.

So I get it sometimes when you make bold statements, it gets views, it gets clicks, it gets things like that.

But be careful when you're watching social media, number one, they Call it fake book for a reason.

And not everybody makes as much money as you believe that they do.

But also the job of an influencer often is to get clicks and to get likes and to get views.

And then eventually you may buy their product or buy their service so more people will click on and talk about and share a video that says you can't possibly live on $35,000 per month.

Then people will share a video about sound financial principles, maybe a video about let's just make sure that we have an investment process that makes sense or let's make sure that we're looking at our car insurances and they are protecting our wealth.

Those are kind of boring.

And I talked a few episodes ago about some boring financial planning topics.

But you will get a lot more attention when you say something like it's impossible to live off of $35,000 per month.

So just be careful and understand.

The motivation of an influencer or a social media personality really is to get views, to get likes to grow their brand and then from their brand they are able to sell whatever product they're selling.

Which I think in Grant Cardone's case may be some courses and he may even be ask asking for investments into his fund.

The other thing that he talks about a lot is that owning a home is the worst financial decision you can make.

So again, that's a little bit outstanding, that's a little bit noteworthy.

So that gets him some attention.

And it is interesting that the guy who buys apartments and is really big on multifamily rentals is telling people not to buy a home.

Little suspect, I'm not sure a lot of people, maybe if somebody buys their home, they're no longer a customer for one of his apartment buildings.

Just a thought, but again, make sure that you're looking behind the influencer to see what their motivation might be for the claims that they are making.

Now, many social media type advisors, they have a philosophy and it's kind of a one size fits all and it works for everybody.

So let's take Dave Ramsey now in many cases it's hard to argue what he says, living a frugal lifestyle, spending less than you earned, things like that.

But I do know financially successful people and some of them are my clients and I know that they're using debt responsibly.

So is debt always a bad thing?

So make sure that when you're following an influencer, you're listening to all of it.

And don't take all of the advice without questioning because maybe some people Literally can't handle debt.

Or maybe they have an actual biblical or spiritual objection to debt, in which case I will never argue that.

But there are many, and I mean many, many wealthy people who have used debt responsibly.

Now, with debt comes risk, just like there's risk in many areas of life.

But I would urge anybody that when you work with a local financial advisor, sometimes your plan can be customized.

When you are listening to an influencer or reading somebody's book that's kind of a one size fits all, everything is for everybody type of approach.

And sometimes I almost look at financial planning decisions as a bell curve.

There's what's in the middle of the bell curve and there could be some discretion and then there's what's out of the bell curve, which would be really, really bad ideas.

So is it bad to have a business loan on commercial real estate?

I don't know.

I would argue that it's not.

As long as you've done your due diligence and the property cash flows and you're not overextended in many cases it may be a good idea.

Now again, if it's an ethical thing for you that you don't believe in debt at all, then hey, go for it and pay cash for everything.

And I think in that case you will be fulfilling some of your moral obligations.

So when you're following an influencer, don't take everything that they say as gospel because there may be some room for discretion within your financial decisions.

So we talked about a couple influencers that are pretty popular and maybe what some of their motivations are and pointed out maybe some gaps in their teachings and their may be some discretion.

There may be some differing opinions, but they're not all out fraud.

Horrible ideas.

But then there are some other videos that I've seen out there and you can Google these.

There's one, it's called the takeout credit cards and then declare bankruptcy idea.

And it's going to be someone who's telling you that you could just basically get free money.

So obviously that is a horrible idea and then that can lead to major, major consequences.

Let's look at the Start and S Corp and avoid all taxes idea.

There are social media posts that say that you don't need to make pay taxes if you have an S Corp or, or there's the old one that is if you write a letter to the IRS and you don't want to pay taxes, then there's some weird legal loss and you don't have to pay taxes.

Which of course is not true.

I've seen the one about how banks have to give a LLC a $50,000 line of credit, then you can turn that into a trust and all kinds of crazy things.

While I don't know, I've been doing this a long time, I don't know of any law that says that banks have to give you a line of credit if you have an LLC without any documents.

So some of the things that just really look like horrible, horrible ideas, more than likely, guess what, they are horrible, horrible ideas and don't follow them.

But it is scary because licensed and credentialed professionals like myself, we are, we're bound by some compliance rules and fiduciary principles.

But any old Joe who goes out there can pretty much post anything on, on TikTok or on Instagram.

And, you know, there's.

There may not be that many repercussions if what they're posting is not accurate.

So again, use a lot of caution when you are getting any advice whatsoever from TikTok, from Instagram, from Facebook.

I do.

I have had clients and, and people ask me about a certain stock that they saw somebody talking about on TikTok.

And my answer to any question about any one stock always is, I don't know if you should own it or not.

It should be part of it should be considered if it's part of your investment process, if it's part of your overall financial plan.

There may even be reasons why you should not be investing in anything right now.

Maybe you should be paying off debts, maybe you should be building an emergency fund.

So that question of should I buy that stock that I saw on Instagram or on TikTok, my answer is it's a much, much, much deeper question than should I buy the stock?

It's does that particular stock fall into a wise financial decision for me?

And that is different for everybody.

All right, so now you're gonna see some parts of this podcast on social media.

And I don't know that I would call myself an influencer, but I'm a podcaster.

I do share information on social media.

And I want to talk to you what my mot and kind of what my goal is when working with my clients.

So I have some financial planning preferences, I have some financial planning ideas, but I am not leading with a main product other than a financial plan.

So to me, it doesn't matter if you feel like a little bit of debt that's well managed is okay for you, or if you feel like no debt is okay for You, I, as a financial advisor can work within both of those scenarios.

Okay.

Within the financial planning process, my job is really to help to identify my client's goals and help make a roadmap to get them to the goals.

Now, sometimes the goals require specific behaviors.

It might require spending less money, it might require paying off some debt, it might require doing things to raise income.

It might require even just having a weekly meeting with your spouse to discuss the family's financial scenarios.

And of course, it's also going to involve different financial products, different types of investments, insurances, annuities, tax savings accounts, things like that.

So what my job is, is to kind of marry the behaviors and marry the products in a way that will help you to reach your goals.

Now, I don't have specific absolutes on how to reach goals and I also don't necessarily tell you what your goals should be.

So going back to Grant Cardone's, how does Anybody live on $35,000 per month?

Well, if your goal is to just live a minimal life and you're okay with that, then I'm not going to push you to try to make $35,000 per month.

That's not my job.

My job is to ask you what you want and help you to get there.

So I don't have really a product that I'm selling other than the plan, and the plan is really just your goals.

So have you heard very many of the other influencers talking about simply helping you to reach your goals or have you heard them talking about their philosophies and their, their products?

So that's a really, really interesting question to ask yourself when you are considering listening to an influencer or taking advice from social media.

So without all that being said, if you've ever wondered what it might be like to work with me personally as your financial advisor, literally in person, or with me personally over zoom, go to my website, www.weeklywealthpodcast.com, click on the Schedule a chat button and you can schedule an appointment and we can talk about what's important to you, we can talk about your goals and we can talk about what you would like to have happen financially and then we can point you in the right direction.

Maybe we would work together on an ongoing bas, maybe we wouldn't.

But that is a great starting point and I'm happy to have a 30 minute conversation with anybody at no cost.

And actually I'd be really interested in knowing who do you follow on social media with regards to money?

Do you have a money guru?

Do you have an entrepreneurial guru that you follow?

Do you have anybody that you follow and what is about them that you like and maybe what is it that you don't necessarily like?

I think there are many great influencers out there that provide a lot of value.

And yeah, they're using social media to promote their business just like I do, and there's nothing wrong with that.

But I also think that there are some social media influencers out there that are just trying to get attention and maybe some of their information is not incredibly positive for you and your financial decisions.

So let me know.

Go to my website, www.weeklywealthpodcast.com, click on the microphone icon and leave me a voicemail who some of your favorite or maybe least favorite social media influencers are.

Or you can leave a comment on our Facebook page on who some of your favorite or least favorite social media influencers are.

All right everybody, so that wraps up this episode.

Let me know if I can ever be of any help to you.

I love bringing this content to you.

Like I always say, I believe that how we handle our money should positively impact our lives and the lives of those around us.

And I hope that this podcast can be a small piece of that puzzle in your life.

And until next episode, I wish everybody a blessed week.

Thanks everybody.

Investment Advice offered through Parallel Financial, an SEC registered investment advisor able to conduct advisory business in states where it is registered or exempt or excluded from registration, contents contained herein or for informational purposes only, and should not be construed as an offer or solicitation for investment advice or for the purpose, purchase or sale of any security, insurance or other investment product.