Ep 64: 3 Kinds of Financial Advice to be wary of

Okay, so I’m sure you’ve seen a lot of financial advice everywhere. Maybe not just financial advice, but also all sorts of advice. But since we are a podcast about financial literacy, we’re going to focus on financial advice. And you get it from all sorts of platforms these days. It used to be that mostly it’s from your parents, right?

Your parents will tell you a certain advice; they will tell you what to do based on their experience, based on their perspective. But with the liberalization of the internet and all these kinds of information medium, you can get information from everywhere, right? From forums to Facebook pages, to even podcasts like you’re listening to us, and YouTube videos and all sorts of platforms.

So, the problem has shifted from a period where there was information scarcity — like there’s not enough information, you got to read books, you got to go in and hunt for some of these good information, and you got to pray hard that you come from a good family that already understands personal finance — till today.

The tides have turned, to become like “Wah piang!” a lot of information, all sorts of information out there, and everybody is trying to position themselves as someone that understands personal finance, as a financial guru, as whatever. And they’re all trying to pick your eyeballs and get you to believe that, get you to listen to them.

And it becomes like a market lah, noisy, and a lot of, for lack of a better way to put it, shitty products or shitty information and it’s just not good enough! And I thought that we’re going to spend some time talking about some of these characteristics and some of the problems with this kind of financial advice.

And I used the word ‘wary’ because they are not actually wrong per se. So, some of these advice, they are not off the chart. They are not shams, or they are not fake or lies. Of course, there is a whole chunk of those, but we’re talking about financial advice that sounds like, “Eh? Can work!” Sounds sound… But fundamentally may not click with your life, because we all have our own lives.

We all have our own way of life. And, sometimes these advice, they mask themselves as the only advice or the only way. So that is a very big problem. So yeah, one of the first kinds of financial advice that I feel you should be very wary of, is the kind of advice for perfection.

What is the advice for perfection? Which means these are the advice that under perfect scenarios, under an optimal scenario, it will work right. And it is usually based on some sort of research; they will use things like “research shows…” which is not wrong, research shows something.

And they will use like, the old results shows something, something, something. And then they try to extrapolate that idea further, which is not technically wrong, but like I said, you should be wary of, because most of them are priced to perfection. They’re assuming that what has happened in the past will continue to happen into the future.

And they’re assuming that in a perfect scenario where there are no anomalies, no random things that happen in your life, these advice will work. And some of these advice are things like DCA. DCA is not technically wrong (dollar cost averaging). It has shown in the past, history shows that it works.

But, does that mean that it’s going to extrapolate into the future? What are some of these assumptions of the DCA? A lot of people don’t talk about it. If all of you don’t know what’s DCA, dollar cost averaging is a very popular concept these days, where the central idea is you keep pumping money every month consistently.

So then, you will average out the highs and the lows, and ultimately get the kind of growth from the stock index, or whatever stocks you choose to buy. But, it doesn’t talk about things like in real life scenarios, during a down cycle, like now right? During a period where we’re seeing recession, some people lose their jobs, right?

So they lose their jobs, they don’t have that consistent income. Then, how can it continue to DCA? So the continuous income, consistent income is very important, and it’s not affected in the whole DCA mechanism. The DCA mechanism just tells you the idea that, every month you keep pumping a consistent amount, it irons out, which is right.

But when you apply it to your own life, you know where life is not a linear path, there are other things to look at, and you realize, “Eh tsk, maybe ah, it may not fully encompass a way of life.” It is a theory that works and is a theory that we can incorporate into our lives, but there are assumptions and there are scenarios that don’t work for us.

So if you want to look at consistently DCA-ing in investing, that theory works, but then how much do you put in so that you can comfortably continue to DCA, even in a period that you don’t have employment? Because that is the kind of supposedly packaged deal that comes with a recession lah.

So, I’m not taking it lightly lah. I know a lot of my friends and you guys, some of you may have lost your jobs, and doing some simple work too to just tide you through. But this is something that you need to be very wary about, which are things that are advice for perfection.

Other advice that are very popular out there, that I think it’s priced for perfection, are things like your 30 year savings plan.

Long-term savings plan, every month you just keep putting and putting and putting, and they make it sound very simple. But when shit happens, shit happens! And you may not be able to pay, you get penalized, you get penalized, all those kinds of stuff. So, you want to make sure that if you subscribe to this kind of long-term savings plans or endowment plans, they’re not fundamentally wrong per se, it is just a particular financial tool. Then, you got to recognize that, okay so this is the theory that after I put in 30 years… I get back this amount of returns. But can I, assuming bad days, can I consistently keep up with this savings?

If I need to have kids, or if I need to do something else. So, I always think that you should try to do a bare minimum, and then keep adding if you feel that you can do more after a while of coping with the new reality. It’s like you go to the gym, when you first started gyming, you do like 20 kg.

And you don’t straight away go to 100kg because 100kg will definitely give you my muscles, duh, but you must start with 20 kg, right? So that is advice for perfection and advice that works on you. So, all these things are things to look out for, and recognize what are things that come from a theory and come from historical results prove that something, so into the future, it will be something.

These kinds of things, based on a research paper…, all those kinds of stuff. You want to be very wary about, whether do they fit my life? And what is my way of life and how does that incorporate?

So for more specific details, if you have something that you’re looking at, or some strategies, or some things you’ve heard somewhere, come to our community Telegram group and just ask us, we’ll try to give you our viewpoint.

The next group of advice that I think you should be wary, are advice that sounds logical independently, but when they are mish-mashed together, it turns out to be quite rubbish. Don’t really know what I’m saying, right? It’s okay, we will come back, after a word from our sponsor!

So when it comes to advice that sounds logical independently, but then mish-mash together, what do I mean? They’re things like, the sky is blue, noodles are nice, the greens are beautiful, and then I’m a unicorn. You know that’s kind of, independently, the sky is blue.

Yes. The noodles are nice. Yes. The trees are green. Yes.

But it doesn’t mean that these three things add together, I’m a unicorn. 不是这样吗! (bù shì zhè yàng ma). It doesn’t work that way! And you realize that it is very, very common in the whole personal finance space. A lot of people do that! it’s like, argh, damn irritating.

I try not to name names, but you know there’s this one YouTube channel, super popular.  Always talking about a particular company that is trying to revolutionize the world… And the argument is always meh lah! Because it’s the same idea, right? Let me just give you a certain narrative.

Today, there is a certain logical flow in discussion. There’s a certain logical flow in whenever we discuss, or whenever we present a certain point. So, let’s say I’m trying to make a point that Apple is a good company. So, what do I do? I say, “Apple is a good company because they have a very strong brand. They have a strong, loyal following, and they’re able to charge a premium for their phones, which fundamentally brings them that kind of revenue and it can allow them to keep making money, and then invest in other growth aspects of their business, or acquire other businesses that will be aligned with them. So, because of that, I’ve decided that I will pick Apple as a company to invest.” This is not financial advice, okay? Just an example. Don’t later you go and invest ah, then got problem ah, then you come and look for me, no ah.

But yes, you hear the logical flow, which is Apple is a good company, they have a certain brand, they have a following, they have revenue, they’re doing well, and that’s why I will invest. So you hear the general flow as to why I’m choosing Apple, and on the same narrative of why do I choose Apple is investment, if someone comes and say that, I choose Apple as an investment because, government bonds suck, and real estate is messy because now prices are inflated, and I think Samsung is rubbish, so I decided to invest in Apple.

Then you’ll be like, “Uh, so you tell me everybody is not good ah, then you invest Apple har? Is that how it works?”

So, what they just did was, they went around and tell you also all sorts of other pointers that may be valid individually, real estate market is very inflated, bond market is not good, Samsung is not doing well, that’s why I do this and that’s why I invest in Apple. But the logical flow does not work mah. What you are trying to do is to present to me why you do this, and you need to focus on this, and not like every other thing.

Which is why when I was in University for one sem(ester), I asked this person and say, “Hey, why are you in business school?” And she’d be like, “Oh, I don’t want to be in architecture, I don’t like engineering, I don’t like science, I don’t like whatever, that’s why I’m in business school.” And I’m like, “Girl, you ain’t no making sense!”

So, I hope you get a decent idea. I know this is a bit difficult to grasp, but whenever someone’s trying to present you something, their discussion needs to be logical and have a logical flow, which is step by step, focused on the particular thing. Be very wary of advice that mish-mash all sorts of stuff together and like, ta-da! Oh, this is why you should do this.

And now that you know that there’s something like that, go back and visit all these other YouTube videos, gurus, and all these other people that are talking about all sorts of stuff. And you listen to their discussion and you listen to their viewpoint. If you try to present to your teacher, your teacher will like, “F! Fail! 下一个 (xià yīgè).”

So, go and listen to their viewpoint, and don’t be sensationalized by all the BGM, you know the kind of cinematic graphics and all those kinds of so rubbish one. So, you want to listen to the core of the advice, and be very wary of these kinds of stuff.

Which brings me to point number three, which is advice that comes from someone that has longer legs than you.

What does that mean? That day I came out of the MRT station and then, I was walking next to a kid. There’s this little kid walking very fast, like he was just taking a lot of steps and he was very, very fast. And I was just walking like normally, and in a few strides, I just overtake him because my legs are longer.

And it got me thinking. Is there advice that doesn’t work for me? Just because the other person has longer legs, so it doesn’t work for me. And if you think about it, yeah, there is. So if someone comes from a very wealthy family, they have a certain view and way of managing their money.

And it may not work for you because you don’t have the same scenarios. You don’t have the same situation. Or sometimes some people they have done really, really well. And they went from nothing, and they go to become like millionaires. Then, they start to give you advice from a viewpoint of a millionaire.

And many times people forget, because even I will forget sometimes. When people ask me like this, this, this, then I’ll give them the advice of now, which is my current optics of how I look at it, rather than advice that I will give myself at that point in time when I was in his or her shoes.

And I’m going to give you some context. There was a short period of time when maybe a few years ago, I would discourage people to be entrepreneurs. I would discourage people to go and try and explore and test things out, because I had very crazy and, for a lack of a better way to put it, bad experiences.

And I thought, “Ya, you should just go out and do a job lah, make your money, and live your life.” And that was the advice that I would give myself, at that point in time, when I was giving advice to that person. But, that person has not even tried doing a startup, has not tried living a life, or work in the job market, and I’m already smashing the person’s desire to give it a shot.

Just because I’ve done it and I didn’t do as well, and I fear that they will go through the same thing, and “waste time”, then I’ll tell them, don’t do. But now after a while when I look at it, if I have not tried to do multiple startups and try to venture into different businesses, I will not be that cognizant today as to how businesses work, and how to analyze companies and how to build a successful startup…

And we wouldn’t be where we are today with all these different podcasts coming, with all these different companies that we collaborate with, all these different products that we have on our sleeves, and yeah, it wouldn’t have happened if I didn’t do all those things before. So, in that case, many people do give you advice that does not work for you at this current point in time.

Imagine if that person really listened to me and never tried a start up, and for the next few years, he just keeps working and he may not love his job, and he may not get a better grasp of how the job market worked, and he may never even build his dream. So, when I look at it, I remind myself that I need to put myself in the person’s shoes, and give them the kind of advice based on what works for them at a point in time, which is very difficult.

And also our Chief Post Production guy, Harry, has started rock climbing for a few years, for a while lah, I think for a while already. And he recently told me, “Hey, I’m going to get a coach.” And I was like, “Oh, who are you getting?”Like, is it like some super buff champion guy?” And he’s like, “No, I’m getting a girl. I’m getting a lady to teach me how to climb.”

And I was like, “Why, why you get a woman to teach you how to climb, right? You know, you man, bro!” He was like, “No, because our physique is more similar.” Because he’s not big size. He’s more petite. So, he actually went to look for someone that is similar to his physique, and that also wow me. It’s like “Oh yeah, that’s true.”

We want to seek advice. We always think that we need to seek advice from the best of the best, from the champion in class, from the champion in the investment world. And then they’ll tell you a certain viewpoint. They will give you a certain optics. Yes, not wrong. But a lot of things that they do, may not work for you.

But if you ask that classmate of yours, that went from fail to get a ‘B’, it’s like, “Eh, bro, how you fail and get a ‘B’ ah?” And he will tell you, and then you can do that advice and get your ‘B’. And then after that, you go and look for the guy that went from ‘B’ to ‘A’, and then get that ‘A’. So, keep searching for advice, but always realize that we want to seek for relevant advice.

Don’t look for people that are like leaps and bounds ahead of you, and they just have longer legs lah. So, they will not know how it feels, or they may have forgotten how it feels like to walk with shorter legs. Okay, so I’m going to sum up today, the three kinds of financial advice that you should be wary of.

And wary, I mean that you should be concerned when applying to your life, and it’s not that they are objectively all wrong, but it’s just whether they apply to you, and how do you be smarter with sieving out different advice. And number 1 is advice that are priced for perfection. Essentially, the optimal, optimal scenario.

More often than not, I don’t think we can meet optimal scenarios, but we can incorporate some of these advice into our lives and they do help us, right? Like DCA, like long-term savings… All these things are good. They do help us. But you don’t want to bet all your eggs on it. You want to cut yourself some slack when using these advice.

And number 2, an advice that sounds logical independently, but then mish-mash together, it becomes quite crappy lah. So, they don’t make sense, like what I’ve shared with you prior.

And number 3, is the advice from someone that has longer legs than you. Many times, people that are way, way, way ahead of you, they have either forgotten where you are, or they may just have never been in a similar scenario like you.

So, you need to get the essence of that advice, and then see how it applies to your life, okay? So, I hope you’ve learned something useful today. See ya!

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With that, have a great day ahead. Stay tuned next week and always remember, personal finance can be chill, clear and sustainable for all.

Stay till next week. And always remember personal finance can be chill, clear and sustainable for all.

Okay, so test, test. I hope you’ve learned something useful. I hope you had fun and yeah, a lot of these advice, there is a lot of advice out there. They may work. They may not work. They may not work for you. They may work for other people. So, the goal is not to tell you that all sorts of advice are crap, but it’s really to let you realize that you need context, you need to understand how to sieve out these advice.

And it does take some time to get your senses more cognitively in tune to smell BS, and what advice works for you, and what advice is like, tsk you know, it’s right, but it may not work for you. So, I hope you’ve learned something useful and I hope that applies to your sieving process of looking for good advice.

Next week, next week, we have a friend of mine, a secondary school friend. We’re not close back then, but I think he’s doing something really interesting. And he’s Zheng Jie’s very good friend. So, he’s coming on the show to talk about social enterprise. Is social enterprise a fulfilling way of life?

Because the assumption is, for a lot of people in the social enterprise space, they take a pay cut to do it, which may not be the best, and we’re also going to talk about that, like is it valuable to take a pay cut? Obviously if you work in tech or you work in the banking field, they pay more, but you choose to give up to embark on some environmental project or embark on some social change project.

And is it worth it? Is it a way of life that people like you and I should consider? So, he’s coming on next week, to give us some optics as to how he sees it, because he has went through the path of doing the tech startup, working for multiple startups, and then going to hike in the Himalayans, and then came back and decided that, “Okay, I’ll do this social enterprise.”

The social enterprise is called ‘Books beyond Borders’, you can check them out. Next week, he will be on the show, Mr. Randal Chong. See you guys next week. Bye bye!