Today I want to get the discussion going about whether some financial products are inherently bad. In other words, are there financial products that are a poor choice for everyone, at all times, just by their nature?
Financial Products Often Characterized as Bad
- Retail Credit Cards
- Adjustable Rate Mortgages
- Whole Life Insurance
- Variable Annuities
Can you think of some other financial products that get a bad rap, justified or not?
One overall problem I see with blanketing these products with the “bad” label is that each can come in several different variations. The amount of choices within the personal finance realm is truly dizzying. Did you know that Vanguard (one of the best online stock brokers) sells variable annuities? They wouldn’t sell a bad product, would they?
Everyone is Different
Another problem with labeling all these products bad is that they are used by so many different people. It’s called “personal” finance for a reason. What’s good for you isn’t always best for your 80 year old grandmother, nor your neighbor down the street. Likewise, what’s bad for you might be perfect for another person.
Take the Time to Understand What You’re Getting Into
All this leads me to one take-a-way: since there are so many choices now, and since every one’s situation is different, we should each spend time learning about the financial products we are using. Is there a single financial product, that if well-researched, applied correctly, and used intentionally, will do a person harm? I don’t think so.
Now, I challenge the idea that you have to become an expert on each product. Although it wouldn’t hurt. All you really need to do is pick up a book, blog , or magazine and get a basic understanding. Then, seek out different opinions from various commission-free people in your life. This could be people you know, mainstream financial gurus, Certified Public Accountants, and Certified Financial planners.
But don’t stop there. Don’t just depend on others. Apply what you learn, the opinions of others, and your own personal b.s. meter, to the decision. If you have doubts and things aren’t agreeing with your personal risk tolerance, then you still have the control to say no.
Where not to get your information: from the person selling it to you!
I definitely get sold from time to time on various products. Life just happens like that. I strive though, to get my information from several sources: other financial bloggers (they usually know the latest and greatest), financial gurus like Liz Weston and Dave Ramsey (their credibility depends on them being right) , and from my friends and family (they know me best and know the local implications). Hopefully after all of that is applied I can weed out the truly bad financial product and make a good decision for me.
Okay, so what do you think? Are certain products just bad, no matter what? Let me hear from you in the comments below…
FYI…Today marks two years since I first started blogging about finance here at PT Money. Thanks for continuing to read and participate.