There is nothing wrong with having an opinion. But there is a lot wrong when you make the mistake of confusing opinions with facts. Indeed, when you make that error you run the real risk of running your financial ship aground irreparably. This is important stuff.
Your mindset is the single greatest predictor of your financial results. And if you magically turn your opinions into “facts” and then make flawed decisions as a result, you run the risk of squandering your assets and your time and leaving your family dangerously exposed. That’s expensive and frightening amigo. You (and they) deserve better.
I received a comment a few days ago that illustrates the dangers of this kind of thought. In fact, if there were awards for making skewed decisions based on distorted opinions, the fellow who wrote to me would get a Pulitzer. That’s exactly why I want to go through this together.
I can’t help the writer. He’s in way too deep. But if we examine his “logic” maybe we can help each other avoid making the same kinds of mistakes.
Note – The entire comment slammed life insurance, real estate, stock market investing and financial advisors. We’ll just look a few of his statements regarding life insurance to save me from getting a migraine.
Also, I am not objective because I am a professional advisor and investment manager. I also love real estate and term life insurance for the right person. I’m not going to debate the merits or pitfalls of these financial tools here. I’ve already done that many times on the blog. I just want to use these to illustrate the dangers of being opinion-based when it comes to money.
“Life insurance is perhaps the worst product ever sold. Here is the truth – 95% of widows have spent 100% and then some of proceeds from the so called “family insuring products” within 18 months.”
I have no idea where this statistic came from. But if this is true, it only means that people either don’t have enough insurance, buy the wrong kind of insurance or they don’t know how to invest the proceeds for income. It doesn’t follow that the product is “bad”.
“Most people cancel their policies.”
Some people do cancel their policies but most do not.
And just because some people do cancel their coverage, does that mean it’s a bad deal? If my neighbor stops eating veggies, should I stop too? Some people cancel life insurance because they no longer need it. That’s great. They should cancel it. But does that mean they never should have purchased it? No. There are a variety of good reasons for canceling coverage but that doesn’t mean (at least term) life insurance is a bad idea.
The writer is jumping to conclusions too quickly.
“Life insurance agents generally receive 80 -100% commissions whether it is term, whole or universal.”
Term insurance does pay high commissions. Whole and universal life pay a lower percentage but on a much higher premium. So what? That doesn’t have anything to do with the value proposition. I think that whole life insurance is oversold all the time and typically a very ineffective choice. But that has nothing to do with how much life insurance agents earn. Some doctors charge high hourly rates. Does that mean I should never see a doctor?
“No one ever actually invests the difference. They spend it.”
I buy term and I invest the difference. So do the people I work with.
“Social Security benefits are already a forced government insurance policy.”
That’s true but again, so what? That coverage is not enough for everyone. I know it’s not enough for most people I meet.
“Perhaps most importantly, dead people have no cares or desires. Life insurance is all sold on false fear and guilt — “oh my goodness, what would your spouse and children do if you were to die?? How would they ever replace your income??” Well it is very simple; they would continue living until they die. If they want income, they would get a job or start a business.”
Eh…….OK. Anything you say. This reader went on and on. It doesn’t matter. You get the point. Do you think a person with this kind of mindset owns life insurance? No. Now, maybe that’s OK. Not everyone needs life insurance as I said above. But that needs to be determined based on his situation – not his opinions.
How Do You Make Sure You Aren’t Making Important Decisions Based On Opinions?
The easiest way to make sure you don’t make this mistake is to check yourself once in a while. Pick three people who have the financial and family life you aspire to have and take them out to lunch one at a time. Then just listen. Don’t try to convince them to underwrite your way of thinking. You won’t learn a damn thing that way. Instead, learn what their thoughts are about finances and why they think that way. I have done this throughout my career and it’s paid off handsomely.
I’ve found that interviewing successful people is a lot better than doing “research” on the internet. I can find anything I want to find on the net – including “proof” that I am right now matter how weird my opinion is. Instead, talk to people who have what you want. Ask about their thoughts and approaches and be objective.
If you do this you’ll come away with information you can really use to advance your financial life. In order to make sure you don’t take yourself off the path of reason and financial insight, you have to be open-minded. And you have to be willing to learn.
Are you making financial decisions based on fact or opinion? How do you know?
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