You Should Ignore These 4 Kinds of Money Advice

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When I was growing up, my father taught me to embrace my paranoia, especially when it came to finance.

Because of Dad's tutelage, I have always been skeptical of people who offer me money advice, and cautious of their possible ulterior motive. What's more, embracing this paranoia (which Dad would call plain old good sense) has never steered me wrong. I've never fallen victim to bad money advice, nor have I ever regretted passing up an opportunity because of Dad's wisdom.

Even if you were not brought up with such a healthy sense of financial skepticism, you can learn some of the warning signs of untrustworthy money advice. Here are four times when money advice is probably not being offered with your best interests in mind.

When they don't disclose what's in it for them

If you're listening to fast food restaurants as a source of healthy eating advice, you are probably a little skeptical. These tips are not so much good advice given to improve your life, but more of a marketing ploy. As long as you are showing up to your favorite burger chain, they will make those profits whether you order a salad or a double cheeseburger. Your health is not really their concern.

This is the same thing that happens with corporations that offer financial advice. Credit card companies offer advice on the best way to improve your credit score, student loan servicers give you tips on how to budget better, and banks suggest ways to save money.

The advice that these companies proffer is not necessarily wrong. But these companies aren't really invested in improving your life. They are invested in getting your money — which means they will give the advice that is most beneficial to their bottom line, whether or not it is the best advice for you.

Similarly, individuals generally don't give you advice out of the goodness of their hearts. Unless you happen to be related to someone who is a financial professional, it's unlikely that anyone will offer money advice to you without there being some sort of compensation. The question is whether or not it is clear what that compensation is and who will be paying it.

It is OK to ask someone who is giving you advice how they are compensated. Their reaction will likely tell you what you need to know about how far you should trust their advice. Many so-called financial advisers are actually salespeople who have an incentive to sell products. If your adviser tells you not to worry your pretty little head about it, then their advice is probably not geared for your benefit.

When the advice is unsolicited

While unsolicited advice about other parts of your life is generally greeted with an eye roll, unsolicited financial advice can often have a different effect. If someone were to approach you with the solution to a money problem, you would be much more likely to hear them out than if they were offering a solution to a relationship problem.

And scammers, con artists, and salespeople are well aware of our relative willingness to take unsolicited financial advice. Sometimes they'll invite you to a "free lunch seminar" in order to offer it, and sometimes they'll just give you a call on the phone or phish you over email.

It's important to remember that any unsolicited financial advice is basically a sales pitch. Just as you wouldn't take the "advice" of a late-night infomercial, there is no reason to accept the financial advice of someone who offers it unsolicited. There is something in it for them, or else they wouldn't go to the trouble of seeking you out.

When you don't understand the advice

One of the dirty little secrets of finance is the fact that it is in the industry's best interests to make money seem confusing. As long as money seems as complex as advanced Calculus, then you feel like you have to hire a financial pro to help you navigate it.

But best practices in finance are not difficult to understand, and you should be able to not only comprehend but also explain to someone else any advice you are given. If your "adviser" talks or writes in jargon that you just don't get, and balks at explaining it to you, then your adviser doesn't really care about you. Swindlers want you to feel confused, but true advisers want you to understand.

The best way to deal with this is to ask a lot of questions. Con artists hate dealing with questions since it gets in the way of their scam. If you're in a one-on-one situation when you start asking questions, scammers generally back away to protect themselves. If you're in a group setting (such as a free lunch seminar or the like), you will likely get the hairy eyeball or otherwise be silenced so you don't mess up the pitch for the rest of the group.

When there is a time limit

Humans are not able to think rationally when we are hurried. This is one of the reasons why everyone from salespeople to online ticket sales will put artificial time limits on decision making. You are much more likely to act if you feel like you might miss out on a good deal.

Good advice should not be something that you have to act on "NOW!" In general, the kinds of actions you need to take for good financial health fall into the "important but not urgent" category of activities. Something that is a good idea today will generally still be a good idea tomorrow or next week. While there are some financial decisions that you need to make more quickly than others, having an adviser hurry you to make a decision generally means that you are dealing with a salesperson rather than an adviser.

Embrace the power of your paranoia

It may not feel comfortable to think that everyone is out to get your money, but it sure does save you a great deal of heartache, not to mention the bruises where you'd otherwise kick yourself for trusting the wrong person.

Embracing your money skepticism also has the added benefit of forcing you to become more self-sufficient about handling your own money and educating yourself about finance. That's a pretty good trade-off for a little bit of paranoia.