Why Should You Never Trust Just One Source? Often They Don’t Know Any More Than You Do

This video from the Daily Show with Jon Stewart is funny and great entertainment:

But it’s also an important lesson in financial management. The lesson to be learned from this video is that you should never trust one source for your financial information. No matter how expert, credible, or trustworthy the person, channel, or magazine may seem, it’s likely that they don’t know everything and they make mistakes. Big ones. In some cases, the things the “experts” report are so wrong it’s hilarious. Thus, Jon Stewart made a video.

I don’t want to rag just on CNBC. I like their programming and watch frequently to see what’s happening in the financial world. However, I know people so devoted to that channel that they base all of their decisions on what the talking heads say. As you can see from the video, those people likely lost a lot of money in the recent downturn. I also know people who base all of their decisions on the words of Suze Orman, Dave Ramsey, Fortune magazine, Money magazine, Kiplingers, or any other financial expert or media outlet. “Well, if so and so says it, it must be true,” goes their refrain. They invest, spend, budget, and get out of debt (or try) in the ways prescribed by their preferred experts, regardless of whether the source is correct or even good for their personal situation.

It’s fine to have a source that you prefer above others, but you need to remember that they are not infallible. They don’t know you, or how much money you have to invest or lose, or how much debt you have, or any of the extenuating circumstances that make your situation unique. Their advice is often generic and tailored to a mass audience, which may or may not include you. Any expert is merely making an educated guess based on the information they have and the trends they see. Some are better at reading the trends and information than others. Since none of them have a crystal ball, they cannot know the future for certain. And you shouldn’t assume that they do.

So if no one can be trusted one-hundred percent, what can you do to keep yourself form being victimized by a clueless talking head? First, don’t take anything any expert or media outlet says as the gospel truth. Even if they were right in the past, that’s no guarantee that they will be right in the future. Listen and learn from your preferred source, but remember that they are making educated guesses and are not certain what the future will bring. Also keep in mind that they do not know your specific financial/investing situation, so their ideas may not apply to you.

Second, educate yourself. The more you know about finance and investing, the better you become at interpreting trends and information for yourself. Since you know your situation better than anyone else, you can take the information you receive and determine whether any of it applies to you or is useful for you. When you are educated about finance, you can watch/read the experts with a critical eye and get a feeling for whether the information is junk, or if there’s something to it. Education can make you into your own expert, reducing the need to rely on the opinions of others who don’t know you or your situation.

Third, use a variety of sources in your financial planning. The best thing you can do to protect yourself from incorrect information is to use multiple sources for your information. Read a variety of magazines and books. Watch different television stations. Listen to several different gurus. All channels, authors, and experts have their own political, religious, or sponsorship affiliations and agendas that lead them to report things in ways that meet those agendas. By using multiple sources, you get a more complete picture of a situation. You get beyond the picture that one station/expert wants you to see and you see how the situation resonates with different groups. This complete picture can lead you to make better financial decisions than if you only had one side of a story.

Talking heads and financial experts don’t know everything. Some are better than others some of the time, but none of them are perfect. If you believe and follow everything one source tells you, you are likely to end up losing some money or ending up in a situation that’s not right for you. Get your information from multiple sources and educate yourself about what works and makes sense for you. Otherwise you’ll end up watching a Jon Stewart video one day and saying, “Geez, if only I’d compared that information with another source, I wouldn’t have lost all that money because that source sure didn’t know anything.”