Here’s my take when it involves money.
When you elect to work with an acquaintance, it creates this trust that derives from familiarity.
That’s it.
I personally don’t trust working with those I kind of know, but not really, when it involves fees and commissions.
If I were to work with a realtor to buy a house, that person would either have to be someone I’ve known and spent a significant amount of time with in recent months/years or a complete stranger who’s competent at their job.
The reality is that this is someone who earns commission from charging me a buyer’s fee.
Of course they would want me to put in a high bid, despite knowing that I’m way overpaying for a house in a mediocre neighborhood. The higher my offer, the higher amount of money they make.
Their ultimate goal is to ensure a purchase/sale goes through successfully so that they can earn their keep and be on their way.
When it’s a mere acquaintance, I can hardly trust that they are acting in my best interest instead of trying to line their own pockets.
But that level of trust has already been established, right? Since we met when we were younger.
So that means I should be convinced that they are working to get me the best deal.
Right. . . ?
Let’s talk about whole life insurance next.
If you own one of these policies, I would say with some certainty that you bought it from someone you already knew.
Ah, yes.
A glorified insurance salesman posing as a financial advisor.
I stand corrected—an acquaintance who has now deemed themself to be your financial advisor.
Doesn’t it make you feel important to know that you have a person in your life providing financial guidance when you need it? It wouldn’t be surprising to discover that it’s someone you barely know, but have met in passing so rapport (aka trust) has been established.
One thing to recognize is an insurance salesman selling whole life policies earns from fees on every policy sold, including yours.
If you have a dependent(s), buy a term life insurance policy instead and invest the difference you’ll be saving from not putting it into your acquaintance’s insurance product.
When your realtor refers you to a mortgage lender, it also creates that sense of familiarity. It induces unwarranted trust.
During the COVID pandemic, interest rates dropped to between 2-3%.
Sadly, I know of homeowners who are now kicking themselves for choosing an adjustable-rate mortgage (ARM) instead of a fixed-rate mortgage at what was likely the USA’s all-time low in 2021.
After a few conversations, somehow they were fully convinced by their mortgage lenders that taking an ARM to save a mere 25 basis points from a historic low fixed rate was a brilliant idea.
5 years has gone by since then, and this week, rates peaked at 7.6%.
ARMs are resetting which means those mortgage payments are going up.
When preparing to buy what is likely to be the most expensive purchase of your life, you need to shop around for rates and engage in forward-thinking to create a sound financial plan for the long-term.
All this is to say, when it comes to your finances, you must do your own due diligence.
It could save you tens of thousands, if not hundreds of thousands in the long run.
Don’t blindly trust someone simply because you knew them way back when or they’ve been informative with a friendly demeanor.
It’s important to remember that this is their livelihood and everyone’s gotta eat.
Life will only get more expensive from here on out because that’s how the system was designed to be.
I wish you luck with your financial journey as you navigate through life’s expenses.
