Many middle-income Americans tend to “wing it” when making complex financial decisions, which has led to some expensive mistakes, says a recent study by the Consumer Federation of America and Primerica Inc.
67% of Americans surveyed said they have made at least one “really bad financial decision.” On average, that mistake cost them $23,000, although some people reported making bad decisions costing $50,000 or more.
The survey focused on how middle-income Americans make important financial decisions. Most middle-income Americans rated their skills as “good” or “excellent” when it came to making daily financial decisions about credit cards, budgeting and purchasing auto insurance.
But fewer thought they did as well when it came to more complex tasks like obtaining a mortgage, buying life insurance or investing for retirement.
17% or more surveyed just “wing it” without doing any research or seeking any advice when it comes to credit card debt, insurance and investing decisions.
“A strikingly high percentage of respondents in our survey said they wouldn’t consult any information at all in making a decision,” said Stephen Brobeck, executive director of the Consumer Federation of America.
From 15% to 25% said that they use information on the Internet, television or publications when making financial decisions.
For more complex decisions about savings, investing, purchasing life insurance or obtaining a mortgage, 45% of all respondents did say they would turn to a financial advisor.
The Takeaway: Many consumers look at the cost of getting professional advice. But it’s also important to look at the cost of not getting good advice. As professional advisors, we see far too many examples of damaging mistakes consumers make when they try to “wing it.” A good advisor can save you money and keep you from making expensive errors, some that can’t be undone.