I have worked within the financial services industry, especially with artificial intelligence technologies. I asked ChatGPT, about personal finance, but more importantly, I wanted to find out if ChatGPT can replace financial advisors in 2023.
When ChatGPT came to the market in November, 2022,
I was beyond excited to try out this new tool. If you don't know what ChatGPT is, ChatGPT is this AI conversational chat bot that was brought to the market by a company called OpenAI which had backers like Elon Musk in its initial days and now is backed by companies like Microsoft, and I really wanted to find out if ChatGPT would replace financial advisors in 2023.
Before I go any further, I must tell you that
I'm not a registered qualified financial advisor. So whatever I say in this video is purely my understanding and my experience. If you want personal finance advice, please speak to a regulated financial advisor.
Now, with that said, let the fun begin.
So here's what I asked ChatGPT, what's the best financial advice you can give to me in 2023?
Now before I reveal the results, just understand that ChatGPT was trained with data till 2021, so it has no idea about the current world that we live in. It doesn't know that there are tech layoffs going on. It doesn't know about the current recessionary climate. So with that said the first thing that ChatGPT suggested to me was:
Build an emergency fund.
Now, do I agree with that? I absolutely do, especially with the recessionary climate that we are in, and especially with the layoffs that we are seeing in the market right now.
What is an emergency fund though? An emergency fund typically would be three to six months of your living expenses that you put aside in a liquid savings account that you can easily access if things were to go wrong.
So, for example, if you lost your job or if you had a car breakdown, or if you had an emergency medical expense, this is the account that you would draw the money from. So, I agree with that one.
The second one that ChatGPT suggested was pay off your high interest debt first.
In principle, I agree with this because high interest rate when compounded over years can become a huge amount of debt that you might struggle to get out of eventually. However, in 2023, we are already witnessing a much higher interest rate across the board for all products than previous years.
So, does that mean that you are better off paying your mortgage rather than investing in the market?
That was not particularly clear to me when I got the answer from ChatGPT, and that is something that I definitely would want to ask a financial advisor.
The third thing that ChatGPT suggested to me was to review my budget.
Now with budgets, I have to say that I'm a bit of a contrarian. I don't like budgets.I find budgets extremely limiting. Instead, what I do is I automate my finances.
So, as my salary or income comes in every month, automatically gets sent out to my savings and investment accounts and whatever is left over after that is what I end up spending guilt free.
So reviewing my budget really doesn't apply to me because irrespective of the inflation, I will not spend more than what I can afford to spend based on what is on my current account.
The fourth point that ChatGPT suggested was Max out your retirement savings.
Now, again, in principle, I agree with this one, but there's a lot of nuance to it, meaning, you could choose to differ your taxes by maxing out your retirement savings. Alternatively, you could put that money into a tax benefitted savings account. You could also actually spend some of that money today.
What if you are planning to buy a house in the next couple of years and you would need access to that cash and you can't really access that cash if you put it into a retirement savings account.
These are really nuances to think about and question, what is your money philosophy? I personally also think that you want to be rewarding yourself for all of the good work that you are doing. I'm very big on rewards and reward is a big part of my financial philosophy, and if you are interested in the five habits that changed my life, I will link that one up here as well.
But, the question to ask here is, are you able to make that decision by yourself or would you really benefit talking to someone like a financial advisor?
I, personally, would be more comfortable talking to a financial advisor if I didn't know my way around with personal finance.
And the fifth thing that ChatGPT suggested to me is consider taking financial advice.
Now I agree with that but there are a couple of caveats. Not all financial advisors are made alike. So what is important is that you know that this financial advisor is regulated by the financial regulator in your country.
Within the UK they would be FCA regulated. Every other country has similar regulations. So, you would want to double check that the financial advisor is a regulated one.
And then the second one to consider is if the financial advisor is charging you commissions or they are working per hour or on a flat fee basis, because the moment commissions are involved, they are more incentivized to work in the interest of their own commission as opposed to giving you the best deal that's out there in the market. And also, remember that financial advice can be extremely expensive, especially with commissions. And when you compound over the long run, this sort of advice is not cheap. If you are in the UK, I will link below a few financial resources that are free and generally tend to be good.
So with that said, if you like this episode, please consider liking and subscribing. It apparently helps the algorithm a lot. Thank you so much and see you the next time. Bye.