Testing AI Money Advice: The TRUTH Exposed (ChatGPT)

Testing AI money advice: the TRUTH exposed!

Introduction: AI / ChatGPT Money Advice

Will AI money advice make you a millionaire, run you to bankruptcy, or something in between?

I put ChatGPT through the ultimate money advice challenge to expose the truth.

I gave ChatGPT 5 different real-life scenarios going from super easy to almost impossible and asked it to give me the best course of action. If it gets 4 or more right, well then financial advisors are in serious trouble!

But there’s only one way to find out!

Let’s start with an easy scenario.

Scenario 1: I am 25 and want to invest for my retirement. What should I invest in?

Here’s what ChatGPT told me:

  1. Set Clear Retirement Goals
  2. Start with Tax-Advantaged Retirement Accounts
  3. Diversify Through a Mix of Investments
  4. Automate Contributions and Investments
  5. Review and Adjust Regularly
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Wow, ChatGPT is off to a great start — I’m really surprised by how well it did!

This is an excellent broad strategy: tax-advantaged accounts, automating contributions, diversification, goals, periodic adjustment – everything is spot on!

But this was an easy scenario – I bet you’ll be surprised by ChatGPT’s performance at the end.

Now to a slightly more complex scenario.

Scenario 2: I just graduated college and have $50,000 in student loans. How can I pay them back?

This is ChatGPT’s plan:

  1. Understand Your Loans and Budget
  2. Choose a Repayment Strategy
  3. Consider Refinancing or Consolidation
  4. Explore Forgiveness Programs and Assistance
  5. Increase Income and Make Extra Payments

Already, I can see that ChatGPT is starting to have a harder time – but this is still a great overall strategy.

Some areas are probably unrealistic. For example, it could have suggested reducing expenses instead of increasing income. But this is still quite impressive.

AI is crushing this challenge – so far. Let’s make it a bit harder with this next scenario.

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Scenario 3: I have $10,000 in credit card debt that I want to repay, but I also want to invest for my retirement. I’m 35 right now, what should I do?

Here’s what ChatGPT had to say:

  1. Prioritize Your Debt
  2. Budget and Emergency Fund
  3. Contribute to Retirement
  4. Allocate Your Resources
  5. Explore Ways to Increase Your Income
  6. Review and Adjust Regularly
  7. Stay Informed and Seek Advice

Wow – I’m simply amazed by this. Once again, AI has done a fantastic job! Most of the steps are actionable and reasonable.

But like the previous response, increasing income is easier said than done.

Even so, AI has done great in every single scenario – maybe financial advisors should start to get worried!

Now let’s give AI a real challenge.

Scenario 4: My spouse wants to invest our life savings into bitcoin for our retirement in 5 years, but I’m sure it’s a bad decision. How can I get out of this?

Let’s see how ChatGPT handled this. It suggested:

  1. Joint Education and Research
  2. Professional Financial Advice
  3. Assess and Discuss Risk Tolerance
  4. Consider Diversification and Compromise
  5. Develop a Unified Financial Plan
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This is the toughest scenario yet, and ChatGPT continues to do an amazing job. This is an actionable, step by step guide.

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Although it is interesting that it asks you to talk with a financial advisor – so I guess they can breathe easy!

Now for the hardest challenge – one that a lot of people seem to struggle with.

I’ll dissect ChatGPT’s advice point by point to see if it slips up.

Scenario 5: I am 57 and want to retire in 10 years. I also need to send my 2 kids to college in 4 years. I currently have no savings. Have I lost all hope?

Well ChatGPT, how do you handle this?

Starting to save for retirement and college later in life can be challenging, but it’s not impossible. With a strategic plan and some adjustments to your financial habits, you can make significant progress towards these goals. Here are steps to consider.

Wow, ChatGPT starts with a bang. I’m excited for the rest of the answer!

Assess Your Current Financial Situation: Determine your income, expenses, and any debts. Creating a budget that tracks your spending can help identify areas where you can cut back and redirect funds towards saving.

Yes, creating a budget is a crucial financial move for everyone — but especially in this situation.

Reduce Expenses and Increase Savings: Look for ways to reduce your daily expenses and prioritize saving. This might involve downsizing, reducing discretionary spending, or finding ways to increase your income through a higher-paying job, side hustles, or passive income streams.

Wow, this is some solid advice. It might not be easy to reduce expenses, but that’s one thing totally in your control.

And saving more is essential when the time frame is so short. But for some reason ChatGPT really likes telling people to increase their income, which is easier said than done.

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Prioritize Goals: With both retirement and college on the horizon, it’s essential to prioritize. While both are important, remember that there are loans and scholarships available for college but not for your retirement. Focus on saving for retirement while exploring financial aid options for your children’s education.

This is basically perfect: prioritizing retirement is essential, and shooting for scholarships is necessary in this challenging situation.

I’ve said it before, but it’s worth saying again: kids can get a loan for college, but parents can’t get a loan for retirement.

Retirement Savings Plans: Take advantage of retirement accounts like 401(k)s, especially if your employer offers a match. Consider opening an IRA (Individual Retirement Account) to maximize your savings. The catch-up contributions allowed for those over 50 can also help accelerate retirement savings.

Exactly, tax advantaged retirement accounts are your best friend when saving for retirement.

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And catch-up contributions are a nice touch since this scenario is for someone over 50.

Education Savings: Look into 529 plans or other education savings accounts. These plans can offer tax advantages for saving for college expenses. While starting later means less time for compounding interest, every bit saved can help reduce future student loan burdens.

Once again, spot on. 529 plans are an ideal way to save for a child’s college expenses – although like ChatGPT said, 4 years isn’t long enough to make the most of it.

This is the most difficult scenario, and ChatGPT is certainly exceeding my expectations!

Invest Wisely: Investing can help grow your savings more rapidly than traditional savings accounts. However, given your timeline, be mindful of risk. A balanced portfolio that leans more conservative as you approach your goals can help manage risk.

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Incredible – tailoring the advice by factoring in the age and time frame is very impressive.

Seek Professional Advice: Consider consulting with a financial advisor. They can provide personalized advice based on your specific financial situation, help you develop a comprehensive savings plan, and guide you on investment strategies.

It’s kind of funny that ChatGPT is telling me to hire a financial advisor when I’m trying to see if it’s good enough to replace financial advisors.

But considering how in-depth the advice is, I might just skip this step!

Educate Your Children: Involve your kids in the financial planning for their education. Discuss the importance of scholarships, in-state schools, community colleges, and work-study programs as ways to manage college costs effectively.

Okay, some more good advice.

Stay Flexible and Adjust as Needed: Your financial plan should be revisited and adjusted as needed. Life changes, and so will your financial needs and capabilities.

Generic but practical advice that’s true for everybody.

Starting late requires a more aggressive approach and may involve making some tough choices, but it’s not too late to make meaningful progress towards your financial goals. The key is to start now, stay consistent, and make informed decisions.

AI / ChatGPT Money Advice: Conclusion

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Well, from what we’ve learned, AI can be very useful – even in specific, challenging scenarios. It got a perfect 5/5!

If you need help but can’t afford a financial advisor, AI can definitely be a good starting point.

But of course, AI can’t do everything – so take AI advice with a grain of salt, and use your best judgment.

But guess what? You don’t need AI or a financial advisor to dramatically improve your finances. Check out my simple step by step guide to get ahead of 99% of people.

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