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When to Question the Numbers

One of thing I’ve always loved about numbers is how they have an unparalleled ability to tell the truth. They can tell an unbiased story based on hard data and facts. By nature, numbers don’t lie. This should mean that numbers can always be trusted, right?

Not necessarily.

The problem is that numbers are often presented by people. And people, they have the ability to be biased and dishonest.

People have motives. Unfortunately, this means that people often bend the truth behind numbers to present a story that fits their agenda.

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So how does a person know when to trust the numbers and/or when to question them?

It’s not always a precise science, but here are some general rules of thumb that should raise warning flags and keep a person out of situations where humans could be twisting the numerical truth.

Question numbers that…

  • haven’t been clearly vetted by a 3rd party.

    People are great at throwing numbers around without providing any detail of their accuracy. Politicians love to do this. So do people in online message boards. Be wary of these numbers. Even if coming from a reputable source, make sure there is reference to a 3rd party that can confirm the figures.

  • are presented by someone who has an incentive for said numbers to be presented.

    What I’m really saying here is to beware of salesmen. I’ve sat through many compelling presentations by banks, insurance providers, mutual fund wholesalers, and other advisors. They can speak eloquently to charts and figures that back up the message they want to portray. However, more times than not, these charts and figures only represent a portion of the full story. Therefore, you must take note when monetary incentives are in play. These incentives will most certainly present a bias in material presented.

Never put your money into something you don’t understand.

Never put your money into something you don’t understand.

  • you don’t understand.

    If there is only one thing you take away from this post, make this the point that you put to memory. You should NEVER, absolutely never, put your hard-earned money into something you don’t fully understand. It’s common practice to portray topics of personal finance and investing as a complicated subject matters. This helps advisors and other product/service providers justify their fees. But a good advisor or financial provider should be able to clearly and thoroughly explain every detail of their product or service offering. You should have absolutely zero confusion. If this is not the case, beware. There are likely hidden fees or risk on the horizon.

  • are delivered by someone who makes you feel uncomfortable.

    Always trust your Spidey sense. Sometimes it’s just that simple. If a person or situation just doesn’t feel right, do not proceed. Too often people get themselves into bad situations because they didn’t want to say no or appear rude. But when the livelihood of you and your family are at stake, there is no such thing being overly cautious. Trust your gut.

Have you come across any numbers recently that gave you caution? Please share!