5 AI Prompts That Will Change How You Manage Money (And 3 Things It Still Gets Dead Wrong)

Tyler Gardner (0:00)

AI doesn't do financial planning. You do financial planning. The AI just makes it more accessible, more interactive, and potentially a lot cheaper. But the quality of the output is a direct function of the quality of your input. Garbage in, garbage out. And in financial planning, garbage can be measured in the size of your retirement account.

Hello, friends. This is Tyler Gardner, welcoming you to another episode of Your Money Guide on the Side, where it is my job to simplify what seems complex, add nuance to what seems simple, and learn from and alongside some of the brightest minds in money, finance, and investing. So let's get started and get you one step closer to where you need to be. Welcome back to Your Money Guide on the Side. I'm Tyler Gardner, and today we're doing something that I've been genuinely looking forward to for a while because the number of questions I've gotten on this topic has officially reached what I call the critical mass level, which is the level where I stop answering individual messages and make a whole episode instead. So congratulations Collective Inbox, you win. Today's episode, Artificial Intelligence as Your Financial Advisor. I did an episode on this about a year ago at this point, and it got a lot of positive responses, but even just over the past year, we've gone from AI might be helpful and cool to, holy crap, this thing is pure insanity, and if you're not using it in some way daily to help you optimize your life, well, I think you're truly missing out. Additionally, I think this might be the most important episode I've recorded, since the tools at your disposal now could quite literally change your life, as they certainly have mine. But before anyone goes and writes in the comments, and someone always does, Tyler, AI can't replace a human advisor. I want to be very clear up front. I know, that's actually the point of the episode. We're going to talk about what AI can do, which is quite a lot, what it cannot do, which is also quite a lot, and we're going to do the thing we always do on this show, which is look at some real data, and use that data to make better decisions, instead of just guessing our way to and through retirement. I know, wild concept. But first, and I mean this every single time I say it, if this show has been even remotely useful to you, if you've learned something, made a better financial decision, or even just felt slightly less like you're winging your entire financial life, please consider leaving a review on Apple Podcasts or Spotify or wherever you listen. Your review helps new people find the show, which affects whether more people learn this stuff, which is genuinely the entire point of the entire endeavor.

We're going to start section one with what I'll call how to actually use AI as a financial guide. Let me start with a number that I think about a lot, and I've shared with you a lot. According to Dalbar, that's the research firm that's been tracking investor behavior since 1994 The average equity investor has historically underperformed the S&P 500 by somewhere between 1.5 and 4 percentage points per year, every year for 30 years. Now just to be clear about what that means in practice, if the market returned 10% and you returned 6.5%, you didn't lose money. You just made significantly less of it than you would have had you just stuck the money in an index fund, and compounded over a 30 year career, that gap doesn't look like a minor rounding error. It looks like retiring with about half the money you should have had. Now, I'm not telling you to just put all your money in a stock index, as that's not always going to be right for you, and we'll explore exactly how you can figure out what is right for you throughout this episode, but you do need to always be looking at what are called benchmarks, which just means how the market indexes are doing on their own, and see how your portfolio is doing relative to those indexes. Now, why do we underperform, on average, a basic index? Well, according to Vanguard's research, and they've studied this stuff exhaustively, bless their souls, the single biggest source of value a financial advisor provides isn't picking stocks. So stop asking a prospective advisor if they can beat the market. That's not what they're there for, especially in this era with the abundance of information we all have. Their value primarily comes from what they call behavioral coaching, specifically stopping you from doing something catastrophically stupid when the market drops 30% and your lizard brain is screaming at you to sell everything, buy gold, and renovate the basement so it serves as your future bunker. Vanguard estimates this behavioral coaching is worth about 1.5% per year in added returns, which is remarkable because what they're essentially saying is a good advisor's primary value is talking you out of talking to yourself. So let's enter this episode agreeing that most financial advisors these days are saying their added value in theory and practice is to be your behavioral coach. Okay? Now, here's where AI enters the picture. Because it turns out, and I've spent a lot of time talking about this and testing this, a well-prompted AI can do a genuinely impressive version of exactly that type of behavioral coaching. Not necessarily all of it, but far, far more than you might expect. Here's the framework I want to give you today. Because using AI for financial guidance is not like asking what temperature we should bake chicken at. The output is only and forever as good as the input. And most people, no offense, are asking terrible questions to AI, and then deciding AI is useless, which is like giving someone a violin for the first time, deciding they're terrible at music, and blaming the violin. The prompts matter enormously. So I'm going to give you the specific prompts that actually work. You can write them down, pause the episode, or just subscribe to the newsletter at tylergardner.com. Do whatever you need to do. These are real, and if a human can get you an additional 1.5% return by being your coach, just imagine what a 24-7 access language model can do for you if prompted well. Step 1 We're going to build your financial profile. The first thing you need to understand about AI financial conversations is that the model has no idea who you are. Even from one session to the next, it can forget every input you gave it unless prompted otherwise. It doesn't know your age, your income, your debt, your goals, your portfolio, your risk tolerance, or the fact that you panic-checked your brokerage account 17 times during the 2022 drawdown. You have to tell it, and then you have to tell it again. Always. Now, I'll come back to the privacy concerns around this in a bit, and they are real. But, for now, let's talk about how to create a financial profile effectively. The single most important thing you can do before any AI financial conversation is give it a complete financial snapshot. And I do mean complete. Here is prompt number one. The financial snapshot. You're going to actually enter this exact text, and again, this is in the newsletter this week, and in the show notes if you want the actual language. I want you to act as a knowledgeable, objective financial guide, not a licensed advisor, to help me think through my financial situation. I'm going to give you my full financial picture, and I want you to ask me follow-up questions until you have everything you need to give me useful, specific guidance. Here's where I am.