Let's face it. Managing your finances these days can feel like climbing Mount Kinabalu blindfolded. Between the ever-fluctuating Ringgit and the rising cost of roti canai, it's easy to feel overwhelmed. Some might run to the idea of getting a financial advisor, but what do you do if you don’t have the budget for professional advice? ChatGPT, a natural language powered by AI Chatbot, has been changing the way we live and work. A study by Zippia.com shows that 77% of people use a service or device that’s powered by AI. While some fear AI taking over our jobs, others see its potential as a tool to streamline tasks. But this begs the question; Can ChatGPT help us manage our Ringgits?
That is why I decided to conduct an experiment to find out. The purpose of this case study is to put ChatGPT's financial advice capabilities to the test to see if it can help you make better financial decisions.
Testing GPT -3.5 and GPT-4.0 for Financial Advice
I’ll ask for financial advice from both GPT-3.5 (Free Version) and GPT -4.0 (Paid Version).
GPT-3.5 is limited to information up to the year 2022, you wouldn’t use this to browse the web.
GPT -4.0 is the paid, updated version of ChatGPT with more data, and it is supposed to deliver more accurate results.
ChatGPT Prompts based on Financial Topics
1. Budgeting
First, let’s test ChatGPT’s ability to help us budget. Budgeting is the act of creating a budget that estimates your revenue and expenses for a specific time period.
ChatGPT Prompt for Budgeting:
You are a financial budget expert. I’m looking for advice on how to budget. My monthly income is RM3,000. I’m RM15,00 in debt. Create a detailed budget breakdown for my budget plan.
ChatGPT’s Response:
GPT -3.5 | The Bot responded with eight budgeting tips tailored to my monthly income based on the amount I provided. It assumed I had insurance expenses and included Malaysia's average insurance cost in the breakdown. |
GPT -4.0 | The Bot categorized my expenses into fixed expenses, variable expenses (for discretionary spending), debt repayment, and savings for emergencies or future goals. It then provided a detailed budget allocation breakdown, offering tips on how to reduce costs in areas like groceries, alternative transport options, and discretionary spending. |
Overall, I found GPT-3.5’s response somewhat overwhelming, with a lot of general information to sift through. GPT-4 immediately provided a useful starter template that I could copy and paste for my own use. The paid version of ChatGPT offered advice that was specific, useful, and in line with budgeting best practices.
(Click here to learn how to pay off your debt in Malaysia.)
2. Savings
Next, we’ll test ChatGPT’s ability to give savings advice. Saving is the process of setting aside a portion of one's current income for future use, or the accumulation of resources in this manner over time. ChatGPT Prompt for Savings: You are a financial savings expert. I’m looking for ways to save money. I want to save RM10,000 in 12 months. My monthly income is RM4,000. List 3 popular saving methods and how I can practice them.
ChatGPT's Response:
GPT -3.5 | The Bot suggested budgeting and expense tracking, automating savings transfers, and living frugally. |
GPT -4.0 | The Bot recommended the 50/30/20 rule, the pay yourself first method, and the envelope method. It also included additional tips to cut back on spending. |
Overall, the responses were acceptable. The advice given was practical and addressed my question about money-saving methods. However, I found the initial response from GPT-3.5 slightly unrealistic, as there is only so much a person can do to reduce costs.
3. Reading Material
Now we’ll get into what ChatGPT will recommend in terms of reading material to increase our knowledge of financial literacy.
ChatGPT Prompt for Financial Reading Materials: You are a financial advisor. I am working on improving my financial literacy. I am a beginner in money management. Suggest popular books on topics such as saving and investing. ChatGPT's Response:
GPT 3.5 | The Bot listed seven popular titles and authors, including Robert Kiyosaki's Rich Dad, Poor Dad and Benjamin Graham's "The Intelligent Investor". |
GPT 4.0 | The Bot categorised a total of 11 books into four categories: books on investing, general financial literacy, personal finance, and books on saving and money. These included "The Intelligent Investor" for investing, "Rich Dad, Poor Dad" for general financial literacy, "The Simple Path to Wealth" by JL Collins for personal finance, and "The Total Money Makeover" by Dave Ramsey for saving and money. |
Overall, I found the results to be somewhat similar. Both versions recommended well-known titles like "Rich Dad, Poor Dad" and "The Intelligent Investor." The paid version went the extra mile to divide the titles into categories and provided insight into how I might find the books helpful.
4. Investing
Lastly, let’s test ChatGPT’s ability to give investment advice. Investing is the act of distributing resources into something to generate income or gain profits.
ChatGPT prompt for Investing: You are an investment expert. I am seeking advice on how to invest in the long-term. I am a risk-averse, passive investor who is new to investing. I want my investments to be recession-proof. Give me advice on how I should be investing my money. I have RM10,000 to invest. Suggest investment options that suit my investment personality and risk appetite.
ChatGPT's Response:
GPT 3.5 | The Bot provided me with investment advice and suggested various investment options based on my risk tolerance, including ETFs, Dividend Paying Stocks, Gold, and REITs, along with examples. It followed up with investment strategies such as Dollar Cost Averaging and regular portfolio rebalancing. |
GPT 4.0 | The Bot began by reminding me to save 3-6 months' worth of living expenses before investing. It then recommended that I keep my savings in a high-yield savings account for easy access. It then provided a sample portfolio into which I could invest my RM10,000. It did not make any stock recommendations, but it did provide examples of investment opportunities. The bot's response also included platforms for passive investors, such as StashAway and MyTHEO. |
Both versions of ChatGPT responded to my request with conservative investment advice that matched my risk tolerance and investing style. The responses included strategies that a new investor should use when starting out. GPT-4's response provided a step-by-step guide to investing my money in a way that matched my risk tolerance. A beginner might find GPT-4’s response to be a good starting point. However, it's important to recognise that both versions did not factor in potential market changes or fluctuations that could impact investment decisions over time. Both versions did emphasise the importance of consulting a professional, and doing adequate research.
(Check out our beginner-friendly guide on how to start investing in Malaysia!)
The Bottom Line
From my brief test, I found that ChatGPT can provide a basic understanding of finances. It offers helpful guidance and education, but it's important to note that it cannot replace professional financial advice. Both the free and paid versions lack the capability to consider critical factors such as economic trends and potential job insecurity, which are crucial for making sound financial decisions. If you want to improve the responses, you can feed ChatGPT with additional information about your income, expenses, goals and timeline, for more concise guidance on how to reduce spending, build savings, pay down debt, or create an investment plan. While ChatGPT can be used as a form of research, consulting with a qualified financial advisor is still necessary for comprehensive financial planning.
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