AI-Powered Finance: The Strengths, Weaknesses, and Smartest Uses

☕ Good morning and happy holidays!

As we wrap up another year, it’s the perfect time to reflect on your wins, fine-tune your strategies, and set yourself up for financial success in 2025.

2024’s standout technology is without a doubt consumer-oriented AI, as seen with ChatGPT, Claude, and other LLMs. 

Today, we’re diving into how these tools can work for your finances and investing goals, plus a few actionable tips to maximize their impact. 

Whether it’s simplifying budgets, analyzing investments, or brainstorming tax-saving moves, AI might become your secret weapon in 2025. 

Get Specific: How to Maximize ChatGPT with Effective Prompts

ChatGPT’s assistance quality depends largely on your prompt specificity.

For example, “Develop a monthly budget for a family of four with a combined income of $230,000, aiming to save 20% annually.” is good, but an even better prompt would be:

 “Develop a monthly budget for a family of four with a combined income of $230,000, $8,000 in monthly fixed expenses (like mortgage and insurance), $2,500 for discretionary spending, and a goal to save 20% annually, while accounting for a $15,000 annual vacation and private school tuition of $25,000.” 

ChatGPT’s newest model, o1, offers a high degree of personalization and thought, making it an excellent brainstorming buddy. 

For instance, a more detailed prompt yields a full detailed timeline and plan of action:

The response for the prompt above. (Source: ChatGPT)

Here are a few more prompts that would let o1 (earlier versions as well) run wild:

1. “Analyze the potential returns and risks of investing in renewable energy stocks over the next decade.”

2. “Discuss the short and long-term financial impact of implementing universal basic income on a national economy.”

3. “Explain the impact of rising or falling interest rates on my plans to accumulate rental property for passive income.” 

🤖Custom GPTs

There are hundreds of pre-built GPTs for various niche financial use cases. 

• Credit Card Matchmaker assists in finding credit cards tailored to your financial needs and spending habits.

• IRS Agent is deeply trained on IRS and provides guidance on U.S. tax law and IRS regulations.

• Budget Buddy is an engaging financial assistant designed to make budgeting more enjoyable. 

🙃 The (Many) Limitations of ChatGPT for Personal Finance

While ChatGPT can be a powerful sidekick, it’s far from perfect. It’s the most impressive information distillation and aggregation product we’ve ever seen, but it’s limited in judgment and application. 

A few more limitations to be aware of include:

🤥 It’s a notorious liar—albeit a confident one. ChatGPT has a habit of delivering polished, articulate responses that sound convincing, even when they’re riddled with inaccuracies.

It doesn’t know when it’s wrong, and it won’t second-guess itself unless you do. This overconfidence is particularly dangerous in finance, where precision matters and mistakes can cost real money.

⏱️ It can’t yet pull live market data. There are minor workarounds, but it typically won’t automatically update its response to today’s stock prices, breaking news, or current interest rates. 

That’s why giving it as much context as possible can increase the accuracy of those time-sensitive insights; even just pasting data from Yahoo Finance, Bloomberg, or Morningstar can yield better results. 

🚩 It has nuanced blind spots. Complex financial scenarios—like tax optimization strategies, compliance rules, or state-specific legal implications– can trip it up AI. 

If not provided and reinforced through conversation, LLMs will lack the context professionals consider, like individual risk profile, tax bracket, or legal obligations. 

When using GPT for personal finance, think of it as an assistant, not an advisor. It’s great for summarizing concepts, brainstorming strategies, and exploring ideas—but when it comes to execution or big decisions, let a qualified professional have the final say. 

It also doesn’t have access to the same sort of insights a trained professional would; in the same way, you probably wouldn’t take life-altering medical advice from AI, and you probably shouldn’t let it make major financial decisions. 

AI can draft a blueprint, but you need human expertise to ensure the house doesn’t collapse.

 ✍️Making Sense of ChatGPT for Personal Finance

It might feel like it sometimes, but ChatGPT isn’t magic; it reflects how clearly you communicate. 

Precision transforms broad questions into actionable insights. For example: 

• Investing: Instead of “Should I invest in tech stocks?” ask, “What are the risks and opportunities for mid-cap tech stocks in a rising interest rate environment, updated for today?”

• Taxes: Say, “How does tax-loss harvesting work for offsetting short-term capital gains in the U.S.?” instead of “Can you lower my taxes?”

ChatGPT thrives on layers and context. Adding context like, “Assume a risk-averse investor with a 15-year timeline” can help personalize its suggestions. It isn’t a replacement for a financial advisor; it’s your research sidekick. Treat its suggestions as a starting point, not gospel.

Ask smarter questions, refine its answers, and layer human judgment on top– it works best when it complements your decision-making, not replaces it.

Stay savvy, stay proactive, and keep your financial future bright.

See you next year!

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

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