Terrible, Horrible, No Good, Very Bad Financial Advice
If there’s one thing the internet will never be short of, it’s people with strong opinions. From politics to pop culture, there’s a never-ending stream of passionate people who want to share their two cents with the world. And like everything else, financial advice is no exception.
The caveat with online financial advice, however, is that bad advice can get you in a lot of trouble in a short amount of time. Your best bet will always be to meet with an experienced financial planner before making any major financial decisions.
With that said, there are a handful of terrible, horrible, no good, really bad financial tips that never seem to go away. Here are a few of the worst pieces of advice you’re likely to run into online. Whatever you do, do not follow these suggestions.
1) It’s Always Better To Buy Than Rent
This piece of financial “wisdom” goes back a long way. The idea is that renting is throwing money away each month that you could instead use towards a mortgage payment. You may hear the phrase: “If you can afford to rent, you can afford to buy” thrown around as well.
There are a lot of problems with this advice. In broad strokes, the economy, job market, and cost of living are vastly different today than two or three generations ago. While this advice may have been sound for your parents or grandparents, it’s not nearly as applicable today.
While a mortgage payment by itself may be comparable to renting, there at least a half-dozen other costs that come with home ownership on a regular basis, including:
- Mortgage insurance
- Property taxes
- Homeowners insurance
- HOA fees
- Property maintenance
- Emergency repairs
All of these things put together increase the cost of home ownership significantly. Unless you plan on staying in one place for at least five years, renting is likely the smarter financial decision.
2) Everyone Should Have Some Credit Card Debt
This piece of advice is one of the most pervasive. It’s also the one that gets more people in trouble than almost any other.
The problem with this idea is that too often people conflate credit card debt with building or having good credit. Credit card debt and good credit are not the same things.
What builds good credit is borrowing money and then paying it back on time. That’s it.
You can build good credit in a number of ways besides using credit cards, including:
- Repaying student loans
- Paying your mortgage on time
- Making your car payments
The most important part of borrowing money is being able to pay it back. What often happens is people max out their credit cards because they’re under the false impression that the more debt they have on their cards, the more it will help their credit.
Unfortunately, the opposite usually happens. High credit card balances result in substantial monthly minimum payments. If you can’t make the minimum payments, it actually hurts your credit instead of helping it.
3) Wait Until You’re Older To Save For Retirement
Of all the bad financial advice out there, this is hands-down the absolute worst. With each passing year, fewer Americans are unable to retire when they’re ready because they don’t have enough money saved.
The sooner you start saving for retirement, the better. Period.
This doesn’t mean you have to start putting every spare cent of your income into your retirement. The great thing about starting early is that you can put far less towards retirement than you will need to if you wait until you’re older.
If you wait until you’re in your forties or fifties to start saving for retirement, you’ll need to make up for all the years you weren’t contributing. This means you will have to put every extra dollar you can afford towards retirement if you want to have any chance at all of saving enough before you stop working.
Don’t Trust The Internet (With Your Money, At Least)
Look, we understand the irony of putting an article online that says: “Don’t trust articles online.” What we’re advocating is not that you shouldn’t do your homework – reading up on the basics of financial planning and investing is a great idea– it just shouldn’t be the only information you use to make a decision.
The cost of consulting with an experienced financial professional is a minimal investment. Just taking that small step can be the difference between having a solid plan and avoiding a bad decision that could impact you and your family for years to come.
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