Understanding the difference between sound and terrible financial advice is crucial. Regrettably, poor financial advice may result in expensive issues thus today we go over money advice that’s better off ignored but have become exceedingly common.
Being able to spot poor advice and making sure you don’t take it are key skills.
There are several traps that you should stay away from, such as accruing excessive debt and having inadequate emergency funds.
In light of this, let’s examine the common money advice you should probably ignore.
Student Debt is fine
Many students hear that attending college is always worthwhile, even in cases when student loans are needed.
In actuality, some people are not better off taking on debt for a degree they may not end up using.
Not that going to college is a horrible idea; in fact, for a lot of people, it’s the best choice. It’s not for everyone, however.
It may be more advantageous for some individuals to pursue apprenticeships in order to work in the company that they want.
Alternatively, if you want to pursue a degree in a subject that pays less, think about enrolling in a less costly institution that nevertheless provides a top-notch education at a cost that is affordable.
Have a modest goal to aim for when creating an emergency fund
Harrison Tang, owner of Spokeo says: “It’s common advice to put $1,000 away for an emergency fund. Do we need emergency cash? Certainly. Furthermore, $1,000 is a suitable starting point.
However, given the current state of the economy, most emergencies will cost much more than $1,000, therefore we advise saving enough for a few months’ worth of expenses.
The ideal way to accumulate this is to make a regular monthly contribution to your emergency fund of $50, $100, or more.”
Have a lot of cash
While banks often provide low-interest rates, there are alternative investment vehicles such as 401ks, IRAs, and 529s where your hard-earned money might be working much harder for you.
Never Talk About Money with Others
This advice has always baffled me. Asking someone in my childhood how much money they earned or how much they spent on their home was strictly forbidden.
If individuals aren’t conversing and exchanging information, how can they learn? Speaking with someone who has done something before is the greatest method to learn it.
Please disregard this guidance.
Ask someone who currently owns a vehicle if you need to know what type of payment to anticipate when you’re older.
Before you begin the mortgage application process, find out what type of closing fees to anticipate by speaking with a friend or relative who has just purchased a home.
Before you ask, state the circumstances and begin, “If it’s okay with you..” if you’re uncertain about their reaction.
Fortunately, this advice seems to be extinct based just on the sheer volume of financial blogs available online. However, it once occupied the world of finance.
Talking to others about money will enable the emergence of a new financial landscape in which information is widely accessible and everyone has the chance to handle their cash sensibly.
Hold off on starting your investments until you are debt-free
David Farkas of The Upper Ranks tells us: “The average annual percentage rate (APR) for credit cards was more than 20% as of the first quarter of 2023. In the meanwhile, throughout the last century, the stock market has generated average annualized returns of around 10%.
Generally speaking, it makes sense to prioritize paying off credit card debt; but, if your company matches a percentage of your retirement payments, that money is almost free.
Is it possible to pay off your credit cards and make a sufficient contribution to get the match?
If your expected returns exceed the amount you’re paying in interest, you may also wish to invest. Let’s take an example where your sole debt is the amount of a 4% APR student loan.
You have the option to continue making your loan’s minimal payments while investing in the stock market. Even though profits are never guaranteed, you could feel at ease taking some chances in the hopes of increasing your wealth over time.”
After you have paid it off, close your credit card
It’s a wonderful feeling to pay off a credit card, particularly if you had a large debt before. When your credit card debt reaches zero, you should cancel it, according to a popular personal financial tip.
Theoretically, it seems logical; wouldn’t it improve your credit score? In actuality, the reverse may occur.
Your credit score may suffer if you close a credit card since you will no longer have access to the applicable credit limit.
This raises your total credit utilization rate, or the percentage of your available credit that you are now using.
For the best effect on your credit ratings, you should aim to maintain your overall credit utilization on revolving accounts, such as credit cards, below 30%.
That also holds true for individual credit cards. Try to keep the amount on one card under $300 if your credit limit is $1,000.
Attending college is essential for achieving professional success
Percy Grunwald, owner of Compare Banks says: “Attending college may have a positive impact on your career. A college degree does not, however, ensure that you will be able to find employment or have a prosperous career.
Furthermore, attending college just because it’s the right thing to do is not a smart choice because of how much it costs.
Millions of recent college graduates are burdened with enormous debt and work at jobs that don’t pay enough to cover their years-long student loan payments.
Many excellent occupations are available without a college degree.
Acquiring a trade or a skill will lower your chances of taking out student debt, enable you to start working and earning money right away, and be just as productive.”