Personal finance is probably one of the most scarcely-taught subjects there is which is really sad because our relationship with money has a huge impact in most areas of our life.
Becoming self-taught by reading personal finance books is a great route to take if you want to improve how you manage your money. However, you need to be careful in regards to who you receive advice from. Take the time to carefully do your own research as well.
It’s important to realize that all financial advice isn’t good and may not help you truly reach your goals. Here are 3 examples of bad personal finance advice that I’ve heard personally and I don’t think anyone should ever follow.
1. There’s ‘Good’ Debt and ‘Bad’ Debt
Growing up I heard the word debt being mentioned a few times. But, I was always under the impression that there was good and bad debt. After following advice from family members, by the time I was 18, I believed that credit card debt was ‘bad’ debt while student loans and mortgages were ‘good’ debt.
When I graduated college with over $20,000 in student loan debt and had no job leads, I certainly didn’t think my debt was a “good” thing and it really stressed me out. Now, I know that all debt is debt.
No matter what you purchased with the money you borrowed, you still have to pay it back. If you don’t like that, you shouldn’t really consider being in debt to be a good thing.
Sometimes it’s hard to avoid debt especially when you don’t have the money to pay for things in cash. In those cases, you may try to trick yourself into thinking that the debt you’re accumulating is ‘good’ because it’s being used for a good purpose. However, you have to think about your overall goals. How will debt play a role in your being able to reach those goals?
Paying interest is one of the biggest downsides of having debt. Instead of looking at debt as good or bad, focus on how it will affect your life in the long run. Then make a choice to avoid or minimize the amount of debt you get yourself into.
You can also chose to consolidate your debt with a personal loan to help you get it paid off faster.
2. You Have to Get a Loan If You Want a Quality Car
Another bad piece of financial advice is that you must take out a car loan in order to get a quality car. Car loans can be a controversial topic. Some people swear by them and will gladly take out a car loan, while others will stick to buying older cars they can afford in cash.
Again, in order to determine what’s best for you, you have to look at your priorities and goals. Also look at who is encouraging you to take out a car loan which could reveal a lot about their true intentions.
Is it the salesperson who stands to make a larger commission if you purchase an expensive car? Is it your friends or your ego persuading you to show off with a brand new car?
It’s a known fact that cars are a depreciating asset and will slowly but surely break down eventually. However, that doesn’t mean you need to buy a $25,000 brand new car especially if you can’t afford it.
There are plenty of reliable used cars on the market. It may be more challenging to weed through the options that will be best for you, it is possible to find a quality used car that you can afford. You may even be able to save up to purchase it in cash so you can avoid debt.
If the thought of trading in your car every 2 years for the ‘better’ and ‘safer’ model makes you feel pretty hopeless, realize that you don’t have to have a car loan for the rest of your life in order to drive a nice car.Do your own research to avoid following bad money advice. Click To Tweet
3. You Don’t Have to Worry About Saving For Retirement Right Now
The 3rd and probably most damaging piece of financial advice that I’ve heard from people is that you don’t need to worry about saving for retirement until you’re older.
One of my friends told me to stop worrying about retirement when I was 23. She said I had plenty time to worry about it later. What she didn’t realize, was that I wasn’t ‘worrying’ about it. I was planning and preparing for it.
Last year Time referenced a survey conducted by Go Banking Rates that indicated 1 in 3 Americans actually have nothing saved for retirement and more than half have less than $10,000 saved. What happens when those people get tired of working, can no longer work, or reach a traditional retirement age of 65?
They’ll have no money to live on and then they’ll be pretty worried. In order to eliminate the chaos and stress that surrounds not having enough money to live on during retirement, everyone needs to start planning and preparing ASAP. You can really never be too young to start investing and saving for retirement. Your money needs lots of time to grow.
When you start early, you’ll actually need to save less money over time. So, you won’t need to work nearly as hard to save. Setting aside a little money when you can is better than nothing and you don’t have to stop living now just to prepare for the future. You can start investing with no minimum and low fees with Ally Invest.
Listening to Bad Advice Can Ruin Your Finances
As you can see, listening to bad advice like the 3 examples above can literally ruin your finances now and in the future. This is why it’s so important to make sure you’re following good personal finance advice. You should be cross-checking everything you hear to make sure the choices you make are in your best interest.
What’s the worst piece of financial advice you’ve ever heard?