People are always so willing to offer up their own financial advice. Every once in awhile you hear some good advice that you can easily take advantage of. However, there has been a lot of advice I’ve heard over the year that has been down right bad. What surprises me though is that people still listen to the advice and actually do the things they recommend. Those poor people! You really need to be careful who you listen to and what advice you actually take…
Travel and Credit Card Rewards
You should not be trying to take advantage of credit card rewards unless you are financially savvy. Travel hacking is all the rage right now. I’ve seen many people get awesome deals using credit card rewards. You just have to spend $5,000 in the next 3 months to get 100,000 miles/points. Sounds pretty easy, right? It can be a great amount of saving if you love to travel… AND if you do it right.
Unfortunately if you aren’t responsible with credit cars you can get into trouble easily and quickly. You could find yourself in over your head in debt. You need to be able to pay off your balance EVERY. SINGLE. MONTH. No exceptions! If you don’t get into the habit immediately of paying off your balance, you will not only end up paying interest and possibly late fees, but you will also find yourself trying to juggle your debt. It can also have a significant impact to your overall credit and financial future.
Don’t Get a Credit Card
I’ve heard plenty of people say that credit cards are only for people who can’t pay for things with cash. As I mentioned above, you shouldn’t get a credit card unless you can be financially responsible with it. However, credit cards have a lot of benefits too. I have used credit cards since I could get one, so probably since around age 18. However, I’ve always been good with money and have therefore always paid off my balance each month. Therefore, I’ve never paid interest or late fees.
Credit cards can offer you some nice rewards – hotel points (free hotel stays), miles (free flights), cash back, gift cards, and even savings bonds. You MUST be financially responsible if you are going to use credit cards because people can get in to trouble quickly racking up debt on them. It’s easy to spend, spend, spend when you don’t actually see the money leaving your checking account immediately. I can’t stress this point enough – be responsible with your money!
Buying a Home Instead of Renting
There is a lot of pressure once you are an “adult” to buy a house. However, it doesn’t always make sense financilally for everyone to buy a home as soon as they think they are reading. Do you move often? Yes. Rent. Do you have enough for a big down payment and closing costs? No. Rent (for now).
Although I was pressured into buying a house instead of continuing to rent, I’m happy I did because I have stayed in my house for over 15 years now. I was also able to purchase a house below my “approved” amount and paid off the mortgage. It is a personal decision for everyone depending on their circumstances, so you need to look at your situation to determine if buying or renting is right for you (and your family too if the case may be).
Have Fun When You’re Young
You don’t need to save when you are young, you have plenty of time for that later in life! Um, not necessarily. As I’ve mentioned before, the value of compounding is huge! The earlier you start saving, the easier it is to get your retirement number and or reach a point of achieving financial independence. Start now, start today!
It’s not about working for money, it’s about having money work for you. ~Stephen Richards, author
Sell Stocks When the Market Falls – Get Out Now!
When people see the stock markets fall, they start to panic. People will tell you that you need to pull your money out now before you lose even more money. This is bad advice! Over time, the markets will rebound. Historically the stock market has averaged about an 8% return every year. So, if you are investing in mutual funds that are indexed to the stock market averages (which you should be!), then you will eventually see your investments rise again. You should be investing for the long-term anyway and watching your money rise and fall with the stock market will just give you anxiety. (Speaking from my own experience – Haha.)
Buy It Because “You Deserve It”
I can’t even count the number of times someone has told me to just buy it because I “deserve it”. I worked hard to earn my money, so why not treat myself, right? If I spent money every time I wanted to treat myself, I think I’d be broke right now. If you end up buying something you normally wouldn’t just to reward yourself, you will eventually be disappointed in your actions. I’ve definitely fallen victim to this though. I think the worst one was buying a luxury SUV because my (ex) boyfriend kept tell me “you deserve to treat yourself” and “you have the money, so go for it.” This was before I became more confident in myself and my finances, and didn’t think as much about the future. I’ve also bought myself expensive clothes and shoes, as well as spend too much on haircuts, pedicures and massages.
I think it’s fine to treat yourself everyone once in awhile, but you need to be conscious of what you are buying and why you are buying it. You could give yourself a budget or create a “dream jar” and save up for a reward you really want.
Other Bad Financial Advice
- Co-Sign a Loan – Although you are usually just trying to help a friend or relative, this can have a huge impact on you if they end up defaulting on the loan and you end up responsible for it.
- Lending Money to Family or Friends – Similar to co-signing above, however, you may just want to write off the amount you “lend” to someone since more often than not you will NEVER see it again.
The older you get, the more financial advice you hear, and the more financial mistakes you make. However, hopefully with age also comes wisdom. (Although not for everyone. 🙂 ) I’ve found that I will listen to other people give advice (good manners), but rarely actually follow it. I enjoy doing my due diligence and with everyone out there claiming to be an expert on various topics, you need to be careful about things you do, especially when it comes to your money. Be cautious when it comes to listening to other people’s advice – what’s good for one person, may not be the best for you.
What bad financial advice have you heard? Was there any advice you followed and impacted you negatively?