Yahoo Finance 6 Terrible Pieces of Money Advice To Ignore If You Want To Get Rich
When it comes to financial advice, there is no shortage of it. Whether it’s on social media, mainstream media, coming from well-intentioned acquaintances or via popular culture sayings, the sheer avalanche of “tips” can be overwhelming — and perhaps sometimes not always quite right.
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Indeed, many money expressions — such as “cash is king” for instance — are so ingrained in the cultural zeitgeist that they can be taken at face value without a second thought.
But not so fast, say experts. While there is a ton of great financial guidance out there, there are also terrible pieces of money advice to ignore if you want to get rich.
“Whether it’s from your neighbor or a financial expert on social media, it can be difficult to wade through financial advice that makes sense for you,” said Steve Sexton, CEO of Sexton Advisory Group. “First, it’s important to remind ourselves that personal finance is just that — personal. Anyone who approaches any piece of financial advice as a blanket recommendation, without taking into consideration their personal financial goals, milestones and challenges, is likely implementing advice that won’t benefit them in the long run.”
Here are some of these “terrible” pieces of advice, according to experts.
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Cash Is King
One of the biggest money myths is that cash is king, said Robert R. Johnson, PhD, CFA, CAIA, professor of finance, Heider College of Business, Creighton University.
In fact, according to him, over the long run, holding significant amounts of cash ensures that one will suffer significant opportunity losses.
“When it comes to building wealth, one can either sleep well or eat well,” Johnson said. “Investing conservatively allows one to sleep well, as there isn’t much volatility. But, it doesn’t allow you to eat well in the long run because your account won’t grow much.”
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You Can Time the Market
Attempting to time the market is “fool’s gold,” Johnson said.
“None other than Vanguard founder Jack Bogle is quoted as saying on market timing, ‘After nearly 50 years in this business, I do not know of anybody who has done it successfully and consistently,'” Johnson added.
He also noted that many people have been preparing for a recession for years and have exited the stock market.
“The opportunity cost of such a strategy is quite high. Investors should stay invested and not try to ‘outfox’ the market,” he added.
You’re Wasting Money by Renting
Purchasing a home is not always the greatest option, even if it can be a wise investment for certain people, according to Hector Castaneda, CPA, principal at Castaneda CPA & Associates.
“Proposing property purchases to individuals without considering the market, their financial status or even their personal long-term goals can result in financial difficulties,” said Castaneda, adding that evaluating all available options and making an informed decision that best fits your needs is better than following generic advice that is not suitable for everyone.
And as Sexton noted, while owning a home is the equivalent of the American dream, it’s important to be realistic about mortgage rates, hidden costs, insurance fees and other expenses that add up in this current economy. In most cases, these expenses will end up costing more than monthly rent.
“Again, this is a scenario in which it’s critical to understand your financial situation and goals, and how owning a home fits into that larger picture — instead of blindly following this widely accepted financial ‘rule,'” he added.
Save For Retirement Later on, When Your Income Is Higher
Consumer finance expert Kyle Enright, president of Achieve Lending, deemed this a “terrible mistake.”
“If you’re a young adult, starting off in your career and not making a large salary, it’s easy to say, ‘I’ll do it later,'” he said. “That is a terrible mistake.”
For instance, he said that if you start with $500 and then save $500 monthly in a savings vehicle that earns 4% over 40 years, with daily compounding, you’ll have more than $595,000 in 40 years.
“Start with $1,000 and save $1,000 every month, and you’ll have almost $1.2 million. But if you save the $1,000 monthly over only 20 years, you end up with just $369,000,” he added.
Money Is Evil
According to Joe Camberato, CEO, National Business Capital, this saying is “absolute nonsense.”
“In reality, money can be a powerful tool for doing good in the world when used the right way,” he said. “The key is to focus on investing — not just saving.”
As he further argued, if your money is just sitting in a bank account, you’re actually losing money due to inflation.
“That’s why you always have to make sure your funds are working for you by way of multiple investments. Think of managing your money as a second job. Wealthy people grow their wealth by continually putting their money to work in different investments, businesses, or opportunities that generate more income,” he added.
Avoid All Debt
Debt is not inherently bad, said Scott Lieberman, founder of Touchdown Money.
“To steal a line from Frank Underwood, there are two kinds of debt: the sort of debt that makes you strong or useless debt,” he said.
He added that, for instance, student loans, business loans and home equity loans give you a tangible asset for your debt, which you can use to build your financial future.
“Credit card debt, however, is truly useless,” Lieberman said.
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