“What’s the worst financial advice you’ve received?” I recently asked my friends and followers on social media this question. There’s an avalanche of financial information online (and from real, live people), but not all of it is good advice. In fact, some it is downright dangerous to your financial health.
Here are some doozies people shared with me, so you can avoid the same financial potholes!
Worst Financial Advice You’ve Received
Spend Money Before You Get It
“My first sales manager (I worked at a gym) would encourage us to spend our checks before we got them on credit cards because if we believed we could make the sales, it was like we already had the money. I was 18 years old.” – Tim L. (What? Yikes!)
“Take out a large mortgage so you will work harder (did not listen!)” – Daniel L.
This advice must be taught in sales management training! I worked with a sales manager years ago who said he wanted all his reps to have big mortgages because they’d be more motivated to sell. Personally, I wouldn’t want my employees to be motivated out of fear and anxiety. (But maybe that’s just me!)
Debt’s No Big Deal
“Don’t worry about taking out student loans, everyone does it and you can pay it off until whenever…When is whenever?!” – Money Coach, K.D.
“Low interest credit cards are like free money for funding a business or real estate investment. Except that unsecured credit with no terms can have the interest rates and payment terms unilaterally changed.” – John B. You’re right about that, John! Banks can call your line of credit, lower your limit, or increase your interest rate at the worst possible time.
“You’re always going to have a car payment so be sure you get the car you really like or lease a car that you can trade in every few years.” – Becky B.
You have to realize that ALL debt has a financial and emotional weight to it. It puts a drag on your cash flow, and can cause anxiety. Our society has desensitized us to the dangers of debt. Most millionaires agree that the best way to get and stay wealthy is to avoid personal debt.
“Don’t worry, you don’t need to understand what we are doing. We are the experts just give us your money and let us take over.” – Marion M.
If you hear this from a financial “expert,” RUN as fast as you can in the other direction! You want the people on your money team to educate you on your financial options and investments. If a banker or advisor can’t explain to you in plain English exactly what you’re buying and why you need it, find someone else who will.
“Don’t put money into a Roth. You’ll have to pay taxes now.” – Lauren M.
The easiest way for me to explain the difference between using a Roth or traditional retirement account is this: Do you want to pay tax on the seed (Roth) or pay tax on the harvest (Traditional)? Personally, I’d rather pay tax now on the smaller amount, versus taxes later on the growth.
“As a young professional and just starting to invest, I was advised to put a significant portion of my little portfolio in Guaranteed Investment Certificates, with less than 1% return… because it was ‘safe’. I was young, didn’t know any better, and trusted that because I had walked into one of Canada’s Big Banks, that they would actually try to help me.” – Miles H.
One of the biggest risks in investing is trying to avoid risk! Risk and reward go hand in hand. And the younger you are, when time is on your side, the more risks you can afford to take.
Consider the Source
“From an insurance agent who was also my Lyft driver: the internal rate of return in our whole life insurance policy is better than the S&P 500 so you should buy one. Say what??” – Darren Wurz, MSFP, CFP®
If your insurance agent is so successful, selling a high-performing product, why does he need a side gig as a Lyft driver?
“That I could teach myself how to manage my finances on my own with no help, big mistake. Listening to others who finances were in the negative was just as bad.” – Charice H.
When you’re seeking financial advice or information, you definitely want to consider the source. Is the website you’re surfing a well-respected media outlet, like Forbes or Money? Does the financial expert have formal training and certification in personal finance, money management, investing, or accounting? You want to take financial advice from people who are at or above the level you aspire to be!
Other Questionable Advice
“When I graduated college and decided to live abroad, I was told that I was making a huge mistake. I was told I need to start working immediately otherwise I’d be behind in life. I’m so happy I ignored that advice! I wouldn’t trade my experiences while living abroad for any job or amount of money. Best decision I ever made.” – Sid Misra, CFP®
I love this, because experiences are valuable in and of themselves. Sometimes the decision isn’t solely about the money.
“Cut up your credit cards, they’re the “devil.” I have a chronic health condition since I was a child. For that no health insurance company will give me coverage, so all the costs of insulin and other medication are on me. Having credit cards is great to be able to buy medicine before my next payment comes, since this is not an expense that can wait until next month or quarter. When the time comes and I get the money, I pay what I paid or in 3 payments at the most. This way, my health and my financial record are good.” -Isa M.
Credit cards are neither good nor evil. If you use them wisely, as a payment method, they can help you manage your cash flow. But if you are an emotional spender, they can turn into little debt machines. So, be careful!
“Our accountant told us to pay off the medical bill to Children’s Hospital with a 2nd mortgage so we could take the tax deduction.” Carrie C.
Yikes! You should always negotiate directly with your healthcare provider on your medical bills. If you pay them with your home equity line or credit card, you’ve just turned a 0% interest debt into one that’s costing you 5%, 10%, 15% or more!
“No advice at all was the worst.” – Danielle H.
Amen to that, Danielle! Unfortunately, there’s an atmosphere of shame and silence around money. It’s my goal to create more open, honest, and helpful discussions around personal finance!
What’s the worst financial advice you’ve received? Drop a comment below and tell me!
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