The Worst Money Advice I Ever Received
If you’re trying to improve your finances, you may be searching for some sound financial advice. However, if you want to attain financial health, you’ll need to be very careful about where you get your financial advice. Just because someone wrote a book or is providing advice on a popular TV show doesn’t mean what they’re money advice is accurate. And if you happen to ask a close friend for advice, don’t assume they know what they’re talking about just because they seem successful. The financial experts we spoke with told us they got some pretty bad advice from friends, other experts, and even bosses. Here’s the worst money advice they ever received.
Take out as many student loans as you can get
Having spent $100,000 on undergrad and graduate degrees to become a teacher making $34,000, I wasn’t in a position to afford life, much less pay off the loans. I believe business ownership and investing in oneself is the best bet. I recommend finding a market and pouring your heart and soul into making a business work.
Jason Bond, stock trader and teacher, and self-made millionaire
Hoard credit card rewards points
In my job as a consultant, I, and all of my co-workers traveled a lot, so maximizing travel points was a common topic for discussion. However, I spent little thought on what I’d do with those points, distracted by the game of maximizing rewards and gaining lounge access. By the time I left that job I had over a hundred thousand points in several points banks that I had no use for, many of which I had to sell to friends for pennies on the dollar or simply allow to expire. If I’d opted for rewards with more flexibility and greater application to my personal tastes, I’d have been much better off. My advice: Pick rewards platforms that not only maximize the points you earn but also provide rewards that are relevant and useful to you.
Sean McQuay, credit card expert at NerdWallet
Buy as much house as you can afford
A good friend and financial adviser gave me a piece of advice regarding home buying. The advice was to buy as much home as you could qualify for to keep you hungry (not just because mortgage rates were low and lenders very willing to lend — this was around 2006). He was a commissioned salesperson who “started at zero” each month so that a large financial obligation being due the first of each month was his motivation to produce and reach the next level in his payout “grid.”
I could not disagree more. This approach may have worked for his individual circumstances but to advise others to do the same then was not personalized advice. The additional stress of too much mortgage would be a trade-off for some that no career progression or home sale proceeds could make up for. First, make sure your financial house is in order, then buy only what you can afford. While a home over time can build equity and be an important use asset, I’ve seen a majority of people become financially successful by keeping their liabilities to a minimum, saving more than they probably need to, and then living modestly on what’s left. It’s essential to first have a good emergency savings fund (3 to 6 months) set aside, then save toward that home. Houses need to be maintained and they have their own unexpected expenses.
Patrick Ritter, CFP® Financial Planning Consultant, Fiduciary Advisors, Inc.
Keep a small balance on your credit cards
One of the worst pieces of advice I’ve heard is that you should always keep a small balance on your credit cards as it helps your score. I think the main culprit of this one is actually misinformed parents. It’s nonsense! Pay off your statement balances in full every month. You’ll save money on interest and still be able to achieve a great credit score.
Jacob W. Parish, Financial Advisor, Schooner Financial Associates
Focus only on your monthly payments
The worst advice I ever received was to only focus on the monthly payment, not the total cost of something. Hands down, worst advice ever.
Rebecca Schreiber, Certified Financial Planner and Co-founder of Pure Financial Education, LLC
Don’t take investment risks
In 1985, I was barely a stockbroker, having passed my Series 7 examination the previous summer. I had been in the McDonald’s All-American High School band ten years before in 1975 to 1976 and still had a soft spot for the company. I asked my branch manager at then Dean Witter for his advice on buying McDonald’s stock for myself. His response was, “It’s been growing 15% a year? How do you know whether that will continue? Is that a sustainable growth rate?”
For some reason, I paid attention to his answer and did not purchase shares for myself. (They would have gone in my traditional IRA). In fact, I have never bought individual shares of McDonald’s. Even though I thought I was right, I let his answer guide me, as I’d only been in the business for six months. I only had about $2,000 at that time to invest (IRA maximum was $2,000 back then). I lost out on five splits and used this calculation to get this result: That 1985 IRA contribution of $2,000 would have grown to $121,511.76, an annualized return of 13.88% per year. Thank goodness I didn’t listen to him on other stocks I purchased in the 1980’s.
Dana C Twight, CFP®, Founder of Twight Financial Education, LLC