Most of us receive poor financial advice at some point in our lives. Some of us ignore the recommendations; others follow it, to their later regret. See if you recognize any of the following common bad tips from your own experiences.
You're Too Young to Save for Retirement – It is critically important to put away even small amounts for retirement to get the best use of compound interest and long-term stock market increases.
Student Loans Are Good Debt – It is not uncommon for students to use loan money for frivolous expenses, and/or look at student debt as "investment" money that will pay off later in a high-paying job. It might, but there is no guarantee – as many graduates with crushing debt and no job can tell you. Look for alternatives before accepting student loan debt.
Co-signing Doesn't Have Consequences – People tend to co-sign as favors to friends or to help their children as they head out into the world. That is fine, but make sure you understand the risks involved. Blithely co-signing loan papers or credit card agreements can leave you on the hook for some or all of any unpaid debts.
You Can Live Off of Credit Cards – Sure, you can… for a short time. However, it is too easy to enter a debt spiral by buying more things than you can afford and making only minimum payments. Use your credit responsibly. Limit high-interest credit card debt, pay that debt off first, and if possible, never charge more than you can pay off at the end of the month.
Spend Your Raise – A big raise may tempt you to change immediately to a more free-spending lifestyle. Do your part to stimulate the economy if you want, but save or invest a significant portion of your raise first. Make sure that basics are taken care of and that you have a sufficient emergency fund.
You Don't Need to Save That Much for Retirement – People tend to underestimate their costs in retirement, especially medical costs. Seek the advice of a retirement planner who can help you find the best target and plan for your needs.
Fund College Before Retirement – Your kids have more alternatives for paying for college than you do attempting to catch up on missed retirement savings during your 50's.
Sell Your Stocks as you Approach Retirement – You should rebalance your portfolio toward more conservative investments as you approach retirement, but pulling out of the stock market entirely may mean that your investments cannot even keep up with inflation.
Real Estate Investments are Easy Money – Real estate investments may have good returns, but they are not easy. Whether you are a house-flipper or a landlord, you must invest a huge amount of capital and time to make the investments pay off. Make sure you have the resources and the stamina for long-term real-estate investments. If not, consider something like a Real Estate Investment Trust (REIT) Exchange Traded Fund (ETF) Exchange Traded Fund (ETF) that trades like a stock.
Try "Dabbling" in Investments – As a general principle, "dabbling" in anything related to investments is a bad idea. Unprepared day trading in stocks is a great example of people who simply fall for ads, dive in over their heads, and come out poorer (but hopefully wiser). Without sufficient research and planning, you may as well buy lottery tickets.
Did any of the above give you flashbacks? If so, do your part to educate others and help them avoid the same mistakes. They may ignore your advice, but at least your conscience will be clear. Check out our follow-up article for seven more MoneyTips to ignore.
Let the free MoneyTips Retirement Planner help you calculate when you can retire without jeopardizing your lifestyle.