Have you ever been given bad money advice? It’s pretty common, so I’m sure you’ve been there once or twice before. You can probably remember a time when some well-meaning coworker, family member, or friend tried to explain to you how things “really” are but, instead of helping, it left you more frustrated and confused than you were before.
As a teen, I vividly remember a family member telling me, “You know, you’ll always have a car payment. You might as well get used to it now and just get the car you really want.” I thought that sounded depressing. Not only that; it isn’t true!
Now, I realize that was just bad money advice, plain and simple. And, I’m happy to say that our family has debunked that belief. We haven’t had a car payment in almost 10 years! Not only that, but we were able to pay cash for our last automobile purchase. We’re living proof that it’s not necessarily true that you’ll have a car payment your entire life. It’s possible to live debt-free!
But that’s just one example of bad financial advice I’ve gotten over the years. There are, of course, many others. Plenty of which is just flat-out wrong. I’d venture to say that you’ve probably been given your fair share as well. Here are a few pieces of bad money advice that most of us have been given.
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RUN Away from these 7 Pieces of Bad Money Advice!
1. “You’re normal if you live paycheck to paycheck!”
At some point in life, almost everyone lives paycheck-to-paycheck. According to a recent survey by First National Bank of Omaha, nearly half of Americans are currently in that exact situation.
It’s true that money is tight for a lot of people. Whether you’re just starting out or you’re restarting after major financial challenges, there just isn’t money left over at the end of the week for many of us. If you’re in that place right now, it honestly can feel like you’ll never break free and jump off that hamster wheel.
Unfortunately, many people believe that paycheck-to-paycheck is normal and will justify splurging on non-essentials with any remaining money left over at the end of the week. The thought usually is, “Why not? I have the money. And I’ll get paid again next week.”
The truth is that the paycheck-to-paycheck cycle can be broken! People come out of poverty every day. You don’t have to win the lottery or inherit a fortune.
Steady work, discipline, and creativity are all that anyone really needs to get ahead. The important thing is to have a plan and work it consistently. You may not become a millionaire and success may not happen instantly, but given time and effort, you will turn that corner!
2. “Just wait for the government to pay off your student loans!”
College enrollment is not slowing down with 2/3 of high school graduates packing up and heading off for a degree. And the average college graduate is left with over $37,000 in student loan debt when they complete their degree [1].
With a career in social services, I was aiming to pay as little as I could each month to satisfy my monthly minimum payment on student loans to get through until the government paid them off in 10 years for my public service.
However, paying the minimum payment only left me with MORE money owed each year. Plus, my lifestyle changed within 10 years and I wanted to stay home with my children and no longer work in public service. Plus, I learned that the success rate of student loan forgiveness was very low.
As of late 2019, statistics show that of the 136,473 applicants for Public Service Loan Forgiveness, less than 1% were approved for student loan forgiveness! That is incredibly sobering since you can see that, unfortunately, it is highly unlikely that these loans will be forgiven in most cases.
So after being almost $68K in student loan debt, we got completely tired of paying our student loans every month. With a small income and a LOT of determination, we became debt-free in just 16 months! If you’d like to read about the steps we took to become financially free, click here.
You may be surprised to know that there are colleges that offer free tuition which you can research a bit more if you or someone in your family will be heading to college in the near future.
3. “You can’t take it with you!”
The moment people recognize that you’re making fewer impulsive purchases and saving for retirement, be assured that someone’s going to say, “You know, you can’t take it with you.” It’s hard to argue with that for one simple reason: it’s true!
The problem isn’t what the phrase says. The problem is what it means. The indication is that you’re being “cheap” and not enjoying life if you’re not spending money in the moment like everyone else. Well, that’s obviously false.
Frugal people care about the present but make decisions today with the future in mind. With anything, it’s about finding a balance between not squandering your money because you won’t be promised tomorrow and saving every penny for the future, and sacrificing your happiness every day.
4. “You need to go to college to make a lot of money.”
Nowadays, children are raised under the assumption from parents, grandparents, and teachers that they’ll be heading off to college when they graduate high school. After all, most high-paying careers require a college degree, right? Wrong!
There are many high-paying, successful careers that don’t have a college degree requirement! A few examples: photographer, makeup artist, executive assistant, brick mason, firefighter, HVAC technician, realtor, blogger, refinery operator, and web developer. So many of these skills can be learned through hands-on experience or online without traditional college and often free of charge!
College, like every big life decision, should be thought out. It’s not an end but a means. If you want to be a doctor, then, of course, you need college. That’s your means of getting there.
But investing valuable time and money into higher education just because it’s a standard these days doesn’t guarantee success. Think of college as a means to achieve a goal, not as an end goal itself. The decision will cost you a lot of time and money, so be intentional.
5. “Never get a credit card.”
Let’s face it, credit cards exist because people want to buy things on credit instead of cash. A few reasons people do this are because they can’t afford to pay for the item in full at the time of sale, they want to earn rewards for their purchases, or they don’t like to carry around cash. Unfortunately, many people fall into the category of not being able to afford their purchases and rely on their credit cards far too often.
There are downsides to using a credit card such as the temptation to overspend and the risk of racking up large amounts of interest and fees. Just to name a few!
The upsides of using a credit card can be: building a good credit score when paid on time with a low balance, earning cashback/rewards, and the ability to make reservations online where a bank card is not accepted.
Our family uses a credit card for all of our everyday purchases. It is on auto-draft each month, so we never worry about paying a late fee or accruing interest. Nor does our spending increase with the ease of swiping the card vs paying cash.
If you have a past or present temptation to irresponsibly use credit cards, then sticking to cash or debit is probably best for you. But if you’ve shown that you can stay on top of your bills and manage your spending habits, then there are a lot of perks to using a credit card that you may be missing out on.
6. “Don’t rent! You’re just wasting money.”
Owning a home is part of the American Dream. I received some bad money advice when I was told that I should never rent because you’re just throwing money away. Why pay so much money and not have something to show for it? As with so many things in life, the truth lies somewhere in the middle and depends on a lot of different factors.
Some benefits of renting a home instead of buying are less upfront cost, little to no costs for upkeep and repairs, flexibility to relocate, no property taxes, and package deals such as included utilities.
Renting is a great option for a younger person starting out, someone starting a new path in life, or even an aging person looking to downsize to something easier to maintain. Having a safe and secure residence is never a waste of money when you consider the alternative of paying that same amount of money with no roof over your head.
7. “You need to retire fast!”
If you’ve read anything in the personal finance blogosphere in the last 5 – 10 years, you’ve probably come across the FIRE Method. It stands for Financial Independence, Retire Early. Not surprisingly, the emphasis here is on saving a large percentage of your paycheck, usually 70% or higher, so that you can retire WAY before the age of 65.
The FIRE Method is really a very attractive concept, but it’s not always feasible for everyone. On top of that, there are drawbacks to early retirement that aren’t obvious at first.
First, if you completely withdraw from the workforce early on, you may lose out on learning valuable skills. It’s always prudent to cultivate multiple paths in life so that you can weather just about any storm. If you run out of money and need to get back to work, you may run into some difficulties due to a lack of recent work experience.
In addition, retirement assumes that you don’t like your work enough to stay. If you love your work, then why leave?! There are major physical and mental health benefits to staying active, especially as you get older.
This is not to say that you have to retire early or late for that matter. But the key is to understand that there is no one-size-fits-all approach. What is best for one is not necessarily best for all. You have to find what works for you and helps you achieve the goals you have for yourself.
Don’t let bad money advice slow you down. There’s plenty out there to go around, so be smart and figure out what’s really being said. The main takeaway is to not take any advice, financial or otherwise, at face value.
There’s a nugget of truth in just about all popular sayings. Don’t go “all in” on any advice until you’ve had time to look at both sides of things and find a middle ground.
Comment below and share the worst money advice you have ever been given. We’d love to hear from you!
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