When it comes to financial advice, there’s no shortage. Whether it’s from social media, mainstream media, well-meaning acquaintances, or pop culture maxims, the avalanche of “tips” can be overwhelming — and they’re not always accurate.
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In fact, many money-related expressions, such as “cash is king,” are so ingrained in the cultural zeitgeist that they are often taken at face value without much thought.
But experts say there’s no need to rush: While there’s a ton of great financial advice out there, you shouldn’t ignore the terrible money advice, either. Become wealthy.
“Whether it’s from a neighbor or a financial guru on social media, it can be hard to find financial advice that makes sense to you,” he says. Sexton Advisory Group“Firstly, it’s important to remember that personal finances are truly personal. Anyone who treats financial advice as a blanket recommendation without taking into account their personal financial goals, milestones and challenges may be implementing advice that will not benefit them in the long term.”
Some of this “terrible” advice, according to experts, includes:
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Cash is king
One of the biggest myths about money is that cash is king, says Robert R. Johnson, PhD, CFA, CAIA, professor of finance. Creighton University Heider College of Business.
In fact, he says, in the long run, holding too much cash guarantees huge opportunity costs.
“When it comes to wealth creation, you can either sleep well or eat well,” Johnson says. “If you invest conservatively, you can sleep well because there won’t be much fluctuation, but you can’t eat well because your account balance won’t grow much over the long term.”
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You can time the market
Trying to time the market is “fool’s gold,” Johnson said.
“None other than Vanguard founder Jack Bogle said about market timing, ‘In nearly 50 years in this industry, I don’t know anyone who has done it successfully or consistently,'” Johnson added.
He also noted that many people have been withdrawing from the stock market for years in preparation for a recession.
“The opportunity cost of such a strategy is quite high. Investors should remain invested and not try to ‘outdo’ the market,” he added.
Renting is a waste of money
While buying a home can be a smart investment for certain people, it’s not necessarily the best option, said Hector Castaneda, CPA and president of a real estate company. Castaneda CPA & Associates.
“Recommending a property purchase to an individual without taking into account the market, their personal financial situation and even their long-term goals can put them in financial difficulty,” Castaneda said, adding that it’s better to evaluate all the options available to you and make an informed decision that best suits your needs, rather than following general advice that may not apply to everyone.
As Sexton points out, owning a home is the American dream, but in today’s economy, it’s important to be realistic as mortgage interest, hidden costs, insurance premiums, and other expenses add up. In most cases, these costs will be more than your monthly rent.
“Again, this is a scenario where it’s really important to understand your financial situation and goals, and how homeownership fits into that bigger picture, rather than just blindly following this widely accepted financial ‘rule,'” he added.
Save for retirement when your income increases
Kyle Enright, a consumer finance expert, achieve Lending called this a “terrible mistake.”
“When you’re a young adult, you’re just starting out in your career and you’re not making a lot of money, it’s easy to say, ‘I’ll do it later,'” he says. “That’s a huge mistake.”
For example, if you start with $500 and put $500 a month into a savings vehicle that earns a 4% return for 40 years, compounded daily, you’ll have more than $595,000 after 40 years, he says.
“If you start with $1,000 and save $1,000 every month, you’ll end up with nearly $1.2 million. But if you save $1,000 every month for just 20 years, you’ll end up with just $369,000,” he added.
Money is evil
According to CEO Joe Kamberat: National Business CapitalThis proverb is “It’s complete nonsense.”
“In fact, money can be a powerful tool to do good in the world if used correctly,” he said. “The key is to focus on investing and not just saving.”
He further argued that if you simply leave your money in a bank account, you are actually losing money due to inflation.
“That’s why you need to constantly make sure your money is working for you through multiple investments. Think of money management as a side hustle. Wealthy people grow their wealth by continually putting their money into different investments, businesses or opportunities that generate more income,” he added.
Avoid debt at all costs
Debt isn’t inherently bad, says Scott Lieberman. Touchdown Money.
“To paraphrase Frank Underwood, there are two kinds of debt: debt that makes you stronger and debt that doesn’t make you stronger,” he said.
He added that student loans, business loans and mortgages, for example, give you tangible assets against your debt that you can use to build your financial future.
“But credit card debt doesn’t help you at all,” Lieberman says.
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This article was originally published on GOBankingRates.com: 6 terrible financial advice you should ignore if you want to be rich
