You shouldn’t believe everything you hear about personal finance.
- It is good to seek financial advice, but be aware of its source.
- Following bad advice could hurt you financially rather than help you.
- For example, if someone tells you that credit cards will lead to debt.
You may have many people in your life who are quick to overload you with financial advice. Or maybe you’re the type to browse financial blogs in hopes of improving your money management skills.
Either way, there’s a world of good financial advice out there, but there’s also some really bad advice you might come across. Here are three examples that you really should ignore.
1. Credit cards will put you in debt
First, credit cards usually offer rewards or cash back for the purchases you make. It could earn you hundreds of dollars every year, especially if you’re able to capitalize on sign-up bonuses without spending more than you normally would.
Plus, credit cards can help you build credit if you pay your bills on time and in full on a consistent basis. And the higher your credit score, the easier it becomes to borrow money affordably when you need to do things like buy a house or take out a car loan.
2. The bank is the safest place for your money
Any money you have allocated to your emergency fund should be deposited in a savings account. But that doesn’t mean you have to keep all of your money in the bank.
The advantage of bank accounts is that your primary deposits are protected (up to $250,000 per depositor, provided your bank is FDIC insured). But you won’t really get a chance to grow your money if you keep it entirely in the bank. Not only have interest rates on savings accounts and CDs been abysmal in recent years, but even in the best years they can pale in comparison to the returns you could get from investing the money you pocket for the future.
In fact, there’s a risk to keeping too much money in the bank: not growing your money in a way that will keep up with or outpace inflation. And that could leave you with insufficient savings when you retire.
That’s why you’re better off putting your non-emergency savings in a dedicated retirement plan, like an IRA or 401(k), or in a brokerage account, and investing it. If you go the old way and open an IRA or 401(k), you’ll also enjoy a host of tax breaks.
3. A house is always a good investment
A house can be a good investment, as property values tend to increase over time. But that doesn’t mean it’s a good investment for you.
If you’re buying a home that needs a lot of repairs and maintenance over the years, it could limit your ability to save and invest elsewhere. And while home ownership can lead to financial stability, it’s more than possible to achieve that goal as a renter, too.
If you have the desire to own a home, know that it is not necessarily a bad financial choice. But don’t accept the idea that you’ll automatically get away with it financially by owning a home rather than renting it out.
Seeking financial advice could make you a smarter consumer and saver. But don’t accept these specific pointers, as they have the potential to lead you astray.
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