Generally, when people lose money or go into financial difficulties, they often say it’s just bad luck or they blame the economy but rarely the poor financial advice they received.
The following are the most common wrong financial pieces of advice that some people give, therefore, you should not consider them.
Don’t Save Money In Bank Account
One of the common financial advices that consider to be wrong is that nobody became rich by saving money in the bank. You should invest all your money to become rich.
It is bad financial advice because it gives the notion that you should not keep money in the saving account for emergency. However, the good advices would be that you must start by saving, because when all your money is invested, then you’re at risk when a financial emergency happens.
We have seen many people liquidate stock market investments or sell real estate properties below market price because they didn’t have an emergency fund in the bank.
A better advice is that we must learn the habit of saving. It’s a foundational skill for wealth building. Ensure proper financial protection by creating an emergency fund. Afterward, that’s the time you should invest. At this point, make sure to invest regularly in valued assets and as much as you can afford.
Credit Cards And Debt Are Bad
Not all debt are bad. There are good and bad debt. For example, a business loan is a good debt. Also, you can use a good portion of your money for other things first when you buy something on zero-interest installment, as compared to paying full in cash.
Mostly, credit cards can benefit people who have the discipline to control their spending. If you don’t know how to manage your personal finance, then focus on learning how to manage your money first before getting loan or credit card.
Also, people must not use debt or credit card to buy unnecessary things. And never use credit card just to get reward points, which is a common cause for unnecessary spending.
Owning Home Is Better Than Renting
Buying a home and renting a place each has their advantages and disadvantages. Neither is absolutely better than the other. Some people, will rush into buying a home because they think it makes more financial sense to do so instead of renting a place.
What they don’t take into consideration is that your mortgage is just the tip of the iceberg that you’ll have to pay. There are property taxes, home maintenance costs, homeowner’s insurance and other hidden payment.
Given that the property’s value will increase in the future, your profit from selling it at market value in the future won’t be as much if you consider the interest rates and other expenses that you paid with your mortgage.
When you’re renting, you don’t have as many payables, as it’s the landlord who needs to take care of taxes and the maintenance. Also, moving out to a better place is easier should the need arise.
If you really want to buy a home, then study your cash flow to check if you can afford the mortgage expenses.
More importantly, if you can’t afford the monthly payments for a 10-year mortgage, then it’s better to rent first.
If your home loan term is more than 10 years, then it’s likely that the interest you’ll pay will be higher than the gains in the market value of your property in the future.
It’s Good To Have Many Life Insurance
Life insurance secures your family’s future. You don’t want them to become poor and suffer when you die.
Life insurance provides financial protection and it’s important to have one. But each person has an optimal amount of coverage and anything over that is just a waste of money. Life insurance is important but only get the necessary coverage.
Investing In The Stock Market Is Gambling.
It’s hard to predict where stock prices will go. That’s why a lot of people have lost money in the stock market.
Gambling refers to playing a game of chance, which is not what the stock market is about. With proper skills, strategy, and the right mindset, you can consistently make money in the stock market.
If you avoid stocks, then you’re wasting the opportunity to make money from one of the highest-earning investments out there.
If you don’t know how the stock market works, then you’re gambling. Never put money on any investment that you don’t understand.
It’s prudent to learn the basics first before investing into stocks. Follow a proven strategy such as long-term cost-averaging to minimize your risk. Diversify your portfolio with mutual funds, ETFs, bonds, and other assets.
Art And Jewelry Are Good Investments.
Not all art pieces will have a higher value in the future. And jewelry prices can be quite subjective.Moreover, the value of precious metals and gems, such as gold, silver, and diamonds, are volatile.
people should first buy art and collect jewelry because they appreciate them, and without high expectations that you’ll make a good profit in selling them after many years.
While they can be considered as investments, it is, however, not necessary to include them in your portfolio. It only makes sense to buy them if you are fond of art.
Your Goal Should Be To Retire Young And Rich
Some might give wrong financial advices by saying that build wealth as fast as you can, so you can start living your life to the fullest as early as you can. This advice assumes that retirement is the only time you can enjoy life. This is of course untruth.
While it is true that we must plan for our retirement earlier. But understand that retirement doesn’t necessarily refer to the time that you don’t have to work anymore.
Unsubscribe to the idea that retirement is when you can finally quit your job and start enjoying life. This should not be the case.
The retirement is the time when you don’t need to work anymore, but you still choose to work because it gives you purpose and self-fulfillment.
Thus, your goal is not necessarily to retire young but to pursue meaningful work that you can imagine yourself doing until you grow old. Moreover, your goal is not necessarily to retire rich but to build just enough wealth and create sources of income that can make you afford the kind of life you desire for yourself and your family.