Everyone has something to say about money; however, there is money advice you should ignore. The truth is, many people don't know the first thing about managing their personal finances. Because we live in a world where materialism and getting the most out of life take center stage, some people make poor financial decisions and inadvertently pass bad advice to others. Not that you shouldn’t heed advice given to you by others, but there is some money advice you should ignore.
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1. You Can Put off Retirement Planning
One piece of money advice you should ignore involves retirement planning. If you're in your 20s, some people may say that you don't have to worry about retirement planning. It’s true that you have plenty of time to save for the future. However, the sooner you start setting cash aside, the better off you'll be in your later years. Therefore, start thinking about retirement as soon as you secure your first real job. Contribute to your employer's 401(k) plan or open an IRA.
2. It’s Okay to Only Pay the Minimum
Some people honestly believe that credit card debt is simply a way of life. And in their minds, as long as you're keeping up with your minimum payments, you're okay. Yes, paying the minimum will keep creditors off your back. But the more debt you owe, the harder it is to qualify for mortgages and automobile loans. Plus, debt could become a nagging headache that never goes away. For this matter, always pay more than your minimum and only use a credit card if you can pay off balance in full.
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3. You Don't Need Life Insurance
If you're single and don't have children, some people may say that life insurance isn’t a necessity. These individuals might mean well, but even if you don't have a spouse or dependents, life insurance is beneficial in the event of your untimely death. Your family can use this money to cover your funeral and burial expenses, as well as pay off any outstanding debts you leave behind.
4. You Have to Buy a House
Mortgage rates are low and homes are becoming more affordable in certain housing markets. Therefore, friends and family may pressure you into buying a house. There are certainly benefits to home ownership, but it’s not the right choice for everyone. Owning offers stability and the opportunity to earn equity. However, if you don't want to be tied down by a house, or if you don't want the responsibility of maintaining a house, there's nothing wrong with renting.
5. It’s Okay to Tap Your 401(k)
Borrowing from your 401(k) can be a lifesaver if you need money to purchase a house or if you experience economic hardship. However, you should not make a habit of tapping your retirement fund needlessly. Even if you take a 401(k) loan and repay this loan through payroll deductions, your growth potential weakens until you pay back the entire loan. And if you’re not able to pay back the loan, you'll get hit with penalties and taxes.
6. Credit Score Doesn't Matter
There are several lenders and banks that offer financing to people with less-than-perfect credit. But although it's possible to get a loan with bad credit, you’ll also pay a higher interest rate. This ultimately results in higher payments.
7. Live It up – Financially
For those who believe that you only live once, they might reason that it's smart to get everything from life now — even if it means going into debt. However, this thinking can trigger a ton of credit card debt and very little savings. It's okay to have fun in life, but you also need to be smart financially.
There is a lot of money advice available and knowing who to trust can be difficult. For that matter, it's important that you do your own research and make decisions that will truly benefit your pocket. What money advice have you ignored?
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