8 Financial Tips Experts Say to Forget–Here’s Why


Although it’s pretty easy to find loads of great personal finance advice on the web and in your social circles, it’s also a good idea to think critically about this advice in light of your situation. That’s what makes personal finance very personal.

At the end of the day, financial advice has to make sense for you. That said, here’s some common financial advice you may want to ignore.

1. Always Buy a Home

Statistically, most homeowners have a higher net worth than nonhomeowners. However, owning a home may not be the best move for everyone.

Taylor Kovar is a CFP and the CEO of Kovar Wealth Management. He says, “The truth is, homeownership isn’t the right choice for everyone and doesn’t always lead to financial gain. Market conditions can fluctuate, and the costs associated with owning a home–like maintenance, taxes, and insurance–can add up, negating any potential appreciation in value.”

2. Cash Is ‘King’

This one is pretty tough, especially since the world is trending towards digital payments and more cashless transactions. Of course, having an optimal amount of liquid assets can be advantageous, but exclusively dealing in cash can mean missing out on rewards from credit card purchases and the convenience of digital transactions.

3. Never Use Debt

While having no debt is an ideal financial state, there are some cases where debt can actually help you accomplish more. Especially when it comes to investing in a business or real estate.

Using leverage can help the cash you have on hand to stretch further. If you aim to accelerate financial independence, using debt wisely can go a long way.

4. Carry a Balance on Your Credit Card To Improve Your Credit Score

Taylor Kovar chimes in on this common piece of advice, “This is a misconception. Carrying a balance and paying interest is unnecessary for building credit. Paying your bills in full and on time, keeping low credit utilization and managing a mix of credit types are healthier strategies for improving your credit score without incurring unnecessary debt.”

5. Pay Off Debt Before Investing

The time value of money reveals that investing sooner and later is the key to maximizing your returns. Waiting to invest while you pay down debt could cause you to miss out on investing gains.

For instance, paying off a mortgage with a 2.75% interest rate in an environment when treasuries and high-yield savings are paying north of 4% and 5% doesn’t make much sense. Considering the higher yields you’ll get from your investment portfolio over time, it makes even less sense!

Then, factoring in tax deductions on your mortgage interest means your savings and investment returns could far outweigh the cost of carrying a low-interest rate mortgage.

While tackling high-interest debt is always a great idea, allocating some of your budget to investing can still be wise. However, the best thing to do is crunch the numbers, run scenarios and choose the best route for you.

6. Skip the Latte a Day To Keep the Poor Away

Financial author David Bach popularized the idea of the “latte factor.” According to his estimation, this small, daily expense promotes overspending on largely unnecessary items and eventually erodes people’s progress toward financial stability.

Though cutting back on spending to reach financial goals is a tried and true strategy endorsed by the masses, there are others who’ve found that they can still “have their latte and drink it,” too, while reaching their money goals.

In other words, you may not have to give up all of your personal pleasures to arrive at “financial bliss.” A balanced approach is best to keep you from “frugal fatigue” and abandoning your long-term financial objectives.

7. Reconsider the 4% Rule

Those using this number as a barometer for retirement planning may be in for a rude awakening when this rule may not pan out as expected. In some cases, retirees will require a more significant nest egg to live comfortably in retirement.

Cliff Ambrose, FRC is the founder and wealth manager at Apex Wealth. He explains, “When it comes to the plain 4% rule in retirement, a number of assumptions are made. But when you dig into these assumptions, you realize that perhaps distributions in retirement are not as simple as just taking distributions of 4% of your portfolio.”

Ambrose goes on to say, “That’s why it’s of high importance for pre-retirees and retirees to familiarize themselves with what’s called the sequence of returns and how market risk may influence their retirement plan.”

8. You Can Do It by Yourself

If you read this article and thought, “Great, I don’t know anything anymore!” Don’t worry. The reality is that most people can’t follow general personal finance advice with very specific needs–a category most people fall into.

Dr. Erika Rasure Ph.D., personal finance expert and chief financial wellness advisor at Beyond Finance, a debt consolidation service. She says, “Consider guidance from a financial therapist, coach or counselor. These professionals each have incredible areas of emphasis that can help you find the balance between money matters, your feelings about them, strategies for saving toward your goals and more.”


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