Dumb Money Advice: 10 Financial Recommendations That You Can Honestly Just Ignore

Dumb Money Advice: 10 Financial Recommendations That You Can Honestly Just Ignore

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It seems that everywhere you look, there is some well-meaning person wanting to offer (often unsolicited) advice — especially when it comes to handling money. While some of this advice can be helpful, particularly if you’re just learning to navigate your finances, much of it should be taken with a grain of salt.

Here are 10 pieces of financial advice that, while common, perhaps shouldn’t be taken at face value.

Dumb Advice #1: Once You Find an Insurance Policy You Like, Stick With It

Whether it’s for simplicity’s sake or sheer loyalty, there are many who believe in finding an auto and/or home insurance policy and keeping it forever. But if you’re looking to get the most for your money, this might not be a great idea.

Even if you’re happy with your insurance policy, it’s wise to shop around at least once or twice a year. Gathering quotes from various carriers can allow you to tweak your coverage over time as certain factors change — for example, maybe you’re working remotely now and could save on your auto insurance since you’re driving less miles. Or maybe you can get more affordable coverage due to your age or driving record, compared to when you first bought your policy.

Platforms like Gabi make it easier than ever to compare policies as often as you’d like. Simply connect Gabi to your existing insurance provider or upload a copy of your existing home or auto insurance policy and get personalized, “apples to apples” recommendations in mere minutes.

The average Gabi customer saves an average of $961 per year on their auto and home insurance, so it's worth taking a few minutes to compare free no-obligation quotes to see your savings. If you find a cheaper policy, Gabi will even help you cancel your old policy.

Dumb Advice #2: Buy Life Insurance Once You Have Kids

The advice to buy life insurance when you have children isn’t bad, per se, but it doesn’t tell the whole picture. In fact, if you wait until you’re a parent to purchase a policy, you could potentially make the process more difficult and expensive for yourself, andt you also risk leaving your loved ones in a pinch if you pass away sooner.

The longer you wait to buy life insurance, the more expensive it can cost simply due to your age. Additionally, if you are seriously injured or diagnosed with certain medical conditions, you will forever impact the rates at which you’re offered coverage.

Life insurance can be important to have as soon as you have someone else to protect. If you are married but don’t yet have kids, consider buying term coverage to protect your spouse for things like the mortgage on your home or any other shared debt.

Even if you’re not yet married, you may want to buy a term policy to pay off things like student loans that your parents co-signed for, or to cover your final expenses so your family isn’t left with that bill.

Buying a term policy though a company like Bestow is a quick and easy way to get the coverage you need at a competitive price, without the hassle of a medical exam or lengthy decision process. You can buy as little as $50,000 or as much as $1,000,000 now; then, as life happens — whether that means buying a home, getting married, having kids, or all three — you can reevaluate your needs.

Dumb Advice #3: Eliminate the Daily Latte

Many popular finance personalities will tout the narrative that skipping your daily latte or eliminating the avocado toast from your life will change your future. And while cutting unnecessary expenses can have a cumulative effect, it’s important to find a balance.

For example, it may not matter if you cut out your $5 morning coffee if you don’t then save or consider investing that $5 elsewhere. Many folks who make such cuts actually wind up spending that money on other things, so it can be a wash.

You may want to focus first on the large savings: you can consider refinancing your home to save on mortgage interest, amd you can cut the cord to eliminate monthly cable bills. If you still want to find extra savings, you can definitely cut out those little pleasures, like your daily latte... just be sure that you put the money that you save to work for you.

One simple way you can do just that is by using a platform like Stash. Through Stash, users can begin investing in stocks and ETFs with as little as $1 (and in some cases, less!).

This puts investing — and potentially growing your savings — within reach, no matter how much you’re able to set aside each month. And when you sign up here and make your first deposit into your Invest account of at least $5, Stash will drop a bonus $5 into your account!¹

Dumb Advice #4: Avoid Debt at All Costs

Growing up, most of us learn that debt is a dirty word. We are told to avoid it, we hear horror stories about those who fall prey to it, and many of us start our financial journeys with the plan to avoid debt in any way possible.

However, all debt isn’t created equal. For many of us, debt isn’t entirely avoidable, especially if we have certain plans in our future. And in some cases, taking on debt can actually be a smart money move.

For instance, if you are unable to pay for your education out of pocket, student loans may be a necessary evil. Unless you can afford to pay for your next car in cash, an auto loan could be the only way to facilitate your big purchase. And when you are ready to buy a home, taking out a mortgage — as overwhelming as that massive debt may seem — is often just an accepted part of the process.

If you find yourself in a situation where you need to take on debt, just be sure to have a plan. This means:

  • Finding the best interest rate. Your rate determines how much that debt actually “costs” you in the end, so find the lowest possible offer.
  • Taking on terms you can afford. Pick loan terms that allow you to pay back the debt as quickly and efficiently as possible, without putting too much strain on your budget each month.
  • Considering a refinance down the line. You can refinance many loans (student, home mortgage, and auto, to name a few) and create a better loan over time.

When it comes to refinancing, there are many lenders to choose from in order to get the best terms. RateGenius, for instance, can help you lower your monthly car payment, reduce your interest rate, or pay off your vehicle sooner (in some cases, all three!) in just a few easy steps.

Not All Debt is Worth Carrying

Now, there are certain types of debt that you should probably work to avoid, no matter where you are in your financial journey. Credit card balances, for example, are often a very expensive debt, since most card issuers charge rates that fall well into the teens and even the 20s.

If you’re carrying a credit card balance from one month to the next, your purchases could wind up costing you hundreds or thousands of dollars in wasted interest. Try to pay off your cards in full each month, if possible, or transfer balances to a card with a 0% interest offer to avoid that added expense.

Dumb Advice #5: Carry a Credit Card Balance to Build Your Credit

This bit of advice was given to me personally when I was a teenager, and I blindly obeyed. I’ve since heard it repeated many times by well-meaning folks, but cringe every time I hear it.

Some people think that the best way to build credit for the first time is to open a new credit card, make a purchase, and pay the balance off over a period of time. This is (generally) a terrible idea for a few reasons:

  • This advice is often given to teenagers without any accompanying credit-management lessons. It can be quite freeing to make a large (fun) purchase on credit for the first time, and many of these younger adults don’t fully appreciate the possible repercussions.
  • Unless the card has a 0% interest offer, you’ll incur finance charges as you pay down your purchase. Be sure that any credit card you open will be managed responsibly, without carrying a balance (if you can avoid it) or paying interest. In some cases, you can be added as an authorized user on a parent’s credit card and achieve the same goal.

Also, be sure to spread out your credit-building efforts over time, as the type of reported accounts you have will also play into your credit score.

Dealing With Credit Card Balances

If you find yourself unable to pay off a credit card (or more than one) and are racking up pricey finance charges each month, it might be time to consider a consolidation loan.

These loans can act as a way of refinancing your credit card debt, but at a significantly lower interest rate. Platforms like Credible and LendingTree allow you to quickly compare loan offers from multiple different lenders at once, saving you both time and money. Oh, and it’s completely free to use.

Dumb Advice #6: Buy a Home, Never Rent

I’ll admit, I used to be a staunch member of the Never Rent Club. I mean, why throw your money away each month when you could be building equity in your own home? Isn’t that the basis of the “American Dream,” after all?

The truth is that buying a house doesn’t always make sense for everyone. In many cases, it might actually be the wrong move, such as when:

  • You don’t plan to live in a home long enough to recoup certain expenses before you’d want/need to move.
  • The market is hot, inflated, and/or homes are otherwise overpriced.
  • Your credit needs to be established or improved before you can qualify for competitive mortgage rates.
  • You don’t have a large enough down payment saved up and would need to pay expensive private mortgage insurance (PMI) on your loan.
  • You don’t want to be responsible for everyday homeowner expenses, such as replacing the hot water heater or dealing with a worn-out roof. In some instances, renting could actually be smarter, like if you’re planning to move again in a few years or less. And you never want to pay more for a home than you have to, whether due to an inflated purchase price or high mortgage interest rate.

There are many reasons to buy a home, but there are just as many to rent instead. If you find that buying would not be cost-effective for you — or you simply don’t want to deal with the hassle of owning your own home — renting may be the smarter choice.

Dumb Advice #7: Credit Cards Are Bad

In finance, as with life in general, you should probably be wary of absolutes. Statements that mention “all” or “never” or “always” usually need to be taken with a grain of salt.

This is the case when people say that credit cards are bad. Yes, credit cards can be troublesome if you don’t manage your spending. But if you use them responsibly, they can actually be very helpful — and sometimes lucrative — products.

Credit cards offering cash back rewards, for instance, can earn you money on the things that you buy everyday anyway. And introductory 0% interest offers can allow you to pay off large purchases over time without any penalty.

Managing those credit cards over time helps to establish your credit history and a healthy available credit utilization can bump up your credit score.

Dumb Advice #8: You Need $1,000 in an Emergency Fund

According to the Federal Reserve, more than one in every four American adults would need to use a credit card or otherwise borrow money if they had a sudden $400 expense tomorrow. This means that just under half of the men and women in this country have inadequate emergency savings.

The common suggestion is to put $1,000 in savings as an emergency fund. But while this is a great starting point, it shouldn’t be the end goal. In fact, many of us need to aim to build savings of at least six months’ expenses — if not a full year — in order to really have a solid safety net.

As many of us have seen during the coronavirus pandemic, the unexpected can happen at any time. While $1,000 may help if your car breaks down or you need to go to the doctor, it won’t keep your family afloat if you’re laid off or get injured and cannot work. Set an initial goal of $1,000 in emergency savings, sure… but then immediately work toward saving even more.

Dumb Advice #9: FIRE is the Ultimate Goal

The Financial Independence/Retire Early (FIRE) movement has been quite popular in recent years, to the point that many folks feel that if they aren’t on track to retire early, they’re behind the curve.

The truth is, though, that early retirement isn’t attainable for many people… and some folks wouldn’t actually be happy doing so! If FIRE is something that really interests you, go for it; but don’t feel that it is the ultimate goal.

Instead, set your goals for a successful retirement, whatever that looks like for you and your family. That might mean paying off your home mortgage in the next ten years, reducing annual expenses, or simply setting aside enough money that you can comfortably stop working at age 65 (or whenever).

Dumb Advice #10: You Need a Pricey College Degree If You Want to Be Successful

If you’re planning to go into certain professional fields, a college degree is certainly required. However, it’s important to recognize that getting a bachelor’s degree isn’t necessarily the right call for everyone. In many cases, it could wind up being a very expensive piece of paper on your wall, that you never actually use.

Instead, consider what you really want to do with your future. In some cases, you may want to go the vocational school route, learning a trade that allows for a solid income without the cost of a four-year degree. In other cases, you might find that certain certifications will get you where you want to go, or perhaps that an associates degree is all you need.

If you want, or absolutely need, a bachelor’s degree or beyond, just know that it doesn’t have to mean a mountain of student loan debt. Chances are, few people will care about that name on your diploma or the cost of your tuition — instead, it will matter what you learned, the connections you made, and how that degree set you up for the future.

Bottom Line

Throughout your life, there will always be people willing to offer you their advice, even if it’s unsolicited (or honestly, unwanted). When it comes to money matters, though, the wrong advice could have serious impacts.

Disclosures & Disclaimers

¹ The Credit Review is a paid affiliate/partner of Stash. Fractional shares start at $0.05 for investments that cost $1,000+ per share. Promotion is subject to Terms and Conditions. To be eligible to participate in this Promotion and receive the bonus, you must successfully open an individual brokerage account in good standing, link a funding account to your Invest account AND deposit $5.00 into your Invest account.

Investment advisory services offered by Stash Investments LLC, an SEC registered investment adviser. Investing involves risk and investments may lose value. Stash is a Paid Partner of Bestow. Stash is not affiliated with RateGenius, Credible, LendingTree or Gabi. This material is not a recommendation from Stash. For more information, please visit www.stash.com.

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