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Have you ever asked a close friend or family member for advice on building your finances? Did you ever think to yourself “Wow, this sounds like a smart move!”, only to realize that it might not be so useful? You’re not alone in this. We’ve all met someone whose financial advice was less than stellar. Sometimes, their words of wisdom feel empty or make no sense. It can be tricky to know what kinds of financial advice we should listen to, let alone ones that we are confident in trying out.
At some point, everyone will be strapped for cash. We will feel as though we need more money to buy new things or to pay off existing debts. Some of us have been told of different ways to get their money back or get a huge sum in minutes. Casinos, and gambling areas in general, are one of the most notorious places to go for a quick profit.
First, let’s clear the air: gambling to get money isn’t bad by itself. Those high-risk games can be enjoyable and you can earn some cash for your efforts. However, it’s never a good idea to rely on gambling and casino games to make cash. The worst financial advice you could possibly follow is a risky investment.
Even If you did earn tons of money, you might get overconfident and try to continue earning more with your gambles. Furthermore, casinos can get very suspicious of those with win streaks. They might suspect you of cheating, and those conversations never go smoothly. Overall, a trip to the casino may be fun, but it’s also a financially risky idea.
If you want to make cash and earn a profit, stocks and bonds are a good way to build your finances. Stocks are essentially the shares or ownership rights to a company, and buying a portion can help bring in stable profits. With stocks, you can sell them to other investors for money or trade them to gain stocks from other organizations. We recommend that you invest in a stock index, which is a collection of stocks from multiple companies. This works better than taking stocks from one company because you get a safer flow of money and value for your stocks, even if one company loses its worth over time.
Bonds are another option you can consider. Basically, they are loans that you give to other companies that will be repaid back with interest. You can earn more than the money you lent over based on their rates and timeline. What makes these useful is that unlike stocks, which can fluctuate in value, bonds are set to match your loan. While they can take years to come back in full, you’ll have a monthly amount reimbursed to your account.
The reason why many people like to use credit cards is because of how quickly they work. You swipe the card, the money enters your credit, and you can pay off the amount at a later date. It’s easy to use a credit card because you can plan your expenses ahead and pay them off when the time is right.
Unfortunately, there have been many horror stories about people overusing their credit cards and accumulating huge debts. For example, impulsive buyers and online gamers can sometimes buy so much stuff that they have to pay back six-figure sums to the companies. With that much temptation in a credit card and the number of problems that can happen, some people say that you should stick to cash and avoid using any credit cards in the future.
The problem is that credit cards aren’t dangerous by themselves. You might believe that the worst financial advice is to be positive about credit. In truth, when used properly, you can cover a lot of purchases for your monthly needs without having to spend money right away. The key to using credit cards is to manage your expenses carefully and to learn when to say no. If you can keep yourself from overspending on the latest fashion trends or cellphone accessories, you can save more money and track your expenses with a digital account.
If you’re still unwilling to invest in a credit card, a debit card is the next best step. Unlike credit cards, debits directly connect to your savings and use your existing cash to pay your expenses. Because they are direct, you will have to periodically send or deposit cash to keep the account ready for future purchases. What’s good about the debit card is that it allows you to track your amount online. It also allows you to directly spend money without withdrawing it from the ATM.
Remember the “You Only Live Once” or the YOLO trend? Although it’s a popular meme, it’s also an interesting way of life. People think that because we only have one life, we should explore and enjoy it as much as possible. While it’s a fun and interesting perspective, some people take it too far. They might tell their friends to spend their money now on what they want, instead of investing in retirement plans and funds.
Being young is no excuse for you to ignore retirement options, however. One of the worst financial advices you’ll ever hear is the idea that you don’t need to worry about the future. In fact, starting out as soon as possible is a good way to build your funds for life after work. You don’t even need to spend tons of cash per month to do so.
When you examine your retirement plans, the most popular and most used options are Roth IRAs and 401(K). Roth IRAs are retirement accounts that already include expenses for taxes. In other words, you put in cash for the future and you won’t need to worry about taxes when you withdraw it. Anyone can open an account and multiple banks offer different IRA plans and rates. On the other hand, 401(K) plans are retirement plans sponsored by companies and agencies. They allow taxes to be written for the moment, so you can get extra money now. However, you’ll need to pay those taxes once you withdraw them later in your life.
At first glance, a rent-only lifestyle sounds more profitable. Monthly rates for apartments, furniture, and other amenities usually cost less than those of houses and other long-lasting investments. However, there are multiple extra fees that go into your rentals. These fees have to cover insurance plans, delivery expenses, and other miscellaneous costs. Furthermore, renting for several years means you don’t have complete ownership over the car or place you’re using.
We recommend buying the most crucial investments that you will need later in life. Typically, these include cars and houses that you’ll be using for the next decade or so. Remember that buying the right one has to fit a proper budget, so be sure to calculate and compare the costs of different options. A nice-looking car won’t feel so special when you have to spend half of your paycheck per month. Also, we recommend asking your family or friends for hand-me-downs and used car options. While they may not be in prime condition, they cost less and can save you some extra money for other, more important investments.
Some people think that they have accrued enough knowledge and understanding of finance to handle their own cash. Like the DIY enthusiasts at home, these folks think they can plan out their investments without the assistance of a trained professional. What’s important to remember is that these professionals have years of experience and training to give the right tools for investment planning.
There might be a few people who can do it better, but that shouldn’t be a general suggestion for every working adult and homeowner. It’s the worst financial advice to assume that you could perform better than bankers or other financial experts. Even if you did study the investment world, you might be surprised how many years it takes to become a certified professional.
Experts can help you understand your investment plans and insurance policies within a few days. They may have consultation fees, but the knowledge they give is incredibly useful. With their help, you can learn what you can get returns on and which stocks or bonds need to be removed. Financial advisors and counselors can also guide you on specialized purchases and funds, from mutual trusts to credit card plans.
When we’re looking for financial advice, sometimes the feedback we get is unconstructive and dangerous for our savings. With these five key types of the worst financial advice, you can find out what options can be more effective and beneficial for you. Whether it is consulting an advisor or using credit cards, you can discover how finances work and protect yourself from making bad and costly decisions.
Check out our new video on how to train your brain to make more money.
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