Common Financial Advice DebunkedBy Caitlin in Advice
Handling finances isn’t always easy. It entails so much number crunching and budgeting that sometimes we lose track of it all. It has been a common problem, even for those who came from wealthy families.
However, there are individuals who are truly capable of handling their money. In that sense, they are the people that we get advice from, and in some way, it makes sense. We can listen to them and apply their advice to our own lives and hope that it will work for us as well.
Still, not all advice is legitimate. For example, much of the advice we get from our peers may have been great a generation ago, but not the right way to do things today. Other financial advice may never have been accurate at all. Here are some of the most commonly given financial that today is outdated, or was never true to begin with:
1. Avoid taking your mortgage into retirement
This might have been true in the past when mortgage rates were at their all-time high; however, today it is different. The mortgage rates of today, albeit rising, are still in their all-time lows. Most, if not all, of those who just applied for mortgages may just be having the time of their lives paying less than ever. This might be the lowest rate they are going to pay in the present, and possibly in the future as well.
Instead of paying extra in order to help quickly erase the mortgages that you currently have, it may be smart to invest it into a retirement plan. If invested properly, you will see gains of around three to four percent more than what you are paying for your mortgage. Let us not forget of course that often contributions to our retirement are tax deductible. Talk to your mortgage broker to determine what’s best.
Having money in your pocket is at times better than being debt free. Since mortgage rates are still quite low, then you do not have to worry. Wouldn’t you prefer to stay in your house, having assured retirement pension while paying mortgage a strong but moderate pace? With the help of your pension, you will be able to pay it off sooner than you think, while still having a lot of money to spare.
2. You should Invest Less as You Grow Older
This is one of the best examples of outdated financial advice. You are never too old to have your money invested in something. The old concept of withdrawing all your money from the market once you reach the age of retirement is an old opinion that should be let go. When it comes to investing, everything is circumstantial and there is no one law that all should adhere by at any given age.
Thinking of the long term has become synonymous with investing in stocks. If it goes well, you might not need to invest in anything else ever again. This age is not for the weak of heart to play with money.
3. Choosing a Debit Card over a Credit Card
This can only be true if you do not have the discipline to control your spending. Otherwise, then credit cards are usually better. Not only will you get cash rewards, your bank will you make you whole again if the card gets stolen. On the other hand debit cards are usually paired with all kinds of fees, while credit cards are free to use so long as you don’t carry a balance from month to month.
Yes, there are risks to carrying a credit card, but most risk is mitigated with preventable measures.
4. Be Practical with regards to Your College Major
The modern thinking with regards to college is to enroll in courses where money is assured. However, if your passion tells you that this is what you want, then follow it. You might become more successful playing around in the area which you are most passionate about. If this how you do things, the school’s name may not even be a factor later on.
Advice, like everything else in this world, comes and goes. What may have been true once upon a time may not be true today. At times we blindly follow certain advice without giving it a test run first. In the end, it is how you play it that really matters. Speak with proven financial professionals to get the advice you need, but at the end of the day consider that only you have your best interest in mind and so whatever decisions you make, make them for yourself.