I don’t believe any of the advice given was done out of ill will. People mean well. Sure they do.
However, when we know better – we can do better.
I’m reflecting on some particularly unhelpful financial advice that I’ve received (or concocted) and followed. When accepting advice, it’s important to consider the source – well meaning, loving people can be the source of horrible advice. Following bad financial advice can set you back a decade or more and take a bite out of your ability to build wealth.
Improving your financial literacy will help you discern the good from the well-intentioned, but awful advice.
5. Buy a Timeshare
Clearly this was advice my husband and I gave to ourselves. A timeshare is a horrible financial plunge – even if you like it for a time. You tie yourself, legally, to a product with no out and no involvement in how the product performs over time. There is no resale market for timeshares (DO NOT BELIEVE THE PUSHY SALES PEOPLE), so selling to recoup costs is next to impossible.
I don’t want to even mention the difficulty in using the thing if you don’t plan ahead 6 months of more for the less desirable locations.
4. Get a car you like so you don’t mind the payments.
It sounds good on the face, but financing an item that loses value is a bad idea. Sure, financing is the customary method to acquire cars these days, but it makes better financial sense to save up and purchase a used car with cash. I realize this is the ideal and realistically not always feasiable. However, the next best option is to locate a used car, in decent condition that you can pay off as soon as humanly possible. In this case, you are looking for functionality, not flair.
Making yourself comfortable with payments is a recipe for decades of indebtedness.
3. Lease a Jeep.
Again, another “pearl of wisdom” that WonderMan and I concocted. Leasing is by far the most expensive method to acquire a vehicle. You basically pay premium rent for the term of the lease and have to give the car back (or buy it again). If you’re special (like we were), you also get to pay a fee for turning the car back – in additional to any mileage overages which can add up quickly. Leasing is a bad deal. Stay away from it.
Still not convinced to leave leasing alone? This post breaks down the data: To Lease or Not To Lease
2. Take out a student loan, get a good job, and spend 10 years repaying it.
Hindsight is generally 20/20, but student loans are one of the most unnecessary bills I created. During my senior year, I carried more credit hours than ever, was president of my sorority, and worked a part time job. Along with grants and scholarships, I paid for tuition and living expenses out of pocket – no loans! My grades were also fabulous that last year.
I had also broken up with a long term (and distracting) boyfriend so I was thinking clearer and making better decisions.
I could have left the loans (and the boyfriend) alone and been much better off. I’m only kidding, he was a nice guy. It was me, not him.
Sincere advisers repeatedly encouraged us that as engineering majors, we’d get good jobs after school and repay the loans. They couldn’t know that some wouldn’t be drawn to the work in that field. No one anticipated a recession – the 90’s were booming. Leaving corporate America to stay home with children wasn’t on the radar. Student loans complicate all of these life experiences – unnecessarily.
My student loan, $13,000 ($21,000 with interest), was low by today’s standards. However, it still restricted my options until we were was able to pay it off.
Encouraging young adults to assume large loans that cannot be discharged in bankruptcy if hard times arise before they can adequately appreciate the impact of their decision is irresponsible.
1. It’s always better to own.
I think this train of thought was spoken outright and implied from many sources in conjunction with real estate. It’s better to own under the right circumstances. We’ve learned from various hard learned lessons that owning doesn’t make the best sense if:
- You don’t have adequate savings in place. Maintenance costs can be expensive and overwhelming.
- You aren’t expecting to stay put for a number of years. Trying to sell a new home (especially when the market cools) is a losing proposition.
- Your business does not revolve around real estate. We took out a loan for an aging building that housed our laundromat and it went from bad to worse. This is a lesson we’re still unraveling, so I’ll have more when the resolution is in place.
There is absolutely no shame in renting until you’re in a financial position to handle all costs associated with home or real estate ownership. Ownership is only best when your circumstances warrant ownership.
In addition to our site, we suggest improving your financial literacy with the following resources:
- Money Smart Week: Find free in-person and online events April 18-25, 2015
- The Total Money Makeover: By far, this is one of the best books I’ve read on adjusting your view of debt and managing money.
- Budget Simple: A free online tool that allows you to set up and track your budget.
- Midday Money Show: Our podcast includes interviews with people who’ve made great progress is dumping debt. If they can do it so can you.
- His and Her Money: Maybe you like video. Tai and Talaat host a web series on personal finance topics.
- Couple Money Podcast: Elle produces another good podcast geared toward managing money for marriages.
- Your local library: Personal finance topics don’t change that frequently – the good books anyway. Dust off your library card and remember the due dates!
What bad advice have you followed in the past?
Before you go, get your FREE copy of our tips to save more money!