In the financial world, there's a never-ending stream of people on all sides of the economic spectrum offering you advice. And while a lot of it comes from successful, educated individuals, some of it really doesn't apply to all individuals.
In fact, following certain pieces of financial advice could actually be far worse for you in the long run. In today's Atlas Credit blog, we're going to look at some of the financial advice you should take with a grain of salt.
1. "You Should Always Try to Buy a Home!"
In the past, homeownership was almost a guarantee for most Americans. If you worked 40 hours a week, you were most likely capable of owning a home -- so why wouldn't you?
These days, it's a little more complicated. If you can't afford to put 15-20% of the total value of the house down from the beginning, you might be severely overwhelmed with mortgage debt. And because the housing market has been -- for lack of a better word -- unstable lately, you never know if it's actually a solid investment or something that could hurt your finances, your credit, and your life later on.
2. "Put All Your Savings into X!"
Whether it's a start-up business that promises their new tech will explode to take over the market or the next crypto-currency, putting your money anywhere is a huge risk. Especially if you dump all your savings into it.
Such a gamble could very much pay off, but you should never put everything you've saved in one place. Diversifying your investments is the smartest way to save with a practical guarantee of solid returns. Though, be sure to do extensive research before ever committing your hard-earned savings to a risky investment.
3. "Use Multiple Credit Cards, It'll Build Your Credit!"
While some people with good or bad credit wisely choose to stick with quick and easy personal loans from lenders like Atlas Credit to afford their necessary purchases, many others opt to strictly pay with their credit cards.
The idea here is that if you always pay the minimum credit card balance each month on all your credit cards, the credit bureaus will see you're trustworthy and deserving of even higher credit, more credit cards, and so on.
This is not really true. Credit scores can actually take significant hits if your overall credit usage is high. The best way to use a credit card in many cases is to keep the actual debt owed next to zero -- but with multiple credit cards and multiple payments, your overall debt can skyrocket, tanking your credit.
4. "Pay Off Your Mortgage ASAP!"
The idea of having less overall debt is obviously appealing. That's why the idea of paying your mortgage off as fast as possible sounds like a good idea on paper.
However, if you're throwing all your extra money each month at paying off your mortgage (something that will inevitably take you 20+ years to pay off even with large payments), you're ignoring your savings.
For instance, the extra cash you're using to pay your mortgage down could be placed into retirement accounts, mutual funds, or some high-interest accounts that can grow dramatically over time. The interest accrued could actually be much larger than whatever money you saved by paying down your mortgage ASAP.
Depending on your unique situation, some of these tips could prove helpful. However, for most individuals, they might actually be the worst decision you could make with your finances. Remember, Atlas Credit posts a new blog every week discussing personal finances -- so stay tuned!