What Financial Advice Should You Ignore?
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.
6 Examples of Bad Financial Advice
Here are a few pieces of bad money advice that could negatively impact your financial future.
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.
5. "Term Life Insurance Is a Waste of Money!"
Some "experts" may tell you that purchasing term insurance instead of whole life coverage is a bad financial move because it doesn't accumulate cash value.
On the contrary, term is often the better option. It's less expensive than most cash value forms of life insurance for the same amount of coverage. You can then use the difference in the premiums for saving or investment purposes.
Also, as your family and life situation changes (such as children leaving home and retirement), you don't have to be stuck paying for coverage you no longer need.
6. "Investing Is Only for the Wealthy!"
You may have heard that you need a lot of money to start an investment program. But if you wait until you've accumulated thousands of dollars, you're missing out on a golden opportunity to let your money grow.
Through the magic of compound interest, investing even a small amount of money can allow you to build a nice nest egg over time. A 401(k) plan, like the one your employer may offer, is an excellent example of how the allocation of a tiny percentage of each paycheck for investments can yield substantial long-term rewards.
The key is to start as early as possible and make consistent contributions to your investment plan — and don't withdraw any money, except for a dire financial emergency!
Turn to Atlas Credit for Good Financial Advice
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!
If you need a personal loan, we can help you obtain from $100 to $1,400 quickly and easily. We assist underserved consumers who may have difficulty getting funds from banks, credit unions or other lenders.
Stop by or call one of our convenient Texas or Oklahoma locations or fill out an online application today.