People like to give advice on everything. And sometimes, that advice isn’t even good.
There’s plenty of money advice out there that’s incorrect, dated, or just plain bad. Here are some of the worst pieces of financial advice that you should avoid.
1. Credit cards ruin your credit
If you don’t make regular payments, credit cards will ruin your credit; that part is true.
But the problem with this notion is that you’re led to believe all credit cards are bad for you no matter what — and that’s not the case. Credit cards can be a good tool if you’re looking to build up your credit or pay for a high-ticket item that you can’t immediately afford. And they can be a lifeline if you’re in a financial bind.
Depending on the cards you choose, you can get cash back or other rewards when you use them for purchases. If you use credit cards responsibly, they can help boost your credit score.
2. Don’t buy a house until you’re out of debt
With student loan debt and credit card debt in the trillions of dollars, it’s easy for people to put off a major purchase, such as a home. But you don’t need to be out of debt to be able to buy a house. In fact, as long as you’re showing lenders that you’re in good standing by making your payments on time every month, you’re proving your financial responsibility.
It’s nice to reduce your debt level before taking on a mortgage, but it’s not a requirement. Federal student interest rates are low, which is helpful when you’re paying your debt back slowly. When mortgage rates are low, you might have a chance to buy your dream home even while making student loan payments. As long as you can budget all your monthly payments in a way that’s best for your family, it can be OK to buy a home while you’re still paying off other debt.
3. You can’t save until after you pay off your debt
If you carry high debt and are worried about saving for an emergency fund or your retirement, take a deep breath. It’s possible to pay off debt and save — at the same time.
Review your budget to see where you could trim some expenses. Could you cook more at home and dine out less? Can you make coffee at home instead of buying a cup on the way to class or the office? Are you willing to let a friend or relative cut your hair instead of going to the salon? Small spending changes can add up to big savings.
If you take your coffee money and put it aside, you’re saving more money than you were before. Once your major loan is paid off, you can start saving more or continue to pay off other loans until you’re debt-free. You don’t have to choose between one or the other. You can work on both options.
4. I’m too young to put money into retirement
At my first job out of college, some older coworkers told me that I didn’t need to save for retirement yet. But that’s not true. It’s never too early to start saving for retirement. The earlier you start, the more you’ll be able to save and the less you have to play catch-up with later. And that can make a big difference.
Retirement is one of the biggest financial stressors for older Americans. About 60% of retirees fear they won’t have enough money to get them through their golden years, according to a recent Gallup poll. Many wish they had saved more and earlier. Lots of Americans still are working through their retirement years.
5. Cash is better than credit
If you’re afraid of going into debt because you can’t make credit card payments, then cash is a solid spending mechanism. For one thing, you can’t spend what you don’t have. You can take the same approach to credit cards.
The point of getting a credit card isn’t to spend money you don’t have; it’s to help you when you need it. When used the right way, credit cards can help you build your credit, make large purchases you wouldn’t be able to afford immediately, and sometimes get cash back or other rewards. Use cards to your advantage so you’re getting the most out of them.
Take some financial advice with a grain of salt
Your friends and family mean well when they give you financial advice, but that doesn’t mean the information is correct or helpful. Try to vet all the tips you get before acting on them. Do your research always and follow the advice that will work for you and your specific situation.
Interested in a personal loan?Here are the top personal loan lenders of 2018!
|Lender||APR Range||Loan Amount|
|1 Includes AutoPay discount. Important Disclosures for SoFi.
2 Includes AutoPay discount. Important Disclosures for Payoff.
3 Important Disclosures for FreedomPlus.
4 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
5 Important Disclosures for LendingPoint.
6 Important Disclosures for LendingClub.
All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.16% to 35.89%. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at time of application. The origination fee ranges from 1% to 6% and the average origination fee is 5.49% as of Q1 2017. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months or longer.
7 Important Disclosures for Earnest.
8 Important Disclosures for Avant.
* The actual rate and loan amount that a customer qualifies for may vary based on credit determination and other factors. Funds are generally deposited via ACH for delivery next business day if approved by 4:30pm CT Monday-Friday. Avant branded credit products are issued by WebBank, member FDIC.
** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33
* Important Disclosures for Upgrade Bank.
Upgrade Bank Disclosures
** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.
|7.73% – 29.99%||$1,000 - $50,000||Visit Upstart|
|6.26% – 14.87%1||$5,000 - $100,000||Visit SoFi|
|6.99% – 35.97%*||$1,000 - $50,000||Visit Upgrade|
|8.00% – 25.00%2||$5,000 - $35,000||Visit Payoff|
|4.99% – 29.99%3||$10,000 - $35,000||Visit FreedomPlus|
|5.99% – 18.99%4||$5,000 - $50,000||Visit Citizens|
|15.49% – 34.49%5||$2,000 - $25,000||Visit LendingPoint|
|6.16% – 35.89%6||$1,000 - $40,000||Visit LendingClub|
|6.99% – 18.24%7||$5,000 - $75,000||Visit Earnest|
|9.95% – 35.99%8||$2,000 - $35,000||Visit Avant|