Dealing with finance is already a tedious activity with activities like having to compute your salary, taking into account the expenses and not to mention the task of budgeting your daily life. It has the potential to be overwhelming. That’s why most of us turn to financial advisors and research using books and the internet. The big question now is how do you distinguish between true good advice and malicious recommendations? Well, there are plenty of ways to tell them apart.
One example of identifying bad financial advice is given by CreditCards.com who says finding the following qualities in these advices could spell trouble for you: confusing, comes from someone with a vested interest, unsolicited, one size fits all, framed as the only option, promises quick and easy results. Having said that, we’ve compiled some of the most common and yet false advices.
The advice: Credit cards are bad.
The truth: Credit cards are neither good nor bad.
Owning a credit card doesn’t necessarily mean that you’ll automatically fall into a spiral of debt until you death as what this bad advice usually warn you about. It all depends on you and how you handle it. If you are someone without discipline that uses his or her credit for every impulse purchase and then forgets to pay the monthly bill then credit cards are truly bad but solely because of you. However, if you are someone who is responsible and uses credit card as cash alternative with booking travel arrangements and purchasing essentials then credit cards will work for you as it offers more protection, bigger discounts, special promos, and a good credit score.
The advice: Life insurance is mandatory.
The truth: Having a life insurance is not necessary but it is good.
It is true that having a life insurance is one of the best ways to make sure that your loved ones get benefits in case something bad happens to you but if you are a young 20 something without dependents and with minimal assets then having a life insurance is not a top priority. You need to buy it when the time comes that you need it. When is this, you say? Well, it depends on your life status. If you’ve got dependents and a sizeable assets then it is a good time to have a backup plan just in case something unfortunate happens. For now, be money smart.
The advice: Buy a house as an investment.
The truth: Not all home purchases are good investment.
As seen in recent years, houses do lose value. The housing crisis in the last decades have seen homes, if not losing value, seldom appreciating. All in all, it was generally a bad time for homeowners across the country. Of course, owning a home shouldn’t only be done solely as an investment. Having a home for yourself and your family is a sign of financial security. Plus, if you pay a monthly mortgage at a fixed-rate and then rent out the house, then you can increase rent as time passes by without having to pay more for mortgage. Just always be reminded that owning a house is not a guarantee of money as sometimes outstanding mortgages can surpass the value of the house. If that happens, then you might be better off homeless.
The advice: Save 10% for retirement and you’re good.
The truth: It depends on how early you start saving.
Saving up for retirement is something that you must do if you want to someday end your working life to enjoy the fruits of your labor. Many financial advisors will tell you that so long as you set aside 10% of your monthly earnings towards your retirement fund then you’re okay. However, they almost always forget to specify when you should start saving up for retirement for 10% to still be enough to cover your post-work life. If you’re just starting today and you’re already in your 40’s then you would have to step up your game to be able to live that comfortable life you want by the time you retire. Of course, you would also have to know what your retirement goals are and then adjust your savings accordingly.
Getting financial advice is a great way to get to know more about your money. However, you must be careful to get only the right advice. Be analytical and do your own research. In time you’ll find that your finances will be okay.