Even though many of us were taught as kids that it’s not polite to talk about money, the world is overflowing with people who want to tell you exactly what you should do with yours. From the gurus who seem to think the coffee is the root of all money problems to your neighbor who just loves to hand out pearls of “wisdom,” we’re bombarded with advice. Some of that advice is terrible.
If anyone offers you the following financial advice, you have our permission to ignore it completely. As for whether to argue with the advice-giver’s flawed logic ... well, we’ll leave that decision up to you.
“If you’d stop buying expensive coffee, you wouldn’t be so broke.”
People who don’t like to have fun love to remind you that this small purchase you make regularly is ruining your financial future. Sure, $5 here and there can drain your bank account quicker than you might realize. But your regular trips to the coffee shop probably don’t add up to “peeing one million dollars down the drain,” as Suze Orman would like to scare you into thinking.
If you took the $5 a day you spend on coffee and invested it for 30 years, you wouldn’t have anywhere near a million dollars. You’d have about $200,000, which may be enough motivation to cut back on extra purchases a bit. But cutting coffee, or soft drinks, or takeout lunches, or happy hour out completely won’t suddenly transform your finances overnight. Go ahead, make your next cup a grande if you don’t feel like making coffee at home.
“Just go to grad school, you might need a higher degree.”
Remember when we were just starting to crawl our way out of the Great Recession, and there were no jobs, and a bunch of us said, “Let’s just go back to grad school. This will all be solved by the time we graduate.” That was a great idea, except most of those people still have a bunch of student loan debt. And salaries for people with graduate degrees don’t always match the level you might expect an advanced degree to offer.
If you begin your higher education knowing that you may need a higher degree to succeed in your career (say, to be a doctor, attorney, or actual rocket scientist), then the value of investing in a graduate degree is clear. If you can’t clearly lay out how an advanced degree will accelerate your career growth (with numbers, please), it’s time to rethink the whole idea.
“You should form an LLC to help with taxes.”
If you’re freelancing or starting a small business, you can expect everyone to give you an opinion on whether you should be a sole proprietor, LLC, or other variety of business entity. But beware of this “tip,” because forming a limited liability company does nothing for your taxes! Doing so will limit, to some extent, your legal liability if your business gets sued, protecting some of your personal funds. It’s often recommended for the newly self-employed who are nervous about doing everything wrong. Yes, you’ll need to save for self-employment taxes, but forming an LLC isn’t going to save you from those early financial growing pains of having a business.
“Owning a home is the only way you’ll ever build wealth. Renting is a waste.”
Home prices are going up way quicker than wages are increasing, so don’t feel bad if you’re spending so much of your income on a rental that you don’t think you’ll ever be able to save enough for a home of your own. Putting your cash in investments counts as “adulting” just as much as taking out a mortgage does.
And for many, homeownership just doesn’t make sense. Before you end up feeling backed into the homeownership-or-bust corner, remember that your individual circumstances along with those of the region where you live can add up to more tally marks in the “pros” column for renting.
“Just make the minimum student loan payment until it gets forgiven.”
If you’re someone who’s working in public service and has been keeping up with requirements for the elusive Public Service Loan Forgiveness program, I won’t argue with you on this one. I don’t have a lot of faith in the program’s longevity, but I don’t blame you for trying.
But if you’re on any other student loan repayment plan, there are some actions you can take to shorten the amount of time it takes to pay over gobs of money for your degree. We’ve got a list of things you can do to cut down your repayment period. While we don’t promise to shave years off your schedule, it may give you peace of mind to know that even if your debt is large, you can start chipping away at a bigger portion of it a little faster.
Tell me in the comments about the worst financial advice you ever received.