Five Things Financial Experts Say That Are Dumb

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Introduction

With the ongoing financial crisis, many individuals and households feel they need all the help they can get.  And there’s no shortage of expertise available. It’s easy to become overwhelmed by the sheer volume of financial advice out there.  Worse, a lot of self professed experts contradict one another. The truth is, some financial advice is outdated, not suited for your particular circumstances, or just plain wrong. The examples below are just a selection of the bad financial advice floating around out there.  Consult with a financial adviser that you trust to get good advice that works for your circumstances.

 

Never Invest In a Traditional IRA

This is the type of one-size-fits-all advice that may be right for you – or totally wrong. The truth is that Roth Individual Retirement Accounts are an excellent option for many individuals, and they may be right for you.  But it’s also true that traditional IRAs have their place. Depending on your circumstances, it may make sense to have both a traditional and a Roth IRA. Your particular circumstances determine the right approach, which you and your financial advisor should work out together.

 

You Should Always Strive to Work for Yourself

You’ve seen them on TV, financial gurus – usually pushing a book or a set of CDs – who denigrate anyone who works for an employer as a wage slave.  According to these experts, the only way to achieve true financial freedom is to strike out on your own. It’s true; there are fortunes to be made from entrepreneurs who happen to launch the next big thing.  It’s also true that you may not be cut out for the rough-and-tumble world of self employment. It’s also true that you may make a very nice living as so-called “wage slaves”, thank you very much.

  

Cut Back Now, Live Rich Later

If you’re drowning in credit card debt, there is no doubt that you have to make drastic changes. You may need to get real about living within your means.  But sometimes debt isn’t due to out-of-control spending, but rather insufficient wages.  There is only so much you can cut back, and many things people cut back on are false economies.  For instance, going without health care, budgeting nothing for recreation and entertainment or giving up your dreams of training for a new career, because you don’t want to take out a student loan may save you money up front, but it’s almost certain that you will not benefit in the long run.  Sure, plan for your future, but live your life now, too.

  

Borrow More Than You Need

At first glance, the logic behind this bit of misinformation almost makes sense.  If you need $5000 for home renovations, but your bank is willing to lend you $10,000, why not take the extra funds and invest it – or take a really nice vacation for a change?  The reason why not can be summed up in one word: interest.  Remember, the bank isn’t giving you this money. You still have to pay it back.  What if you lose your job or some other circumstance arises that makes it impossible to pay back the loan? Suddenly that “extra” money becomes an anchor around your neck rather than a windfall.

 

 

Always Pay Yourself First

No one is saying that having savings is a bad thing. However, if you’re paying 18 percent or more for credit card balances, you’re not doing yourself any favors by stashing your money away in investments that pay lower percentages – which is nearly every investment. It makes more sense to take at least some of that money to pay down your credit card debt.

 

It’s wise to set up different accounts for different purposes, for instance, if you were going to start trading you could set up an account strictly for that purpose and not mix up your trading account with your credit cards. Click here to find out more about setting up different accounts. Once you’ve paid off your cards, you still have the available credit to use in case of emergencies – and you can continue to save money, too.

 

Author Bio:

Post contributed by Hayley Spencer. Haley is a freelance writer and an online tutor at the Northeastern University. She enjoys sharing her insights through her writing. Her articles appear on various finance and investment blogs.

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Category: Debt Freedom