Bye-bye bad advice
What financial advice to ignore
Amid the black-and-white world of financial advice-giving, there’s a lot of gray. Don’t ignore your unique needs and circumstances when plotting out your finances.
1 Lack of wealth v. lack of discipline
Repeat after me: a lack of wealth doesn’t equal a lack of discipline.
There’s a lot of cultural worship of hustle. But that glosses over larger issues that prevent millions of hardworking, disciplined people from attaining financial security — like crushing student loan debt, job uncertainty and budget-busting child care costs.
According to NerdWallet’s 2019 American Household Credit Card Debt study, the average U.S. household with student loan debt owes $46,459. Average annual U.S. child care costs ranged from $18,442 to $26,102 in 2019 for two children in full-time care in a child care center, according to a report by Child Care Aware of America.
Discipline is good, but it’s also OK to recognize your limitations and obligations.
Start by writing down all of your expenses for a month so you can get a picture of where your money goes. Then, create a budget that leaves room for needs and wants, like the 50/30/20 budget: 50% of your take-home pay covers needs like housing and groceries; 30% covers wants like dining and travel; 20% covers savings and debt repayment.
This way, you don’t stress if you have a moment of weakness. You’ve built a budget that allows for fun.
2 Austerity isn't always a virtue
As your income grows through the years, it’s wise to funnel the extra cash into savings and investments without otherwise changing your spending habits. But it’s OK to spend money on luxuries or conveniences that will make your life better or easier.
Living below your means helps you save toward goals, but leave room in your budget for purchases that can make your life easier.
3 ‘Passive’ investments
Some investments, like 401(k)s and IRAs, are often “set-it-and-forget-it.” You can automate contributions and select target-date funds that will adjust your asset allocation for you. But other investments, like real estate, require not only regular effort, but also significant investments of money and time.
For example, if you are considering buying a rental property consider the time and expense of finding renters, maintaining the property and more. There could be gains to be had but they are not guaranteed and they certainly aren't hands off.
Investing is key, but it’s a space where one old adage does ring true: To make money, be prepared to spend money.