5 Common Financial Tips
& Why You Shouldn't Follow Them
You've probably heard a lot of money advice in your lifetime. Isn’t it nice that financially experienced people want to give you finance tips that will help you secure your future? They don’t want you to repeat the mistakes they made.
What is missing here?
Well, first of all, everyone’s financial conditions are different. So the advice suitable for one person may not be that useful for the other. Secondly, the financial sector is transforming rapidly. For instance, only a few types of savings accounts were available with banks earlier. But now you have plenty of options, including digital savings accounts.
The legitimate advice in the past year may not be relevant today. This blog post is about 5 common pieces of money advice you should ignore. Check them out!
5 Financial Tips You Should Ignore
Sometimes you might get confused as some of the most successful people can swear by these 5 things you can do for better financial prospects. But that doesn’t change the fact that these are outdated financial tips.
1. Stay Away From Credit Cards
“You will impulse buy and won’t be able to pay back”. “You will be troubled with recovery calls”. “You will end up paying hidden charges”. You must’ve heard at least one of these statements regarding the horror of credit cards.
Let’s start with the last one. In today’s information and consumer rights world, you can study the terms and conditions properly and know what you are signing up for. Impulse buying, bad credit behaviour and other irresponsible traits are individual.
If you plan your expenses well and control your budget, you won’t get tempted to buy what you don’t need. And not to forget, a credit card has so many benefits. You earn reward points, cash backs, and extended warranties.
It also saves you from the hassle of carrying cash and the fear of theft. You can enjoy credit card facilities by being a bit responsible and aware.
2. Buying a Home is the Best Investment
This is one of the most common pieces of money advice you should ignore. But you don’t, as it often comes from your elders. They insist on living in a self-owned house, not understanding that banks actually own that house until you pay all the EMIs. Banks indeed earn good ROI in the form of interest.
Suppose you pour all your savings and investments into buying a home. But what if its value doesn’t increase the way you expected? And there are other forms of investments providing extraordinary ROI. You won’t have any money left to invest in them.
So don’t spend too much on buying a home or don’t buy it at all. Do whatever is right according to your financial calculation.
3. Pay Down Your Debt in Full ASAP
Not all debts are the villains as they are made to be. Some debts are suitable for your financial health. Assuming that you don’t have unlimited wealth, you may need a home loan or education loan. A home is your asset, and education can help you achieve financial freedom. So all debts are not bad debts. Some act like ladders to your dreams.
Don’t pay off your debt in a rush. Pay them through EMIs and try to repay the ones with higher interest rates first. It’s noteworthy that the debts to acquire material possessions you can’t afford don’t fall under responsible borrowing. And they are actually bad for your long-term financial profile.
4. Cut Back on Your Expenses
It’s an “easier said than done” rule. If you ever tried dieting by forbidding every food item you love, you know how it ends up with you giving in to the craving one day and overeating. Similarly, if you try to avoid every single expense that gives you some kind of comfort or entertainment, you may end up spending more than usual by the end of the month.
Clubbing every day might take a toll on your monthly budget. But treating yourself occasionally with a short vacation, movie, and dinner date is not bad. “Occasional” is the key here. So don’t try to cut back your expenses. Limit them and try to be mindful when spending money.
5. You Don’t Need Life Insurance
Do you think that life insurance is not a necessity while being young or single? However, there are many benefits to purchasing life insurance while you are young. For example, monthly payments are typically lower when you are younger, and you still have time to grow your money.
So whoever told you “not to take insurance while you are young” as a finance tip that will help you secure your future was wrong. There are insurance plans that combine investment and protection. The earlier you get your insurance, the more time your money can earn interest.
Naina Rajgopalan has a thing for numbers and a deep fascination to learn about all things finance. She's been moneywise from a young age and has always shared her knowledge and tips with those around her. Being a part of the content team at Freo Save, a digital savings account app that offers a 7% interest rate on savings along with benefits such as insurance on balance, safe & secure banking, and so on, Naina stays updated with the latest of what happens in the banking and fintech industries. She has taken it upon herself to share her knowledge with readers across all walks of life to help them manage their finances and budgets better, so they can make better decisions while spending, borrowing, investing and saving.