Timeless Financial Advice That's Really Making You Poor

Financial advice is enormously tricky. We simultaneously live in a society where there is an abundance of financial resources and financial advice but a lack of overall financial literacy. Many of us stick to the same pieces of financial advice we've always heard without question, never asking whether or not the advice we hear is actually beneficial or working with modern money sensibilities.

It's high time we tackled some of the financial advice we have all heard that just doesn't add up. Whether it is dated and wrong for our modern context or never had a solid toehold on reality, these are some pieces of financial advice better left in the past.


5 Pieces of Financial Advice That Make You Poorer

1) Forgo investing to eliminate debts.

One of the most common pieces of financial advice we hear is to set aside our financial goals and ambitions until we have eliminated large, burdensome debts. These include credit card debts and large outstanding balances with high interest rates.

While paying down out-of-control debt is wise, doing so at the expense of say, saving and investing, is not wise. We can't get that time back. The time used to save and invest is precious, and that time we need for wealth to grow, gain interest, and appreciate is critical. If we put off investing in the future for the sake of eliminating debt, we are hurting ourselves.

Instead, do both. Chip away at debt a bit more slowly so that you can afford to put some money towards your future as well. While many money management experts will encourage the prioritization of debt elimination, it is not wise to ignore other financial priorities in the process.

2) A great credit score means your finances are in good shape.

There is a huge emphasis on the credit score today. It makes sense. We are living in an economy that is largely credit-driven. Because of this, the health of our credit score is highly lauded. We're told to improve it, keep it high, salvage it, and don't ruin it!

While a credit score is important, particularly in my business, it is not a true indicator of financial wealth or health. If your credit score is high, don't make the mistake of believing that you are financially healthy because of it. Your credit score is only an indication of how much you're able to borrow.

3) Buying a home is a financial investment.

One of the oldest and most ingrained bits of financial wisdom is to buy a home as an investment. This is part of the American Dream, after all. We are all expected to buy a home. While it is true that real estate is a great investment, a personal home is not where you will maximize the rewards of that investment. This is because it much harder to combat the wear-and-tear in a personal property versus the wear-and-tear in an investment property. Not only that, but you rarely have the same opportunities to make passive income through your personal property as you with an investment property, despite the rise of the Airbnb model.

Furthermore, the cost of one's mortgage may be higher in your market than the cost of renting. It just might not make financial sense to buy and invest in a personal residence. Instead, renting and, if you want to buy property, buying an investment property, makes more sense.

4) High risks are necessary for good investments.

We would hope that the culture of day-trading is behind us, but sadly, it is not. There is a large portion of investors who view the stock market and investing in general much like gambling: a high-stakes game of chance where you buy obscure stocks and wait for them to hit big so you can sell, sell, sell!

The problem with this approach is that you're putting your investments in the hands of chance and leaving your wealth at constant risk. High risk is not necessary to reap the rewards of investing. Instead, build up a portfolio that looks to grow steady, stable, long-term wealth—as with turnkey real estate investing.

5) Save 10% for your retirement.

Conventional wisdom says to set aside just 10 percent of your earnings for retirement. In years gone by, this advice may have been sound. But today, it just doesn't cut it. Retirement is projected to be longer and more expensive than ever. Experts now suggest a minimum of 15 percent saved and a 20 percent ideal.

For many of us, however, even that may not provide the peace-of-mind that we seek. A better retirement strategy may not be built on savings but on investments. Investing in, for example, turnkey real estate can provide both appreciation and leverage on top of the passive cash flow that can help sustain the uncertain years of retirement.

With so much information out there regarding financial management, it is all-too-easy to get duped by advice that sounds good instead of listening to sound counsel.

Instead of taking money management advice at face value, examine each piece of advice in your context: both where you are and where you want to be.

What’s the financial advice that has HELPED you the most in your life? Share it in the comments.