Question of the day: What money advice have you heard at some point that seemed to make total sense, and maybe even felt like an aha moment for you, but then you later realized it wasn’t such great advice after all? Share your answers in the comments! Today we’re exploring why some bad money advice seems reasonable — and the philosophy behind it all.
We’ve been reflecting a lot lately about the factors that made Mr. ONL and I the people we are today, and of course money is a huge part of that. We grew up with similarly middle class upbringings, though Mr. ONL’s family seemed to embrace “enough” better than mine did. We each learned about functional money stuff like balancing a checkbook in high school. And we each took on some credit card debt before we decided we didn’t want to live under that weight. All important lessons.
But another important lesson that we all get — good or bad — is the osmosis kind that comes from just observing how other people deal with money, especially people we admire or are close to. And while this kind of information may not be of the pick-this-index-fund or don’t-hire-a-financial-planner-on-commission variety, it still impacts us in a big way. I’m thinking specifically about how some of my ideas about what money is for were formed.
For us at least, we were definitely influenced by the people around us once we started working. We grew up in families without much extravagance, but suddenly at work we were surrounded by people with nannies and $60,000 cars and second homes. Not filthy rich or anything, but definitely people with means. And, as we’d each learn, people who see money differently than we do now.
The Philosophical Question: What Is Money For?
Though we didn’t realize it at the time, what we were learning from our bosses and coworkers was their answer to what I now think is actually an entirely philosophical question: What is money for?
We may not have asked them directly, but their actions told us how they would have answered. They would have said that money is for making life easier. That’s a far cry from how we’d now answer that question (money is for buying freedom), but their answer also makes sense in its own way. Like, a lot of sense, especially if you’re a young recent college grad who hasn’t yet gotten the hang of adulting, and you see a future for yourself in a high-stress career path. You see other people in that path who seem to have figured it out, and they use their money to make the high-stress part of it sustainable: by paying others to do things for them, by paying to relax, by paying to buy more time to work.
If you agree with the philosophy behind it (money makes life easier), then spending money on that stuff makes sense.
Knowing That It’s a Philosophical Question In the First Place
The piece that’s harder is knowing that, in showing you how they use money, people are giving you the answer to what they think money is for. Maybe they think money is for buying experiences, or for buying the most toys, or for filling an emotional void, or for quelling the fear of financial insecurity.
In our case we didn’t realize that that question was at play at all until much later, in hindsight. Instead, we saw how people spent money without recognizing the philosophy underlying those choices, and we just thought that’s how smart people spend their money, so that they can keep doing those high-stress jobs and in turn earn more money. So we started spending our money that way, too — outsourcing some of our household tasks and taking lots of vacations to “relax.” (Thank goodness we never got into expensive cars!)
How the Bad Advice Comes to Seem Reasonable
I always crack up at the fictitious story of how Chevrolet tried to sell the Chevy Nova in Spanish-speaking countries, with disastrous results. Why? Because “nova” (“no va”) means “no go” in Spanish. As it turns out, this didn’t actually happen (thanks, Snopes), but I love the story all the same. And I’ll use it as a metaphor here.
If two people are saying the same two syllables — let’s stick with nova — the meaning is entirely dependent on which language you’re speaking. If you’re speaking English and someone says “nova,” and especially if you’re a space nerd like me, you’re thinking, “Ooh, get me some Hubble photos stat!” But if you’re speaking Spanish, the same syllables mean, “Hey gringa, stop assuming that we don’t know the difference between ‘no va’ and ‘nova.'” Or something like that. Point being: the meaning is different depending on the context. And it’s the same for interpreting money advice. If you don’t know what language someone is speaking — their philosophy on what money is for — then you don’t actually know whether their advice or what they’re showing you by their example is good or bad.
Some of the Most Convincing Bad Advice We’ve Gotten
I want to share some of the actual nuggets of advice that we got in our early career years, especially the ones that stuck with us. But before doing that, a big caveat: Most of this advice is only bad to us because our underlying philosophy is different from that of a lot of the people we work with and for. But there’s nothing wrong with the “money is for making life easier” philosophy, and nothing wrong with spending according to it. The only thing that’s truly bad is not knowing your own philosophy or spending in a way that’s at odds with your own answer or values. We will never try to argue that no one should buy stuff or spend on extravagant things — if you can afford it, and it fits with your money philosophy, then more power to you.
But since I’m assuming that most people reading here at least partially agree with our philosophy that money buys freedom, here’s that “bad” advice:
It’s okay to throw money at problems. Meaning: It’s often easier to just pay for things than to spend time trying to resolve issues, especially in personal life. I understand this, and have for sure learned that sometimes there’s no resolution besides paying for something. But now we’d say we’re at least going to try to resolve something without shelling out!
To relax on vacation, you need to feel pampered. Meaning: Treat yoself. Spa treatments, room service, five-star hotels. We for sure see the appeal of this one! Though with some exceptions (okay, some rather large exceptions) we’ve always enjoyed the more adventurous, DIY vacations. But we also love the spa.
If something takes a lot of your time, you’re better off paying someone else to do it for you. Meaning: Outsource as much as you can so you can focus on the important stuff. Following this advice led us to use a fluff-and-fold service for our laundry for years. And, to be honest, It. Was. Awesome. But also a dumb use of money, especially because we now have laundry in the house and can run the machines while working and fold clothes while watching TV.
The little spending doesn’t matter. Meaning: It’s okay to buy your lunch at work every day, or to buy that daily latte, if it helps you be more productive. Mr. ONL definitely once had a daily Starbucks habit (though he’d say that he drank drip coffee, which is much cheaper than a latte), though I always brought my own lunch to work… but I also didn’t complain if someone else wanted to buy me lunch! ;-)
Chime In!
What’s the most convincing bad money advice you’ve ever heard? Or the advice that was good until you realized it didn’t match your own financial philosophy? Any major zingers in there? We’re dying to know!
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Categories: we've learned
I fell for the “you should carry a credit card balance because then it will be reported to the credit agencies and you will grow your credit store” and of course it came from my parents and definitely falls under “nova” advice! While I didn’t carry a lot of credit card debt (I think the max was $1.5k), I still can’t believe that I paid it off slightly slower because of this. As you stated above, it is important to review advice and see if it matches you own personal philosophy. You can never take advice at face value. You always need to do you own research and make sure you actually agree with it. Unfortunately, there are no easy outs!
I got that advice, too! Unfortunately for me, I ran up way more debt than you did — good for you for keeping it in fairly modest limits! :-) And yes 100% — you have to weigh all advice against your own situation and then decide if it’s good advice or bad advice!
Bad advice: “Don’t pay off your mortgage early because it is cheap money and there are tax benefits”
Why: while rates are low and there ARE tax benefits, the interest is still costing you money and it is still (commonly) a huge debt.
We have no debt, including the house, and gained a huge amount of daily peace once everything was fully paid for.
I was just given this same advice the other day. I was told it was “stupid” to focus on paying off our house right now because “money is cheap.” I try to remind myself that other people are speaking from their own perspective and experience and that they can’t possibly know what is best for us (even if they think they do).
Those people also can’t know the future! Paying off your mortgage is a guaranteed return while investing is essentially a gamble. Sure, markets have certain levels of historical returns, but none of that is a sure thing. Good for you for following your gut!
Oh, the worst red herring ever — the “tax benefit” of the mortgage! That’s one of those bits of “good advice” for people who don’t understand math, and can’t see that you only get a little slice of that mortgage back as tax savings. We for sure understand the case for not paying off your mortgage early, but the tax argument just doesn’t hold water for us. And like you said: peace of mind is worth a ton, and you can’t put a price tag on that!
I love that you address the “what money is for” question. That is huge!
Bad advice: Buying a newer car because it gets better gas mileage. The difference in fuel cost cannot overcome the price of the vehicle.
Oh that car advice is the worst! Like people who buy a brand new Prius to “save money” on gas — but you just bought a brand new $30,000 vehicle! (I don’t actually know what one costs. Does that sound about right?) Have you done the math on how long it will take to make up the difference? As usual, you guys made the smarter choices by actually thinking this stuff through! :-)
You know us well :) We have a big spreadsheet on it and can plug in the details of the vehicles being compared. It’s a bit too much to share here but we’ll post on it at some point. Suffice it to say, you are better off sticking off with what you have, or purchasing a less expensive vehicle despite gas mileage. We’ll have to run some more calculations once the new electric cars become available.
Look forward to reading that post!
As many things in life I feel like the in between works. Yes we don’t believe that throwing money at a problem will solve everything, but there are sometimes when you do realize, hey, I work hard so that I can make money so I need to decide how to spend it. We continually balance living in the moment (when we needed a new car to accommodate our growing family, we bought one) while also saving in order to fully enjoy retirement. As with food… everything in moderation.
The Green Swan
I agree — I think moderation is generally a pretty solid way to go. It doesn’t make sense to judge others’ decisions when you don’t know all the background just as it doesn’t make sense to take all advice at face value without weighing it against your own situation!
“The only thing that’s truly bad is not knowing your own philosophy or spending in a way that’s at odds with your own answer or values.” I could walk through lots of bad advice, but to me this quote is the crux of the issue. What is your money philosophy? For a long time I didn’t know I should have one, and was floating along making decisions without a deep understanding of WHY. I learned the basic frugality very early–best lesson my mother ever taught me.
But once you start to have more than you need, then how do you spend the rest? All the conventional wisdom said to save 10-20% for retirement. So if you have more available, you can buy a bigger house and a fancier car, and that nice handbag that everyone around you seems to own. I am so grateful to this community for showing me that there is a different way to live that more closely corresponds to my own values–even though being a bit counter-cultural may feel uncomfortable at times.
We’re super grateful to this community, too! :-) I love that you started from a place of frugality early on (I wish I had!), and you must have known on some gut level that saving 10-20% wasn’t enough — so good for you for trusting that instinct! Our whole society is set up to reward lifestyle inflation, so you’re right — not inflating IS pretty countercultural!
I had these questions too. I’m a saver by nature so my default was to save the extra money, but I didn’t know what to do with it until I realized early retirement was an option. I do splurge on some of those nice things, but I try to do it with one off things like purses rather than with recurring or larger things like cars and I try to stay practical with it.
I think you’re doing a pretty great job of living your financial philosophy, Leigh! Nothing wrong with splurges as long as they fit into your plan.
Bad advice: Take a 30 year mortgage at the high end of the range price range. You can grow into the payment as you earn more.
Doh!
I kind of want to punch whoever gave you that advice. ;-) Was it a realtor?? A mortgage broker? This goes right along with the “starter home” thinking and the “debt is inevitable” way of looking at things. Thank goodness you had the wisdom to find our own path to financial stability!
The banks will lend such ridiculous amounts! I bought at the top of my personal price range four years ago, which put me at spending about 30% of my net base salary on housing. I’m really glad I did that though because that meant I bought enough space to grow into a couple, to entertain, and now housing prices are up enough that I would have paid far more monthly for the same place had I bought now. But there’s no way I would have bought at the top of the bank’s price range and I knew that I had room to grow in the subsequent years on a personal level.
Oh, we’ve been through this same thing with the banks! And we felt like we had to push back strongly to say, “No! We really don’t want to borrow that much, regardless of what you think we can afford!” But the banks are so used to people stretching themselves that they almost can’t compute it when someone doesn’t want to max out their borrowing. Glad in your case that it worked out to stretch the littlest bit. :-)
You guys hit on the great master question, which is what is money for…and that it is different for each person. Because the “bad” advice for one person may be “good” for another person that has a different philosophy of it, or different goals. For example, I can think of many times when not having a mortgage payment is great, but I can also think of many situations where either renting or having a small mortgage payment is favorable to having too much equity tied up in a house. Situation is the key. I’ve found that giving “drive-by” advice is very challenging lately. Those of us that blog still do it to a certain extent, but it is always great for us to dig in deeper to the WHY, just like you stressed here.
Not that it always matters who comments but my computer didn’t sign me in for my initial comment for some reason. Another great post guys!
Weird! Thanks for letting us know it’s you, Scott! :-)
Totally with you on looking at the why. There’s an interesting phenomenon in the FIRE blog space, which is that most of us are doing this because we’ve realized that we don’t have to follow conventional wisdom, and can go a different way financially. But, then we’ve taken on this alternate conventional wisdom, which many bloggers spout as though it is the indisputable truth… which runs counter to the whole idea of bucking the CW! So yeah, we try hard not to give driveby advice, or to label things as good or bad, but instead to dig deeper to focus on aligning your choices with your values, your purpose, etc. Thanks for chiming in!
All the bad investment options that people throw around at cocktail parties and that sound really cool ans sophisticated:
Hedge Funds, Commodity ETFs, trading actively, not just day trading, but also the “Opportunity is everywhere” thing.
If it’s an investment product advertised on TV it’s probably only making the issuer rich.
https://earlyretirementnow.com/2016/03/23/never-ever-invest-in-this/
Oh yeah, I totally extricate myself from those conversations! Or, now that Planet Money did that “Boring vs. Brilliant” podcast episode, I can say, “Warren Buffett thinks trying to beat the markets is foolish. We invest in index funds.” (Haven’t had occasion to use that line yet, but maybe soon!)
I hate folding clothes, would rather do anything else around the house. Anything.
Don’t invest in the stock market – I know people that lost a lot of money (father in law)
Get a mortgage before a new car, somethings if people get a car first they can’t get a house (Mom)
They mean well :)
Haha — I hate folding clothes, too! But now we don’t even have a fluff-and-fold option in our small mountain town, so that decision was made for us. :-) It’s nice that you’re charitable in your assessment of that questionable advice, and you know their hearts were in the right place!
I’m not sure there’s any financial advice that falls under the category of always being bad, although there’s plenty of advice that turned out to be bad for us. Your situation and your personal value system dictates whether or not advice is good or bad, and that changes with time. I’ve paid to have yards maintained and homes cleaned, and at the time those decisions felt right. Mr. AR and I have spent hours and hours pouring cement, laying brick, taping and texturing, etc., and at the time those decisions seemed right as well. We’ve had periods in our lives where we had more time than money, and periods in our lives where we had more money than time. You have to paint with a pretty broad brush to categorize every seemingly indulgent expense as unnecessary, and it’s equally possible to frugal yourself into a grinding, stressful existence in a misplaced attempt to avoid all unnecessary expenses. There is some advise that’s always “bad,” and that’s comparing your insides to someone else’s outsides and doing what they did because you think they have all the answers and you don’t. New cars, credit card debt, mortgages, second homes, whatever, under certain circumstances may make sense. The trick is understanding whether or not they make sense for you. We choose to have no mortgage, but that works for us today. We have a new car, with a bumper to bumper warranty and a zero interest loan. That also works for us today. Does it work for someone else? Only they can answer that question, and in order to do so they would need a clear financial plan, which is the pitfall 99% of the people (including us, in the past) seem to fall into. Without a plan, all advise sounds great because everyone else appears to have a better handle on finances than you do (particularly since people tend to never discuss financial hardships and failures). Once you have a plan in place, it’s much easier to weigh your options and make the best financial choices independent of the influence of so called “successful” people around you, knowing you’re working to achieve your financial goals (whatever they are).
I agree with you completely that most advice isn’t good or bad until you weigh it against your own situation and priorities! And I think you guys spending money to have lots of work done over the years is great if that’s what you needed at that time — more money than time is for sure true for us now, too! That’s why we shelled out $4K to have our house restained last year, and pay $500 a season for snow removal. We’ll reevaluate all of that once we have more time than money, but you have to be practical and prioritize according to the present situation. And I especially love your reminder that we can’t compare our own insides to other people’s outsides! That is always good advice. :-)
The “advice” aka “noise” that we get from various business wires/feeds . It often ends up in a herd-like mentality where everyone is talking about it over morning coffee or the water cooler.
Things like :
Brazil or Ruusia or India is going to fuel the next wave of global growth. Look to add focused funds which are heavy in BRIC to your portfolio.
Mmm….not so much.
Greece is going to bring down the global economy. Investors should bale from the market.
It didn’t happen. Investors should not bale.
Apple are in real trouble with iPhone sales. Investors should be very wary.
Oh, hang on a minute, Mr Buffett just sanctioned a recent billion dollar investment. Wanna argue with his wisdom or insight?
I try to adhere to more of the following and maybe it is a growing older thing…
Ignore most of the “advice”
I only get that kind of news in small snippets when the plane I’m flying on happens to have Direct TV. For some reason, the TVs in first class are always set to CNBC or Bloomberg, while the seats in the back are on NBC or some kids channel — how’s that for prejudging your passengers?? But if I see some CNBC, I can’t believe how vehemently they seem to be about whatever specious advice they’re sharing! How can you be in financial media for more than five seconds and not realize that this stuff is largely fluky, not always rational, and completely subjective at best?!
I always think those financial wisdom nuggets and bogus predictions (on MSNBC etc) should come with the clear disclaimer:
“Please don’t try this at home. It is dangerous for your financial health”
Unfortunately doom and gloom sells and many think because it is on TV or other media streams it must have some truth.
Haha — They need a black box warning like the one on cigarette packs!
Mine was like Brian’s comment “buy as much house as you can afford because you’ll grow into the payments and house eventually.” (Former boss)
“Don’t worry about paying off your credit card balances now. You’re about to get a big paying job and you can pay those off then, no problem.” (Uncle)
“You guys are looking for a new car? Are you getting a BMW, you can afford that, or maybe a Mercedes? It’s a good investment for luxury cars, less maintenance and more reliable…” (Same uncle…)
The big thing is when you figure out for yourself what money is for — to you. Then if you want a cleaning service because it helps you out go for it, or other things like that. I’m all for saving and reaching FIRE but there has to be a balance, at least for me, before burn out gets reached and the plan fails spectacularly. 😄
Can I go punch that boss for you? ;-) Translation: “I really want to golden handcuff you to this job, so I’m giving you advice that will trap you here.” And re: the credit card debt, WHO SAYS THAT?! Credit card debt is the worst thing there is. It doesn’t surprise me that the same guy told you to buy a luxury, maintenance-free (HAHAHAHAHAAHA!!!!) car. (Which, by the way, why are more expensive cars worse on maintenance? Our el cheapo Honda Civic, now 12+ years old, has been by far the cheapest thing ever to maintain, but people we know with BMWs and Audis are always putting them in the shop. Come on engineers, figure this out!)
I was thinking of you guys and the cleaning service when writing this! That’s what the fluff-and-fold was for us for years. We just didn’t have time to go to the laundromat, and it was SO NICE to have our clothes all folded and packaged for us, and it wasn’t that much money overall. But it’s still worth questioning the philosophy: don’t just get a maid because the Joneses have one, for example. Get one if it makes sense for your own situation, like in your case keeping you from burning out before you reach your goals!
Oh man, this is an easy one – home ownership! I’ve read countless times that mortgage debt is “good debt” and that home ownership is the American Dream, it builds equity, it strengthens your credit and some such absolute nonsense. Unfortunately, I believed that advice and bought a home, just like my wife did, and proceeded to lose a TON of money in the process. We are just now crawling out from underneath our respective piles of depreciation. Unless we buy our next property outright, I don’t think we’ll ever buy another home again if it means a mortgage.
You guys definitely had some spectacularly bad timing, which bums me out for you — but then you’re so close to being completely done with mortgage debt, which is incredibly awesome. (You didn’t close yet on your old house, right? But soon?) We’ve all made our fair share of dumb moves financially, the things that teach us important lessons, and as far as those things go, at least you made the “smart dumb mistake.” ;-) And timing is everything — there are so many cases of people who do well with owning homes, but in the end it’s a crapshoot. Either way, I don’t blame you for wanting to be mortgage-free forever. We’re planning to keep owning, but I can’t WAIT to be mortgage free… it could even happen this year! ;-)
Being mortgage-free this year would be AWESOME for you guys. It definitely sounds like you’re properly motivated enough to make it happen, too, depending on how your compensation works out.
We did close on our Tucson home (the home that we directly moved from), but we haven’t yet closed on my home south of Tucson. We did accept an offer, though. Closing isn’t until the third week of June, unfortunately. But, that means once my 35th birthday comes around (in mid-July), we’ll be 100% mortgage and debt free. Looking forward to that feeling!
For us to be mortgage-free this year I’ll have to twist Mr. ONL’s arm a bit — and we’ll have to do very well at year end… but it’s possible! :-D
And that’s where I thought you were in the home sale process. What a way to celebrate a milestone birthday! Fingers crossed that everything goes smoothly in this second escrow and you close on time!!
Bad money advice? That it’s stupid to NOT to borrow money (i.e. leveraging) to buy stocks when the market is hot. Sorry but that’s not for me. :)
Oh, that’s the WORST advice! I know that some people are more comfortable with debt than we are, and think prepaying a mortgage is idiotic (they have a good case on paper, but what if something goes wrong in the plan? or the markets have negative returns?). But borrowing to invest is the craziest to me!
It really depends on what you’re comfortable with. I feel that so many people started leveraging without knowing the downside of it.
Hear, hear!
My uncle told me once that we’d never be able to buy a house unless we had a significant amount of credit card debt. Mr. T and I did our best to steer him right, but luckily for him, he passed away before his crazy money ideas became a problem. He didn’t have a cent when he died, but he managed to make it up to that point!
Wow, how sad is that to be lucky you died before you could get into serious money trouble?! But I have a relative like that, too. And, of course, good for you guys for not following that wackadoodle advice!!
Luckily we had small business owner fathers who actually owned houses and never had credit card debt!
So great. I’m pretty sure both of my parents STILL have credit card debt. :-( Nothing massive as far as I know but, like, come on!
My mom abused credit cards bad in college because she had no concept of how they worked. As a wedding present, my grandpa paid off her debt and told her to never do it again. I learned that lesson growing up.
What a great present. And even better that she learned her lesson instead of repeating her bad ways. How great for you to learn that lesson early on so you never made that mistake like I did! :-D
That was the only lesson about money mom taught us, but she was scary about it!
I bet!
The worst advice we ever got was from my parents when they told us that a 30-year mortgage was the only way to go. They believed that if you took the 30-year note, then you could invest the difference. But our investment calculations proved this to be incorrect. Thankfully we move on from this bad advice and was able to refinance our mortgage to a 15-year at an ultra low rate, thus saving us thousands of dollars in interest.
That’s one of those bits of advice that *could* be smart under a very specific set of market conditions, and assuming that debt doesn’t weigh on you. But we’re with you! Hooray for 15-year mortgages, the lowest rates and the quickest payoff! High five for going your own way. :-)
Words of wisdom from my mother and older cousins when I got to college, “Just take out the max student loans, you’ll pay it back.”
Glad I did not max on my loans and even then, paying it back was such a burden and I’m so glad they’re gone :)
OMG — I feel a little nauseous hearing that advice! To give that kind of advice to someone so young is just crazy. Good for you for not listening! Same here — I had barely any loans comparatively (like $10K) but those things still weighed on me, and a huge weight was lifted when I paid them off!
Worst money advice I’ve ever received: my bank told me to close my savings account and only use a chequings account. And guess what? I listened! Stupid 17 year old me.
Bad banker! Giving bad advice to a KID! Can I go give them a piece of my mind? ;-) I’m sure that mistake in the scheme of things is not a big deal, but how irresponsible of them to steer you that way. Shouldn’t a bank WANT you to save more of your money, so they can lend it out? That just seems like dumb advice all the way around.
I know right?! I still to this day do not understand why they told me to do this. But, the past is the past for a reason.
Amen to that. Here’s to smarter decisions in the present and future! :-)
I second all the comments about houses. My post today lists how much I’ve spent on my house in the last 15 years :)
There was one friend from high school who went to a college in the same city as me so we’d hang out often and that included shopping. She’d always try to convince me that it was ok to spend more than you make “because you’ll be earning more in future years.” We drifted apart a few years later and I’m sure that saved me a lot of money…..
That’s a different kind of toxic relationship, isn’t it! I’ve had friends like that over the years, too, and I am pretty glad to have grown apart. Like you said, doing so has saved a lot of money! But, I never had anyone outright say to me that it’s okay to spend more than you earn — I hope that former friend of yours discovered the error of her ways, or she must be in some financial pain by now!
You touched on an interesting dichotomy in this post that fascinates me. In the early retirement world, it is encouraged to in source everything. In the career driven world, it is encouraged to out source everything. In reality, some balance between those two is more logical, but it is something I think about a lot.
For example, ER would say we shouldn’t hire a house cleaner because we are perfectly capable of cleaning it ourselves, but CD would say to do it so we have more time to work. I find the benefit of it is that it’s far easier to stay on top of the laundry and go to the gym AND the cleaners are way better at cleaning than we ever were. There’s the debate of home cooking vs eating out and bringing your lunch vs buying it at work, which are also interesting dichotomies. I go back and forth about bringing my lunch to work – sometimes the small cost for the sanity saved of not having to spend the brain time organizing it is amazing.
As for bad advice I’ve gotten over the years: 1) buy a bigger house because they appreciate more (clearly market dependent, but also more expensive!)
2) don’t worry about saving for retirement in your twenties (my parents didn’t save much until their thirties and they turned out fine, but look – I’m done saving for 60+ retirement after doing so for 10 years in my twenties/teens)
3) housing always goes up, so buy as soon as you can (they did say though to be careful you can stay for a few years in case it doesn’t)
4) keep all stock your employer gives you because the worst thing that happens is you have to work longer (I actually have considered keeping some of it for the luck question once I have the mortgage paid off. And oh gosh I have many friends who have this investment strategy and sadly it has paid off handsomely for them.)
I’ve gotten good advice too, but it’s less amusing.
That dichotomy is so true! The other one is the weird contradiction that FIRE folks reject conventional wisdom, but then there’s basically this set of alternate CW in the FIRE space, but not always a mindset of just questioning generally. Example: outsourcing, bad! Liking nice things, bad! Buying your car new, bad! I’d love to find a more middle ground approach to both dichotomies — finding the middle ground on insourcing vs outsourcing, and acknowledging that few decisions are black-or-white good or bad, but mots are highly situationally dependent, and rely on your own assessment based on your situation.
As for that bad advice… that’s definitely not the worst advice we’ve seen here today, but not great either. At least I like that most of the bad advice you heard comes from a place of optimism! :-)
I’ve never thought about it this way but you’re so right about insourcing vs outsourcing.
I’m not at the income level where outsourcing really makes sense but I am now at the level (and own a home) where I’m thinking about getting a cleaner in maybe every few months to do a deep clean and that sounds/feels so extravagant. I’d love a regular cleaner but that’s a bigger expense I think and I’m okay with having a less clean house vs more money (at the moment I don’t have the time or inclination to do more housework than I already am).
I fully support the occasional professional deep clean. We are all so busy these days, and it’s such a good thing for your own mental health to be able to have your house cleaned. I say do it. :-)
The house cleaner is an interesting one because having a clean house is such a mental boost for me – it’s one of my highest priorities for keeping my sanity – and yet I refused to pay a house cleaner for years until I started grad school. What insourcing that looked like was me constantly being stressed about the house not being clean (somehow it became less clean with two people than with one…) and then never having time for any fun.
The question of whether to hire a house cleaner is such a tough one — we’ve struggled with this for years. We can clearly afford a cleaner, we don’t have time to do any real cleaning ourselves and yet we can’t bring ourselves to hire one, despite many good peptalks from Mr. SSC! :-) It just seems like we *should* be able to manage our own house, which is a bigger factor than the money, honestly. I think the periodic deep clean idea is pretty brilliant, though, and that might be what actually sways me to hire someone as long as we’re still working.
I’m totally on your side! I really felt like we should be able to manage it ourselves with the smallish size of our place. (But we weren’t.) There are some things they clean that I don’t really care about being done as often as they are, but others that I do, so a periodic deep clean probably isn’t a bad approach if you can keep the bathrooms clean!
We just need to bite the bullet and do it!
Surprisingly, no one has mentioned this one yet?: “Save 10% of your paycheck.”
Sure, saving something is better than nothing and certainly somewhere to start, but that is a dismally low savings rate. Once you get initiated into the PF world, you learn that the best are saving half of their paychecks or more!
Reading through some of this terrible advice in the comments, I’m glad for two things 1) My parents and family in general were good money role models, 2) the internet allows us now to Google the advice we get and weigh it against the opinions of industry experts (search “should I carry a balance on my credit card?” and you’ll see that the resounding answer is, thankfully, “No.”
So true! Saving 10% is nowhere near enough for any real financial goals, even if you’re not aiming to retire early. And you’re definitely right – the Internet has democratized information and made it a lot easier to get good info. But unfortunately, it also creates a lot of echo chambers and makes it easy to “verify” even a wacko opinion! ;-)
Here’s one I didn’t see – “You have to use a tax professional to get the biggest refund- especially since you have so many rental properties!” Well I did our taxes myself one year and still took them to a tax preparer (because I was freaked out I would have missed something.) $300 later – the preparer made some mistakes that I ended up having to fix! Doing my own taxes taught me so much! I learned what was mentioned in the previous comments – that the “mortgage tax deduction” didn’t even matter for me! Great post!
Ooh, that’s a good one! Yeah, we are totally in the camp of doing our own taxes and have found that tax pros make just as many mistakes as regular people, and cost you money whether or not they save you money. I think this one is driven by fear… So many people fear the IRS or their country tax authority that they feel they can’t tackle the return themselves.
Buy now, you are a professional. In 2008. As housing values were crashing. As I had no salary. I also had no inclination at the time to own any real estate because I find it stressful. I like calling the landlord to handle the problems in their purview.
Wow! Good for you for listening to your own inclinations instead!
Students in my first year of medical school were told by the upper-level students to take out the max amount of money that we could on loans (which was roughly three times the cost of tuition for one year). The unspoken second half of that advice was, “Because you’ll be able to pay it back someday.” HORRIBLE advice! Some of my friends ended up spending their extra loan money on things like vacations, home upgrades, and toys for their kids. Now all those purchases are racking up serious compound interest while we’re still in residency (and nowhere close to paying it all back).
Whoa, that is epically bad advice! The whole getting loans to spend on non-education related things idea is so crazy to me. Home renovations? Vacations? Like does that even pass the common sense test?
It IS crazy! But seeing those commas in your bank account from “your” money can be so enticing. And common sense isn’t so common.
I get it. And you’re working so hard… Some people probably feel that they deserve to have that money to spend.
Rent money is dead money / Buy a house. It is not always the case.
YOLO, have fun, don’t worry about the future! It is these people that need financial teachings the most.
Increase your income, don’t worry about the expenses. As lifestyle inflation eats up every extra dollar, therefore that person is always unhappy, and feels they need more to be happy.
Property prices always increase. No, they do not. Over the very long term assets may increase, but it’s not that simple.
Tristan
Yeah, lots of bad advice there, for all the reasons you said. Especially not questioning whether it always makes sense to buy a house, and that evil lifestyle inflation!
This isn’t especially bad ( I’m thankful to have good role models), but the worst I’ve gotten is to get rid of my perfectly functional 10 year old car. The reasoning being “I’ve got a good job and can afford it.” Just……. no. I’d rather max out my 401(k) than have a 2016 Subaru WRX STI!
Ha ha – I can definitely relate to that! When people know what I do, and then see me pull up in my 14-year-old Honda Civic, it’s a little bit funny. :-) But once they know our real plans, it might make more sense!
One piece of advice that I once got had to do with buying premium oil in souk while on holiday. I basically fell with my eyes wide open in a classic tourist scam…
I guess you need to have one of those to learn it the hard way!
Oh, tourist scams are the worst, because you feel like such a sucker afterward. Sorry that happened, but glad you learned from it. At least you have a great story!
My old boss gave me the day off work if I would go test drive Audis. I took the day and test drove a convertible but didn’t buy. He still suggesting an Audi knowing my commute was over 40 miles each way on 25. I’ve heard plenty of bad money advice haha.
Whoa — I think you win the worst advice award. :-) When your boss was pushing the Audi, did you counter back with, “And you’re going to give me a raise equal to the price of one?!” ;-)
Oh gosh, this one is probably to obvious to even mention, but all those messages about how education is priceless and “you’ll pay these loans off in no time one day” are ones I could have done without. Education is valuable, sure, but there are cheaper ways to learn, and I would not exactly describe my current debt payoff timeline as “in no time”.
Of all the reasons to go into debt, I think education is among the best. BUT that doesn’t mean you should go into massive debt blindly, and I think that message is not out there enough. I am not joking about this — I remember at my loan entrance interview, the opening line was something like “Congratulations! You’re making the smartest choice you can by investing in yourself!” On one hand, yes, but obviously there’s so much more to it. And yeah, the timeline is a whole other issue!
The worst advice that I consistently hear has to do with leverage in real estate. Back in 2008, my grandpa who was a lifelong real estate investor was only at about 35% leverage. Later that year, he was up to 85% due to the drop in prices. Not only that, but the cashflow went from super positive to just above zero because he lost so many tenants. Prices have recovered, but it could have been very easy to lose everything by being too leveraged. A lot of real estate investment websites that I read act like you’re being super clever by using leverage, but it’s a risky game.
I will say, I give myself a lot of latitude with paying my way out of problems. I’m very willing to hire someone to watch the kids, or to hire someone to help Rob with remodels even if I could conceive of ways to get those tasks done for free (like bartering).
I think paying your way out of problems CAN make total sense. But I’m sure you’ve been smart about it and weighed the cost-benefit!
And yes, totally agree re: leverage! A lot of folks even in our PF space are much more comfortable with debt than we are, and continue to take on more for real estate purchases — but as you said, what if prices go down and tenants move out? That is not risk we’re willing to take on, either!
Worst money advice I’ve received, hands down, has got to be the whole student loan is good debt thing. I have student loans and plenty of it and it sure as heck doesn’t feel too good right now.
Oh, for sure! I mean, if loans are your only option to go to college, then some level of debt is probably worth it. But not the way we advise young people to just take out tons of debt like it’s no big deal and there are no other options!
“Buy a starter house before you miss out.” No. We want a home and not just anything. We are expected to follow along the norm and buy a house we are not attracted to, in a suburb we do not like because it’s what ‘we’re supposed to do’. It makes me angry. Haha!
I know! It’s like the people who say that think that houses are going away, and this is your only chance to catch one. I’m pretty sure houses will be around for a while. :-) Good for you for resisting the dumb advice!
“Today is a good time to buy!” – says any real estate person in any market. To me I think the best time to buy is when you can afford a down payment. We’re conditioned to think that a low interest rate and what you can get preapproved for determines if it’s a good time for you to buy a house.
It just bugs me that people feel pressured into buying a house so they can feel successful. As a homeowner myself, I see plenty of negatives into owning and there are days when I’d like to trade my mortgage to pay a similar amount in rent.
It also bugs me when people say that renting is a waste of money because you’re not building equity. My mortgage is $1432 (which is great in CA) and the interest portion of that is in the $800’s still even after we’ve been paying it down when we can. A lot of people don’t realize that paying a huge amount of interest is kinda like throwing your money away too.
Oh, dude, we’re in the pit of homeowner negatives right now! ;-) We’ve had several times in the five years we’ve owned this house when it seems like everything is breaking at once, and we feel like we’re one step away from money pit. But then other days owning is great, and the fact that we’ll be mortgage-free in a year and a half or less is pretty awesome, too.
And YES, mortgage interest is absolutely throwing away money! And if you pay PMI. And all those closing costs! There is plenty of money to be thrown away no matter how you live. :-)
I greatly admire the way you rarely stoop into judgmental language (“nothing wrong with the ‘money is for making life easier’ philosophy…”). I don’t have quite the same restraint ;)
I’ll throw my favorite into the ring, from a high-income partner at my old firm, when I was making mid-five figures as an entry level consultant: “Don’t even think about saving any money at your age; you’ll be making so much in the future that whatever you save won’t matter anyway. Better to live it up!” Uh, sure.
Aw, thanks for that. I genuinely do believe that it’s fine to do whatever you want with your money, so long as you are doing it deliberately. I think most people’s money problems stem from just not really knowing what they’re spending on, or how quickly they could be saving, but seriously — if you have the money and you want a Ferrari, awesome. Or you want to pay people to do every little thing for you, great. We don’t happen to want those things (well, okay, I’m sure Mr. ONL wouldn’t turn down a free Ferrari), but money should be just another tool in the quest for self-actualization, whatever that looks like for each of us. ;-)
And holy crap, that’s terrible advice! I mean, I get where he/she was coming from, and encouraging young people to live it up rather than be nose-to-the-grindstone all the time. You’re only young once, and all that. But the not saving part? Crazy.