9 Financial Tips That Sound Like Good Advice, but Really Aren’t
The internet is full of advice on how to become rich, save money for a large purchase, or at least stick to a budget to make it ’till payday. However, most of these tips don’t work in real life and some of them are actually harmful.
Bright Side tried on the role of a financial advisor and did some research on how to live on a budget. Now we’re ready to tell you which internet tips are the most harmful. And it’s all meant to help you manage your money effectively.
9. Sell your car before it’s too old.
Why this doesn’t work: You should only get rid of an old car only if you have to spend more on its maintenance than you’d spend on buying a new one (even if you’d have to take out a loan). Specialists claim that this should happen only after many years of constant exploitation. It’s impossible to tell the exact number of years since it greatly depends on the car model and maintenance conditions (some cars work pretty well even at an “old” age).
8. Avoid credit cards.
Why this doesn’t work: If you don’t indulge in the temptation to blow your money on a sudden desire and spend it wisely (to pay off tuition, buy household appliances, or save up for emergency situations), a credit card can become a real lifesaver. Besides, regular payments will help you built a good credit history.
Banks usually offer profitable bonus programs and discounts for credit card holders. When you use a credit card, stick to one main rule: pay off the debt in full, not just the minimum balance.
7. Buy things in advance and use discounts and coupon codes.
Why this doesn’t work: An American study showed that most families who buy products in bulk tend to buy things they don’t really need. It’s an attempt to save money in advance: people buy now so they don’t have to buy later. It’s even worse with discount deals (for example, take 3 and pay for 2). Marketers know that customers actually prefer getting something for free rather than paying a lower price for the products. They use this psychological rule since you usually pay a full price for discounted goods. Besides, the quality of these goods often leaves a lot to be desired.
6. Invest money for high returns.
Why this doesn’t work: If financial gurus from an advertisement promise a high return on an investment, they’re likely using a fraudulent Ponzi scheme. This scheme is based on creating a financial bubble: investors get income from new investments and not from the revenue of an organization. Sooner or later (usually sooner) these bubbles burst leaving people looking for easy money with nothing to back it up.
Bitcoin investments are also useless: only dealers can benefit from them. This cryptocurrency is so unstable that it’s impossible to predict anything. Remember, if someone promises you’ll get easy money, asks you to bring your friends to the business, or claims that you should only invest a small amount to get millions, it’s likely to be a fraud.
5. Invest in real estate.
Why this doesn’t work: If you can’t decide if it’s better to make a deposit into a bank or spend money on a down payment for a mortgage, it’s better to choose the first option. You’ll have to invest more in property anyway: think about redecoration, interaction with a lessee (if you’re going to rent it out), paying taxes, and making utility payments.
Dreams about having your own place to live can turn into a nightmare if you take on a mortgage you can’t really pay off. The situation may differ in different regions so it’s better to analyze the real estate market and financial projections first.
4. You’re obligated to buy life and health insurance when taking out a loan.
Why this doesn’t work: When you make a large purchase on credit, a credit manager has to offer you life and health insurance. The idea is that if you can’t pay off the debt, the insurance will cover it. However, it’ll significantly increase the amount of the loan.
In most cases, you aren’t legally bound to buy insurance to take a loan. But you should evaluate your personal circumstances and possible risks of unemployment and sickness to make a final decision.
3. Borrow money from your friends and family so you don’t have to pay interest to the bank.
Why this doesn’t work: If you’re in a difficult financial situation, it’s natural to want to ask your friends and family for support. However, financial problems and debts often lead to the worsening of the relationships and misunderstandings. Besides, people who lent you money will subconsciously try to control your expenses and wait for you to pay them back.
2. Attend several business seminars.
Why this doesn’t work: Business seminars dedicated to personal growth and enrichment attract people with big promises and mottos including loud words like “inspirational” or “breakthrough.” Experts compare these events with cult or multi-level marketing meetings. The only person who benefits from these seminars is the coach.
It’s better to check the reputation of a business coach before you start trusting them and following their recommendations. You can read reviews and find out more about their real achievements by doing a little bit of research. These coaches often post photos of themselves on a white yacht, wearing expensive watches, but in real life they’re just ordinary people. Remember, if a coach promises you easy money for a part-time job and a small investment, it’s likely to be a fraud.
1. Do everything yourself to save money.
Why this doesn’t work: There are some things you can easily do yourself. If you have enough patience, the final result of your work will be just fine. Well, almost... However, very few people, who are cutting down on expenses by cutting professional help, really estimate the cost of their own time.
If you count how much time you’ll spend performing an unusual task and estimate how many useful things you could’ve done instead, the difference in the price isn’t actually that dramatic. The conclusion is that you should trust professionals. This way you’ll save both time and money.
What financial advice irritates you the most?