When it comes to financial or money advice, it seems like everyone has an opinion – some of it can be great and definitely worth looking into, and some of it, well, it’s just really, really bad and should be avoided.
If your resolution for 2021 is to save more money or get your finances in order, here are a few pieces of BAD advice you should steer clear of.
- Keep all your money in cash or a checking account for easy access. There are much better places to keep your money than under a mattress or in a checking account that doesn’t earn you any interest. Let your money help earn you money. While interest rates are currently low, they won’t stay that way forever. Putting your money into a Savings account, Money Market account, or even a Certificate of Deposit account to help you earn a little extra. There’s no work involved on your part other than opening the account, so this is a no brainer to help make your money work for you.
- You don’t have enough money to invest in the stock market. Yes, the stock market certainly can appear scary. Stock prices shoot up and down like a roller coaster ride, and no one knows if and when we will see another crash. Some of the best returns on investments have been made when people bought stocks at really low prices during tumultuous times. You don’t need to invest thousands or even hundreds, but if you’ve been curious about trying your hand at stocks, do some research, pick one or two that interest you and buy a few shares. Mutual funds are a great way to have a small piece in a bigger “stock pie”. Who knows, you may be buying stock in the next Amazon.com.
- You shouldn’t bother requoting your home or auto insurance each year. This is just horrible advice, especially if you’ve had a spike in your insurance premiums. Not having your insurance requoted each year could end up costing you hundreds of dollars. While some programs do offer loyalty programs, you may find that switching to a different carrier is still a better deal. Of course, you want to talk to a licensed agent to make sure you are comparing apples to apples and have the appropriate amount of coverage.
- You don’t need life insurance; it’s too expensive or I have plenty of money in the bank. Like most insurance, it’s an expense when you don’t need it, but it can be life saving when you do. Have you thought about how your family would manage without your income after you’re gone? How will they pay the bills? Send the kids through school? Whether you have hundreds of thousands of dollars in the bank or only a few hundred dollars, having life insurance is a great way to make sure your family will be all set once you are gone. There are different types and at different costs, so speak to a life insurance agent who can best assist your needs.
- Pay off all your debt before you build your savings. In theory, this sounds like good advice. Pay down all the debt that’s costing you money in interest as fast as you can. The problem with this approach is that every time you have an emergency or unexpected expense, you’ll put yourself right back into debt by having to use credit cards, take out a loan, etc. No matter how much debt you’ve managed to pay off, if you don’t have a savings account with money for emergencies, then you’ll end up right back where you started. To get out and stay out of the debt trap, you have to also prioritize saving while you pay down debt.
These are just a few of many bad pieces of advice that people believe to be true, but that doesn’t mean that all financial advice given to you by your friends or family is bad. There are certainly many knowledgeable people out there who are happy to share their tips and tricks with you, but you should always do your research and make sure that it’s the best advice for your personal situation as well. If you have questions about a bank service or offering, we are always happy to explain how they work and may benefit you, otherwise, please consult a financial advisor who can provide you more detailed advice.
Branch Manager – Torrington