Financial Advice you Shouldn't Take
A few dumb ideas I've seen:
A House is a Liability
The next time the CPAs I work with need a good laugh, I should bring this up. Houses are assets (they can be sold for cash), mortgages are liabilities, and repairs and maintenance are expenses. These are important differences if you're trying to put together some personal financial statements to see how you're doing.
How to Succeed without Really Trying
No, this can actually make you poor. A coworker and I figured what this advice would cost us--to eat out, hire a cleaning service, hire someone to mow the lawn, and hire out every little repair on the house. I came up with $13,000; she came up with $17,000. That's just for one person for one year.
The long-term cost of fluffing off your chores: let's assume $15,000 per year to start. Invested in the stock market at 8% per year, that adds up to $1.76 million in 30 years. Even if you're spending your time reading, meditating, and writing a novel instead of watching sports or fiddling with your phone like the hoi polloi (99% of the population), that's a shitload of money to pass up. Maybe this works out financially if you have an income like a fire hose; most of us are better off tending to our own cooking, cleaning and basic repairs.
More nonsense on in the same vein:
IRL, if a couple saves $3 per weekday 50 weeks per year at 1.5% interest, that adds up to $7,782 in five years, enough to make a 5% down payment on a three-bedroom house in a large but non-trendy city in the South or Midwest.
Retire Early
Most of us thrive on challenges, purpose, feeling useful, and having human connection. Given that, early retirement sounds like a recipe for boredom and unhappiness if you have nothing productive lined up, particularly when "early" means "prime of your life." Google suggests I'm onto something:
Then there's the risk of needing a job after being out of the workforce for several years. I've known employers who wouldn't hire people who hadn't worked in the last six months. And while nobody thinks they'll get old and develop health problems, it happens, even to people who seem to be made of iron (my dad) or take care of themselves (me). I'm glad I had second jobs in my 20s, because I don't think I could do it now.
Don't Knock Over any Sacred Cows!
Of course, nobody comes out and says this, they just ignore elephants in the room. One piece of financial advice I almost never see is limit your family size. For instance, saving money on paper towels is fine, but when you're having one child after another when your car is falling apart (literally!), you're ignoring the elephant in the room. I'm referring to a YouTuber who isn't a big guru, but seems like a decent person and mom of four who hasn't had the epiphany that children are an expensive luxury. When you listen to evangelical Christians like Dave Ramsey, the advice you hear is going to be mixed with a big dose of ideology. And they're never, ever going to admit that having a big family or tithing to a church is ideology that's good for your church, not smart money management that's good for you.
People used to say, "Charity begins at home." Well, not everybody. Some of my relatives were hardworking people with good jobs but always seemed to be broke. They were Mormons, and it turns out that the Mormon church wants their members to tithe up to 30% of their income. That's another bit of financial advice I never see (except from Bob over at Living Stingy): find cheaper salvation. Hey, Jesus wasn't a Mormon, didn't have any kids, never got married, lived an unconventional life, and still got to heaven. Why can't the rest of us? And don't our tax dollars count as giving to the poor?
It's the same for more secular people, as shown in the Stanfordmag article above. Moving to a an inexpensive, non-trendy city, leaving a job at a nonprofit to make more money elsewhere, and even brewing your own coffee are apparently nonstarters for a bunch of Millennials spinning their wheels. I hate to pile onto Millennials--they're a lovely group of people--but it seldom occurs to a lot of them to wonder why their life needs to look like something from Instagram.
The best financial advice I've read came from investor Joel Greenblatt:
- Don't trust anybody over 30.
- Don't trust anybody 30 or under. Get it?
His point was to do your own homework. Does the advice make sense? Is the advice good for you? Does it sound too good to be true? There's no substitute for answering these questions.
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