It’s a rare person who doesn’t want to be rich, so you’ve got plenty of friends if you’re trying to turn your pennies into millions. The bad news is that there’s a ridiculous amount of horrible money and finance advice floating around that could devastate your accounts.
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Here are some of the worst money mantras people commonly follow, along with their fixes.
1) Buy Lots Of Different Stocks And Then Keep A Close Eye On Their Performance, Selling When The Price Is High
There is sense in the idea of having what financial professionals iterm a “diversified portfolio,” the rationale being that if one investment fails, you won’t lose everything and can fall back on the others. But as guru Warren Buffet notes, no one really can determine what the stock market will do a day, week, month or year out. Subsequently, it’s better to treat your stocks like businesses, focusing on just a few and analyzing their long-term productivity potential rather than worrying about what the price might be in the future.
2) Save From Whatever You Have Left After Covering Your Bills
Income and emergency expenses are not always predictable, so discretionary income is not always predictable, either. You also might give in to impulse buying and, therefore, have a varying amount left each month. Instead of saving from your leftovers, treat saving like one of your bills you must pay. Make it part of your regular budget, setting a designated, unchanging amount aside for it just as you do for rent or food. Otherwise, you’re more likely to let saving slide, and you won’t be able to tell when you’ll reach your savings goals.
3) Put Away 10 Percent Of Your Income Away For Your Retirement
People’s situations are vastly varied when it comes to income, pensions, Social Security earnings or other elements like their desired standard of living and the number of years they have until retirement. Subsequently, 10 percent might be more than enough for some individuals and woefully inadequate for others. Look at your individual circumstances and preferences and then save a percentage based on that without comparing yourself to anyone else.
4) Set Up Automatic Withdrawals So You Don’t Get Hit With Late Fees
Automatic withdrawals are helpful when you’ve got a lot of bills to remember, but if you don’t have enough money in the account they’re paid with, you still can get hit with overdraft fees on that account. They also can make you lazy about checking your statements for accuracy and monitoring your providers’ activity. Instead of automatic withdrawals, set up automatic reminders on your laptop or smartphone. Pay the bills only after you’ve manually checked that all is well with your transactions and balances. If you must use automatic withdrawals, set up an alert with your bank so you know when your account balance dips too low.
5) Put All Your Extra Money Toward Paying Down Your Credit Card Debt
It’s not wise to put every penny toward paying down credit card debt, because if an emergency hits, you’ll have nothing to cover it except another charge. Review some of the unexpected expenses you’ve incurred over the past year or, better yet, five years. Then ballpark how big your emergency fund needs to be from that. This approach might mean that you’re left paying minimum payments on your cards, but try to pay more than the minimum if you can, as you want to avoid unnecessary interest payments.
6) Avoid Debt–It’s Always Bad!
Yes, debt usually means you pay interest. But debt sometimes can provide a foundation for future financial security, even with interest considered. For example, a car loan can mean you’ve got a reliable way to get to work and, subsequently, that you can earn the income you need to pay all your other bills, including other debts. Go ahead and take on reasonable debt as long as you’ve researched your risks and have good reason to believe the debt eventually will translate to reliable income later.
7) Have Joint Accounts With Your Spouse. It Will Simplify Handling Your Money
Everyone wants to believe their romantic relationships will last forever, but statistically, the odds are pretty good that you might split from your partner. If such a breakup happens, it can wreak havoc on your financial standing. Have a joint account you and your partner both contribute to equally, but create separate accounts, too.
Although there’s no singular way to become financially secure, some of the advice available about money is flat out atrocious. By abandoning these common recommendations, you’ll likely put yourself in a much better position for reaching your money goals.