It is quite common to seek advice about life or financial choices from friends or family. Not all the advice you receive can be great, some can affect you badly, it can also be the worst decision of your life. The top 10 worst money advice you’ll ever receive are,
1. Invest only after clearing debts
“Don’t save or invest until you are debt-free” – This is one of the worst and the most common advice you’ll receive. This makes sense only if you have high-interest rates on your existing debts but still, you can’t turn down the investment opportunities that would be highly helpful in the future.
Clearing high-interest debts are as important as an investment for the future. Revisit your monthly budget plan and check what can be compromised to fulfil the investment ideas.
2. Don’t save for retirement early
Retirement savings can be postponed or started late is the advice you must avoid.
Though there is no specific age for retirement it is always recommended to start retirement investment or savings early. To be more specific you need to start in your 20s itself. Because the 20s is the time where you’ll start earning and have fewer responsibilities where you can save at least 20% – 30% of the salary for retirement. The more you delay, the higher the responsibilities you’ll have like a house loan, car loan, kids education, etc. Starting early will not just make you save money but also have plenty of time to set your finances right for post-retirement.
3. Avoid Credit Cards
There is a big misconception that credit cards will land you in debt traps so it is recommended not to get a credit card ever in your life – This is completely false.
Credit cards are very important financial products that can be an asset when used rightly. The right usage of Credit cards can help in increasing credit score. Usually, banks are sceptical about offering unsecured loans to individuals with no credit score. In order to build a credit score, you can get a credit card and start using it wisely.
Credit cards also offer high rewards, cashback and several discounts on your purchases. This can help you save money on your regular purchases. But ensure you manage your credit card carefully and disciplined with the money and shopping habits. Also, if you are already in huge debts then getting a credit card can be a bad option for you.
4. Credit card is to buy things that you cannot afford
Some people get a credit card to buy expensive things that they cannot afford like starting a business or buying an expensive phone. There are other ways to fund your expenses but getting a credit card for it and closing it once the purpose is solved can have a bad impact on the credit score.
5. Foreclose Mortgage
Foreclosing the home mortgage and saving on monthly instalments is advice you might have got. But before even taking up this advice understand that mortgage loans come with long tenure, low-interest rates and while foreclosing it, you need to pay an early settlement fee. If the early settlement fee is high then you can use the money to settle any other high-interest debt or make a wise investment.
Usually, the early settlement fee is high when compared to the money you are going to save on a monthly interest rate on the mortgage. Hence it is better to let the mortgage continue and make wise use of the money.
6. Invest only in Gold
A well-known investment option everyone is aware of is the gold purchase. Investment in Gold in Dubai can be considered as one of the investment options that is, you can have it in your investment portfolio but investing only in Gold can be a bad decision. There are other investment options with a moderate risk profile that provides good returns than gold. Also, other investment options are not valued emotionally, unlike Gold which can be a bit difficult when you need to sell it.
7. Don’t save when you’re in your ’20s
People advise, the 20s are for fun and travel not for savings and investments. This notion needs to be changed. The 20s can be for fun but you can make sure you are not spending all your earnings on unnecessary expenses but also save for the future.
8. Avoid taking debts at all
Debts can be classified as bad debts and good debts. It is better to avoid bad debts that take more than half of your monthly earnings. But good debts like a home mortgage, education loan, can be considered by taking your financial situation into consideration.
9. Investments are only for rich people
There are no eligibility criteria for investments. Any individual can invest in any investment option according to their risk appetite. There are several investment options available according to the investment amount. People can start investing with just AED 3000 per month as well. Hence, investments are not confined to any specific class.
10. Emergency funds can be broken at anytime
It is important to know that emergency funds are restricted for emergency circumstances like job loss, medical treatments, etc. It cannot be used for other wants like to buy an expensive mobile, to redecorate your house or to go for a dream holiday. Hence, emergency funds cannot be broken anytime unless it is a serious emergency.
Read about: Importance of Emergency Fund in the UAE
Though the good thing about any bad financial decision is you learn from it but committing the mistake intentionally can worsen your financial situation. Money plays an important role in everyone’s life and making a poor decision without a second thought can land you in trouble. Therefore, take a financial decision only when you are sure of it or if it has been backed up by a financial expert.