We are bombarded by both good and bad financial advice from friends, advisers, the news and family. But, in order to truly learn the right steps to financial success, we need to sift through the clutter. Avoid following these bits of terrible financial advice.
You are too young to worry about retirement.
When you start out in your 20s, you’re getting on your feet in the real world and trying to secure employment. Even though you are struggling to keep your finances afloat, this is a critical time to start saving for retirement. The earlier you start, the more money you will have since your interest will compound on its self for the decades until you retire. On the other hand, remember that it is never too late to start saving for retirement.
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Buying a house is a good investment.
Buying a house can be a good investment, but you have to go into the transaction assuming it might not be. The real estate market is notoriously volatile, so you have to consider your purchase as a long-haul investment because there are no guarantees where the market will be if you want to flip it in a year or two.
Buying a home can wreck havoc on your finances. You need a down payment of 20 percent of the asking price, but that’s only the beginning. Even if you can afford to buy the house you need to consider other costs, like insurance, property taxes and closing costs. Owning a home also brings added financial burdens like increased gas, water and electric charges, repairs and upkeep.
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You don’t have enough money to invest.
Investing can seem like an overwhelming process, but today’s technology means that everyone can get in the game. If you are in a good place with your debt and savings, you can budget money to invest. Look for an online broker who doesn’t require a minimum balance, make commission, or charge other fees.
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You can use your 401k before retirement.
You should try to think of your 401k as money that you can’t touch until retirement. You should never use they money to pay for something like a wedding or a vacation. A 401k is a powerful tool for retirement because of tax deferment that allows a larger principle to grow. If you withdraw early, you will pay income tax and a percentage penalty. You will also miss out on future years of compound growth. Keep in mind that the IRS does recognize certain circumstances as hardship withdrawals, like avoiding foreclosure or medical expenses.
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