Some of the most popular money advice is as unreliable as it is common. From social media drivel to well-intentioned counsel from industry professionals, money misinformation can come from anywhere.
Sometimes it's bad investment advice. Other times, it's misguided suggestions about saving, spending, borrowing or building credit. No matter the subject, all misleading money guidance has one thing in common -- it never helps the person on the receiving end.
GOBankingRates asked a variety of experts to share the unsound financial advice they would most like to see go away. Their answers span all topics and categories, but they come to the same conclusion -- a lot of what you've been hearing about managing your finances is wrong.
Carry a Balance To Improve Your Credit Score
You can improve your credit score by using credit cards responsibly, and the first rule of responsible credit card use is to pay your balance in full every month to avoid compounding finance charges. Some people, however, make the mistake of believing that you have to carry a revolving balance in order to reap the benefits -- which is exactly what you don't want to do.
"My boss proudly explained to me that she carries a credit card balance and pays interest on it in order to increase her credit score," said Martin Lassen, founder and CEO of GrammarHow. "She received this recommendation from her mortgage broker. It was suggested that she keep the balance between 40% and 50% of her credit limit. It's the worst financial advice I have ever received."
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You Have Plenty of Time To Worry About Retirement
Credit card debt is so troublesome because of the snowball effect of compound interest. When you're saving instead of spending, however, compounding works in your favor by converting small contributions into a big retirement nest egg -- but only if you give it time to work its magic.
"When I was young, one of my friends advised me to stop worrying about retirement," said James Crawford, co-founder of Deal Drop. "He said I would have plenty of time to think about it later."
It's hardly unusual. People often hear that they should put off retirement planning to invest in something more immediate like a business. That's bad advice that will force them to save much more as their timeline grows shorter.
"It takes a long time for your money to increase," said Crawford. "You'll need to save less money over time if you get started early."
Invest In Actively Managed Funds
Novice investors often hear that they should buy into mutual funds that are actively managed by people who know what they're doing. Sure, fund managers take a fee, but your money will be under the supervision of a professional who is likely to compensate for the expense by outperforming the market.
In reality, you could probably do as well or better for next to nothing with a cheap and simple ETF that mirrors the S&P, Dow or some other index.
"Choose low-cost index funds over actively managed funds," said Lassen. "Contrary to popular belief, very few actively managed funds outperform the market."
Put Your Full Faith in Your Financial Advisor
It's never a bad idea to consult with a trusted professional before making big financial decisions, but complacency is the enemy of good financial health -- don't listen to anyone who tells you to take what your advisor says as gospel.
"Relying solely on financial advisors is one of the worst things you can do when planning your finances," said Mike Walsh, CEO of Cloud My Biz. "I've seen a lot of people suffering from huge losses and bad finances just because they blindly trusted their financial advisors. You must have at least a basic knowledge of your finances, how they must be invested and the current trends."
Avoid All Debt at All Costs
You'd be wise to avoid any advice that lumps all debt together in the negative column. Some debt, of course, is toxic -- but you can also borrow to your strategic advantage.
"I believe that you should be as debt-free as possible, but we need to understand that not all debts are bad," said Dustin Ray, chief growth officer at Incfile. "If a debt's interest rate is less than the returns you're generating with that debt, you actually end up benefitting from that debt."
A lot of it comes down to what you do with the money you borrow.
"Avoid taking debt for buying stuff that depreciates over time," said Ray. "Instead, invest that debt to generate a good return like your business, stocks, real estate, etc., which will appreciate with time."
Making More Money Is the Only Way To Have More Money
Some people simply don't earn enough money to get by. For many others, however, no amount would ever be enough because of irresponsible investments, undisciplined spending and lifestyle creep. A recent Lending Club/PYMNTS study shows that more than one in three people who earn at least $250,000 a year live paycheck to paycheck.
"One of the most widespread fallacies is the idea that having more money would suddenly fix financial issues," said Zephyr Chan, founder of Better Tools.
If you're doing a poor job managing a little bit of money, you'll probably do an equally poor job of managing a lot.
"Your savings rate will determine your financial success, not your income," said Cecil Staton of Arch Financial Planning, LLC. "The higher your savings rate, the more likely you are to achieve higher levels of wealth relative to your income."
Rent Only Until You've Saved Enough To Buy
There's no shortage of people who leveraged homeownership to create wealth and security, but contrary to popular belief, buying a house doesn't always make financial sense.
"Homeownership is much more expensive than people think," said Rei Shen, a personal finance expert and the founder of Success in Depth. "Property taxes, repair costs, maintenance -- these hidden costs can add up over time. So don't be in a hurry to purchase a home. Compare the financial benefits between renting and homeownership to make the right financial move."
Shoot For a Six-Month Emergency Fund
Before the pandemic, most financial pros recommended saving three months' worth of expenses in case of emergency, but the virus' endless pain made that feel insufficient. Since 2020, many advisors have been telling their clients to save twice that amount -- but many others disagree.
"That's too much money to let sit in an account that earns your pennies," said Melanie Musson, a finance expert with Clearsurance. "Instead, aim for three months' living expenses in your savings account, and put additional savings into accounts you can access within two or three months to earn better interest. An emergency fund is crucial for hard times, but three months will give you time to access other funds."
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This article originally appeared on GOBankingRates.com: The Worst Money Advice That Keeps Going Around, According to Experts