Are you tired of hearing the same financial tips from every self-proclaimed financial expert on the internet?
Oh, me too!
It’s amazing how many articles I read on the web titled, “How I Made $XXX Last Month from My ABC Financial Blog.” Then when I read the posts, it’s the same financial tips the last blogger gave.
Seriously, how many times do we need to read another article on budgeting? I need another budgeting form or frugality post like I need another fight to settle between my kids.
I think Ramit Sethi captured the craziness of budgeting and frugality in this hilarious video.
Now let me back up a moment because I don’t think every financial blogger is a moron. There are a lot of awesome people, giving great advice.
Some of my favorite blogs on the internet include:
However, there are a lot of bad financial tips. That’s what we’ll discuss today.
6 Popular Financial Tips You Must Ignore if You Want to Get Rich
Cutting coupons is popular. It’s easy to do, and you may feel good that you saved 32 cents on canned salmon you will never eat.
The problem with clipping coupons is it is time-consuming.
Let’s face it; saving real money isn’t going to happen with one or two coupons. You are going to have to spend hours going through newspapers, searching online, and scouring through your mail.
If you want to save $100-$200 in a month, it’s going to take you seven to eight hours. Even then, you are probably going to go home with a stockpile of products you’ll never eat and have to find places to store them.
You’ll go from being on Extreme Couponing to an episode of Hoarders in a matter of months.
Better Financial Tip: Instead of spending eight hours a month to save $150, figure out how you can earn $300 with that same amount of time. I know I regularly make over $50 an hour with Amazon FBA.
Skipping coffee may be one of my least favorite financial tips. Most “experts,” tell you to stop going out for coffee and save your $2.00 a day.
There are even calculations that show how if you stop spending $2.00 a day on your coffee, then you’ll become a millionaire.
This information is false. If you stop your $2.00 a day habit on coffee and invest that money, you would have $90,000 after 30 years (assuming an 8% return). You’ll also have one upset, un-caffeinated parent.
There are a few reasons I disagree with the famous “Latte Factor.”
- If you stop spending $2.00 on coffee, you probably won’t invest that money.
- It takes a tremendous amount of willpower to quit your coffee habit; making willpower harder in other areas of your life.
- You’ll lose productivity.
Better Financial Tip: If you feel guilty about spending $2.00 a day on coffee, try to tie your coffee into productivity. Schedule meetings at Starbucks or work from a coffee shop for an hour.
Your Credit Score Doesn’t Matter
Many popular financial experts are yelling at the top of their lungs that your credit score doesn’t matter.
Actually,…your credit score matters a lot; sometimes to the tune of tens of thousands of dollars.
Loans like your mortgage and car notes are determined based on your credit score. This means if you have a bad credit score then the interest rate on those big ticket items are higher. When you have higher interest rates, you will end up paying more money.
To learn more about your credit score here are a few articles I wrote detailing its importance:
Financial Tip: Your credit score does matter. If it’s low, fix it.
Investing Your Money in Mutual Funds
If you are investing your money in mutual funds, then I’ll congratulate you on planning for your future.
Now, I challenge you to learn how the fees work in mutual funds.
Although you may think you are doing the right thing, often you would be much better off investing in index funds.
The fees in mutual funds can cost as much as 3% per year, where the average index fund is typically less than a half percent.
$50,000 invested in a mutual fund with 3.00% in expenses and fees and an 8% return will cost you $287,000 over 30 years! This amount of money could be 4-6 years worth of retirement income.
Even the ultra wealthy believe index funds are the superior choice. Warren Buffett said, “Most investors, both institutional and individual, will find the best way to own common stocks is through an index fund that charges minimal fees.”
You can get rich with mutual funds; it will just take a lot longer.
Better Financial Tip: Invest in index funds.
Follow Your Passion
I’ll probably get some heat for this, but not everyone can just follow their passion and expect wealth. Following your passion is some of the worst advice I’ve heard.
It’s especially dangerous for parents with families to follow this advice.
If we are honest, then we know your passion isn’t good enough. Have you seen American Idol?
On that show, there are a lot of people passionate about music, but their voice is similar to nails on a chalkboard.
To be successful, you need to be good at something, enjoy it, and be passionate about it. Then you will have a higher chance of success.
Better Financial Tip: Discover what you are good at doing, enjoy doing it, and are passionate about doing it.
Don’t Take Any Risk
Many people are risk adverse, but telling people to avoid risk is a middle-class life sentence.
I’m not recommending you take your savings account, fly to Vegas, and bet everything on black because you should bet on red. Just kidding.
You do need to take some risk in your life to achieve more success. As Andre Malraux said, “Often the difference between a successful person and a failure is not one has better abilities or ideas, but the courage that one has to bet on one’s ideas, to take a calculated risk – and to act.”
Here are a few places to start taking more risk:
- Invest in stock index funds
- Start a side business with your money
- Spend some money buying books
- Invest in an online course
- Apply for a job you aren’t qualified for
Better Financial Tip: Take calculated risks.
You have probably heard the financial tips above often if you have read any financial blog. However, you would be better off and wealthier if you took the road less traveled and followed the better financial tips in this post.