Whether you’re just starting to live in the adult world and are feeling overwhelmed about all of the responsibilities you now have, or you’re someone who’s been living in this grown-up world for some time now, everyone has one thing in common. We all have to manage our finances the best way we can, and a lot of how we manage them comes from the advice we get from people around us. However, not all advice is good.
“There are as many forms of advice as there are colors of the rainbow. Remember that good advice can come from bad people and bad advice from good people. The important thing about advice is that it is simply that. Advice.” — Al Franken
Here is a list of the pieces of advice you should ignore when it comes to your finances.
When someone is trying to get you to invest in a speculative venture
You should always be cautious when it comes to people who are trying to get you to invest in a new start-up company or a speculative venture. Most of the time it’s practically impossible to know if the thing you’re investing into will actually be profitable and you could end up losing all of your money.
Sometimes, you could even be sucked into a Ponzi scheme, which is a special kind of fraud where one person or a group of schemers get other people to invest in their ideas, promising to double their investments in a short period. When the scheme gets enough investors, the system will crash, and the schemers will get away with all of your money. Therefore, be leery of anyone who is offering a get rich quick trick. More often than not, it’s a scam.
Any type of stock tip
The so called “hot stock tips” are always circulating. Even though the person who is giving it to you probably has your best interests at heart, there is no way to predict if the stock you are planning to invest in will go up or down. The stock market itself can be a great way to make money if you know how it works, but it takes time and effort to do so. Even then, you never know what tomorrow will bring.
Investing advice that requires borrowing money
Never borrow someone else’s money to invest in anything. You may be thinking what you’re investing in is a sure thing and that when you get the money, you will pay off your loan and simply pocket the difference. However, if your great business idea doesn’t come through, you’ll just remain in debt and all for nothing. Therefore, if you already want to invest in something, invest your own money; don’t borrow it.
Advice from unsuccessful people
Many people who are unsuccessful themselves are always looking for ways to get rich without putting in a lot of work. Therefore, when you’re taking financial advice make sure that the person from whom it’s coming can be trusted when it comes to finances.
People who suggest that you should go into debt
Banks lure people in with low-interest rates, and some take that not as an opportunity to save, but as a license to spend more. However, that money the bank gives you has to be paid back, plus interest. And those contacts you sign come with large penalties if you don’t manage to pay the debt back in time.
Advice from financial advisors who aren’t fiduciaries
The scary thing is that a lot of people today can call themselves financial advisors when in fact they aren’t even qualified enough. Many complex rules determine who can have that status. Quite recently, some people have been victims of investment salesman who technically are financial advisors and can’t quite help you. If you’re hiring an advisor, make sure you hire a fiduciary.
Obviously biased advice
Listening to personal experience from people who had invested and profited from their own advice sounds logical, but on the other hand, what worked for someone may not work for you. If a person you knew made a lot of money buying a new house, fixing it up, and selling it at a much higher price than what they’ve invested, that’s great for them. Nonetheless, you can’t be sure that you will have the same luck.
Advice that sounds too good to be true
Every successful investor will tell you that the process of actually making money through investing is a long process, so don’t forget that there are no shortcuts to building wealth.