Just a quick Google search and you can have access to some of the best financial information. Stop into the credit union and we have financial counselors who can walk you through the best options for your finances. But what about the not-so-great financial mistakes? As a credit union professional, I have heard some pretty bad advice in my tenure and I am going to share some. I have also surveyed the staff at Rocky Mountain Credit Union to hear about the worst advice they have received.
1. Using the tax write off incentive as a reason to buy a home.
A tax write off should not be a reason to buy a home. There are so many other good reasons to purchase a home. The equity you will gain in the home alone makes it a benefit. However, many people see the extra tax benefits as a plus side to owning a home, which is true, but don’t put yourself in a financially shaky place just for a tax benefit.
*As always, RMCU recommends speaking to a tax professional about all tax matters.
2. Using equity in your home to play the stock market.
If you are thinking of taking cash out of your home’s value to invest in the stock market, don’t. While it is probably not as common today as it was prior to 2007, some people still see their homes as a cash cow. The stock market is never a guarantee, as we may remember from the housing market crash. Your home is an asset, but not something you should use to gamble on the stock market.
3. If you give up your coffee habit, you can be a millionaire.
This is a popular thought process today. You can cut that coffee habit and BAM, you will have an influx of cash. Not necessarily true. While yes, you can cut back on your latte habit and save a few bucks, it is not going to happen overnight. It will take diligent savings habits on your part and not everyone is able to save.
4. Keep a balance on your credit card.
I am not sure why anyone would think this is good information, but credit card balances are always a hot topic in the financial world. Most financial experts say you should keep you balance below 20 to 30 percent of your available balance and this is where it can get confusing. Yes, if you must keep a balance on your credit card, keep it low. Otherwise, pay it off in full every month. Check out this article from NerdWallet for more “expert” advice on conventional credit card myths.
5. There is no such thing as too much credit.
Yes, there is such a thing as too much credit, even if you don’t use most of the lines you have available. Most major retailers offer a credit card of some kind these days and having a store card for all your favorites could have a negative effect on your score. According to USA Today, store cards charge on average 23.8 percent interest versus the average interest of normal cards of about 15 percent. If you carry a balance on these cards, you can gain interest quickly and your balance will rise. If you just love that one store card, try paying off the balance each time it is used. No interest will be assessed and your balance will remain manageable.
6. You don’t need insurance on your loans.
This information comes from a loan officer at the credit union. Every once and awhile someone will just be floored to know there are insurance products available for most loans. For example, GAP Insurance on a vehicle is an important one to have on your vehicle loans. Edunds.com, explains that when you purchase a vehicle without making a significant down payment, GAP is there to protect you when your full coverage insurance falls short of your total loan balance. When you finance a new vehicle, your loan amount is usually more than the total amount your insurance company will give you if something happens to the vehicle. GAP insurance covers the difference. You can obtain GAP insurance from the dealership or the financial institution you use for financing.
7. Go ahead, co-sign on a loan for your cousin (or insert family member, friend, co-worker).
When a loved one approaches you to co-sign a loan, most people consider it and even see it as a low-risk way to help. You are just as responsible for the loan as your loved one. If he or she does not make the payments, you must, and if you can’t your credit will suffer. Jean Chatzky tells us there is a usually a reason the person needs a co-signer and it is because the lender does not have faith he or she will pay the debt back.
8. I have a free shipping coupon and a 20% off code, I should get it because of the great deal.
Another great tip from our friend Jean Chatzy and her Money Rules book ; 50 percent off is still 50 percent on. Even though it is a great deal, do you really need it? If you are anything like me, you see a great deal and think, “how could I go wrong?” Well think of Black Friday and all the amazing sales. If you are using a credit card to shop, are you even saving money? Depending on the interest rate, probably not.
9. Only focus on the monthly payment.
This is a tool most auto dealers use when talking you into purchasing a new car. A monthly payment doesn’t seem too terrible, but what else is associated with the purchase? The overall cost, interest rate, any fees and other charges could be a factor when your overall loan comes together. Don’t fall for the monthly payment game, do your research.
So, there you have it. The nine worst pieces of financial advice we have heard. Have you heard some bad financial advice? We would love to know what kind of bad advice is being passed off as good advice!
If you're looking to change some of the bad financial advice you've accidentally taken check out our FREE Budget Worksheet!