On the internet, you can find all kinds of conflicting financial advice. Not only are there a gazillion ways to get out of debt, but there are opposing strategies when it comes to investing, saving for college, paying off your house, and more.
Some bloggers and financial personalities share their advice as if it were the gospel. For these “experts,” it’s their way or the highway. If you don’t follow their advice, you’re simply doing it wrong.
Unfortunately, not all financial advice on the web works for everyone. If I had listened to Dave Ramsey’s advice on debt, for example, I’d still be schlepping away in an office, working every day to pay off junk I couldn’t afford in the first place. Instead, I’m debt-free (except the house), working for myself, and traveling the world every chance I get.
Some rules are worth breaking, folks. And the rules I’m about to share are some of my faves…..
Hold Low-Interest Mortgage Forever
Want to know who believes in keeping a mortgage forever? Somebody who wants to make a commission, that’s who. “Pay it off slowly,” they say. “You can make more by investing,” they tell you. Sure, but what happens when you don’t?
Standard sales talk convinces you that carrying a mortgage is normal. Heck, everybody is doing it! Oh, and when you’ve “outgrown” your current house, just trade that old mortgage in for a shiny new one. That way, you can never really own anything… but at least you’ll be keep paying interest, pumping money into the market, and paying out nice commissions. (BTW, you can create an account to use this free calculator and learn what your investments are really costing you!)
You see, paying off your mortgage doesn’t benefit anybody but YOU. Banks make less in interest. Salesmen make less in their commission checks. But you – you get the benefit of having your house paid off. You get a roof over your head without thousands of dollars in monthly payments attached. That’s a monthly raise of 4 figures, and you get to decide how to spend it! Just think of the awesome vacations you could take with that much cash.
And, guess what; It’s not all or nothing. You can save for retirement and pay your mortgage off quickly… but you won’t hear that from somebody who wants to sell you something. Instead, they’ll try to sell you a shit sandwich and make you believe it’s a steak burger. I’m not buying it, and neither should you.
Some Debt is Good Debt
This money rule is a doozy: Some debt is good debt. That’s like saying some car wrecks are good car wrecks. Yeah….no.
Debt is debt is debt is debt... and it’s all bad. Like anything else, there are varying degrees of bad. Breaking your foot isn’t as bad as cutting off a leg, but don’t fool yourself. It’s still bad, right? The same goes for debt. Taking out a loan for college isn’t as bad as piling up $40,000 in credit card debt – but it’s still not great. The end result is the same. Whether it’s $40,000 in credit card debt or $40,000 in student loans, you still owe $40,000 to somebody else, and that limits your options.
When we began to understand this concept, we reached a big turning point in our financial lives. Once we stopped rationalizing our debt, we finally saw it all for what it was – a giant ball and chain holding us back from living the life of our dreams. Now that we’ve paid off everything but the house, we have so many more options. Instead of making those monthly car payments, we can save the money and use it for travel, retirement, or anything else we want or need. That freedom is something that debt will never allow you to feel.
Use 0% Offers When Possible
Using zero-percent offers may seem like a good idea. I mean, why not use somebody else’s money without paying interest? You get what you want and don’t have to pay extra for the privilege. Sounds like a win-win, right?
I used to fall into this trap all the time. I’d binge watch some HGTV and decide it was time to knock out a wall, upgrade the floors, and replace my kitchen countertops. So, I’d head over to Home Depot, plop it on my store card at 0% interest for a year, and head on my merry way.
Unfortunately, it was too easy. Because the purchase came without pain, I’d end up spending waaaay more than I planned. (Why not when there’s no interest for a year, right?) Worse, those monthly payments destroyed the power of my paycheck, limiting my options and making it harder to save. It took a while, but I finally found the best way to get a zero-percent interest rate: Pay cash. Saving up cash meant I could afford what I purchased, and I’d never have to worry about making payments again.
The 50/20/30 Budget
The 50/20/30 budget is a budgeting method that’s become very popular around the internet. It’s based on the idea that you use 50% of your take home pay on needs, 30% on wants, and 20% for savings and debt repayment. Sounds pretty logical, right?
Well, I don’t do trendy very well. Just ask Greg. My wardrobe consists of paint-stained yoga pants and holey t-shirts I bought for a quarter in my neighbors garage. So, if you want me to get on board, it better have more substance than just putting a flag over my profile picture.
Although I believe the best budget is the one you use, this one leaves a lot of room for error. There’s no specificity, which means its hard to find holes in your spending.
Besides, do you really need 30% of your income reserved for wants and only 20% for savings? I prefer to bump that savings percentage quite a bit higher. And if you’re willing to actually do the math for a 50/20/30 budget, why not use a zero-sum budget instead? This app makes budgeting AND tracking your spending automatic and easy.
Some Money Rules are Meant To Be Broken
If you don’t agree with my take on these money rules, it’s perfectly okay. I’ll just be over here avoiding debt, making the most of what I earn, and living my best life now while saving for the future. #sorrynotsorry
But if you want to get ahead, you might want to dig a little deeper. Don’t blindly follow everything you’re told. Do some research and decide what’s actually best for you. Then, act on it. A little bit of knowledge can help you cut through the hype and find the type of life you really want.
What do you think? Have I missed the mark? Are there any money rules you won’t follow? Let me know in the comments!