In our media-saturated culture, you can find financial planning advice everywhere. People you know, people you don’t know, TV shows, and articles in print and online are all full of tips on making the most of your money but how do you know if it is advice worth following? In general, financial planning advice that seems too good to be true or doesn’t fit your values may not be for you.
The finance gurus at The Motley Fool wrote about “6 Pieces of Bad Financial Planning Advice You Shouldn’t Follow,” including:
Buy a home to rent for an additional income stream. Renting a home or apartment is not a route to easy money. As the article explains, there are a number of challenges including, “…empty and income-less properties at times, dealing with troublesome tenants, having to make expensive repairs, and not always being able to sell when you want to for a price you want.” If you aren’t sure you want to commit to being a property owner, seek other financial planning advice on ways to earn more.
Pay off debt before you save for retirement. Being debt free is a good feeling and it does free up resources but The Motley Fool says that you should only put all of your resources towards this goal if you can pay off all your debt within a few years. Otherwise, you are missing out on the benefits of years of compound growth. A Fee-Only financial planner can help you figure out a way to allocate funds towards debt repayment and retirement so you don’t have to choose one over the other.
Invest in gold. This is a time-honored piece of advice that The Motley Fool calls into question. The economic downturn brought a resurgence of interest in gold since buying gold makes some people feel secure that they have a physical asset of lasting value. Investing in gold has been a great choice for some but there are no guarantees and usually those who have benefitted from buying and selling gold knew just when to make those moves.