Money advice that really is mucho bullshit

Published May 10, 2017   Posted in Having some fun

Advice is a dime-a-dozen…especially shitty advice. And about money. We humans have a way of taking conventional wisdom and turning it into gospel that gets disseminated blindly and without a second thought. Especially about money. So much of it relates to money.

I’ve heard it. You’ve heard it. And let’s face it: It’s kinda fun to sit back and reflect on the money advice that we were given throughout our lives that really does amount to a bunch of bullshit.

Let’s start with a big one:

Save 10% of your income

While it’s true that saving is a critically important component for most of us to derive true happiness later in life, 10% only scratches the surface of what many of us could save. If you are anything like the typical American (and by definition, you probably are), you could probably save considerably more than a mere ten percent. Don’t lull yourself into a false sense of security by setting aside 10% and then considering everything else “free game”. The more you save while young, the better your retirement.

Buy as big of a house as you can afford

The presumed wisdom is that buying a larger house will allow you to “grow into it”. But, human nature makes this advice bullshit. The problem is we humans get used to our surroundings. If we buy an additional 1,000 square feet, most of us will get used to that square footage. When we expand our family, we find a way to argue that we also need to expand our homes. What we expect out of our surroundings expands with our family. Most of us aren’t willing to accept this kind of encroachment into our first world lives.

Start saving for your kid’s education ASAP

Admirable, but bullshit. Take care of yourself first. Similar to the wisdom of being selfish, your top priority is ensuring a fiscally solid foundation for yourself first. Of course, this doesn’t mean blow your son’s first year’s tuition on a new Porsche. It means bank it! Only after you’ve set yourself up to achieve your goals is it prudent to begin funding your kid’s education.

Retire as soon as you can!

Whoa, this is bullshit? Actually, yes. Certainly, there is profound wisdom in retiring early. But there is even more wisdom in retiring when you’re ready. The goal isn’t simply to “not have a job” so you can sleep until 10am, laze around all day and turn yourself into a sloth. Think of early retirement as the beginning of a new phase of your life rather than the culmination of another one. Retire TO something, not FROM something. You’ll drive yourself insane if your only true goal is to “quit work”.

A college education is how you make money

There is no doubt about it – getting a college degree can set you up for greater earnings over the course of your working career. But, it doesn’t just automatically happen. Simply having a degree does not guarantee anyone success. For example, taking out student loans to pursue a degree program without marketable value provides very little benefit to your life and career. Don’t get a bullshit degree and expect the money gates to spread wide and far. If you haven’t yet figured out your direction, consider a trade school first. Your costs are much lower and those skills will directly prepare you for marketable work. Later in life, pursuing a college degree to advance your career is always an option.

There is such a thing as “good debt”

Bullshit. Debt is never “good”. Debt means you owe a creditor who’s making money off of your risk through interest that you pay. Debts are a limiting factor in growing our net worth, and for many of us, debt is addictive. One loan leads to another, and then another. The bank said we can borrow $500,000 for a home, and “that’s what we should spend”. It is true that taking on debt can provide value, but debts also put us in a position of weakness. Weakness isn’t good. Instead of classifying debt as “good or bad”, instead think of debts in terms of the sense they make. Some debts make more sense than others.

Let’s hear it: What financial advice would you consider bullshit?

We track our net worth using Personal Capital



Comments

43 responses to “Money advice that really is mucho bullshit”

  1. Any investment advice from Dave Ramsey is bad in my opinion. Buying mutual funds and not worrying about fees is garbage. Fees matter, active funds are terrible and telling people they should expect 12% returns is awful.

    • I agree MSM. That’s probably my top issue with his advice. He makes too much money from referrals to brokers for him to ever change that “guidance” though. He should be more clear about his conflict of interests.

    • Steve says:

      Yup, I’ve heard of his 12% (or something like that) return on investment spiel. Not sure of the specifics of his argument, but on its face, that seems WAY too high.

  2. Slow Dad says:

    The very concept of the existence of a “safe” withdrawal rate. Some withdrawal rates may be less risky than others, but none of them can be said to be safe (i.e. risk free).

    Spending down capital to pay for current living costs is playing chicken with mortality.

    If the market gods smile a person will likely be fine. However draw down too much, too often, or not achieving the rates of investment return that many of us have come to take for granted may see a former early retiree packing shelves at their local supermarket.

    An educated guess maybe. A calculated risk for sure. But “safe”… I don’t think so.

    • Steve says:

      I completely agree, Slow Dad. It’s only safe for a period of time, perhaps. Over time, however, one’s flexibility will be the deciding factor in one’s long term success.

  3. “Anything an insurance salesman ever said to me” . . . I’m just old enough to remember the practice of the neighborhood insurance salesman visiting your house and touting the various products you needed (or else). Part of that pitch was always whole-life insurance policies . . . I got sucked into that (albeit briefly) in my early 20s. When I think back now that some old dude was taking advantage of a young guy who wanted to get ahead and start saving young . . . . grrrrrrrr, makes my blood boil.

    Good stuff Steve.

  4. DadsDollarsDebts says:

    No such thing as good debt! I am with you on this one and still get a lot of push back. Sure there is financially mathematical more favorable debt, but is it good. Heck no. No debt is way better.

    Some education helps. I am a doctor- that is 8 years post high school schooling and another 6-7 of training (like an apprenticeship). I make great money now, but man there are plenty of people I know better off then me straight out of college. No need to be a doc to be rich!

    • Steve says:

      “No need to be a doc to be rich!” – very true! Doctors do make a great deal of money, but then again, it often comes later on in their careers, and that’s after accumulating mountains of student debt in medical school. In the long term it probably pays off (literally), but…some of us aren’t looking for the long term. 🙂

  5. Mrs. BITA says:

    You will need a mini-van if you pop out progeny. And yet somehow all over the world children pop into existence and gas-guzzling monstrosities don’t get bought.

    Oh and that perennial favourite:renting is throwing money down the drain. Buy! Buy! Buy!

    • Steve says:

      Ha! Well said, Mrs. BITA. I’m totally with you on both points. Conventional wisdom about the van/SUV thing is interesting…of course, people have just so damn much STUFF these days to cart around…

  6. “Buy the worst house on the best block.” 1. The best block might be hyper expensive, even for a shit hole. 2. Not everyone wants a ‘fixer-upper’, and if you don’t know what you are doing and looking for, you could get yourself into some real problems.

    As a real estate investor and someone who prefers owning over renting, I would say: 1. Analyze all properties as if they are a future investment, don’t just spend as much as your can afford on your ‘dream’ home. 2. For the home you are going to live in, look for location beyond just the ‘best block’… try to find somewhere that fits your lifestyle preferences. For me, that means somewhere with great access to public transportation, car sharing and bike paths.

  7. 99% of advice related to purchasing whole life insurance = #fail. There are VERY few situations where this option makes sense. The average person should stay far away from it.

  8. The Millionaire Educator says:

    Of the six I really hate numbers 1, 2, and 6. Save 10%? Wrong, save 100% if you can. The higher the savings rate, the faster your wealth will grow. A 100% savings rate is incredibly powerful…10% flaccid! Buy the biggest house you can afford? UH! I know the argument…homes are usually people’s greatest asset. Yeah, it’s true because most people save little to nothing. Their home equity is their only “savings.” A big home usually requires a big fat mortgage with lots of taxes, insurance, and maintenance costs. No thanks! You nailed the rub on the “good debt” advice: it puts you in a position of weakness. Those three pieces of advice are a sure path to job/debt slavery.

    • Steve says:

      “homes are usually people’s greatest asset”…true, but only because people tend to buy such large, expensive homes! They certainly don’t HAVE to be our so-called “greatest asset”. Choices.

  9. brian503 says:

    When I hear you’ll grow into the house or payment, I throw up a bit in my mouth. Such bad advice. The bigger the name of the college you get your degree from the better. Which typically mean more debt. I’ve hired tons of people over my career and never once cared what college they got their degree from. It’s more about the person, will they fit in, can the learn, can they communicate, etc. Good poop Steve!

    • Steve says:

      Thanks Brian! Like you, I’ve hired a bunch as well, and I’ve never cared about their college. Hell, I never personally cared whether they even went to college, much less what college. College is completely meaningless to me…at least in my field. Computer Science is about practice (experience) and attention to detail.

  10. I actually agree that these “rules” aren’t based in sound financial principles. It’s wonderful to try supporting your kids, but I don’t think outright paying for their college education is the best way to help them. Put your debt oxygen mask on before helping others.

  11. Divnomics says:

    Some of these we have never heard personally, but they all are good and bad in a certain way. Depending on your view. And apart from the house and debt part… Ah heck, their probably just all bad.

    Something that can be used here is to leave out your college debt on applying for a mortgage (so you can get a higher one). You still have to pay it off, so it will only increase your monthly expenditures even more and lower your savings ratio. Just so you could afford a bigger home.

    • Steve says:

      Yeah, I’m not sure why student loans don’t apply when it comes to a mortgage. I understand that student loans CAN result in greater income over time, but that also isn’t guaranteed.

  12. Miss Mazuma says:

    Oh my – I have much to say about each but I’ll be good and limit my response to just 3… 😉

    Buy as big a house as you can afford…well, most people can’t even “afford” the loans they are given! I remember when I first moved to the city after buying my studio and my grandparents (lifelong real estate investors) said a studio was a bad investment because they are harder to rent out. Perhaps in some locations this might be true, but in the city peoples lives are constantly in flux. Jobs bring them here, jobs move them out. There is ALWAYS a studio market in the city. I’m glad I stuck to my guns and 12 years later I’m still studio living (well, besides spending most of my rtime in the burbs at my BF’s!).

    Kids college savings/ college education… This is a twofer for me. My parents saved nothing for my college but when I decided to go to community college my dad gave me $1000 and my mom helped with books. That was it. I have to be honest, thank goodness I dropped out after a few semesters or I would have wasted a ton more of my own money. My sisters both went to college and neither used theirs degrees until many years after they graduated. To me, college savings is really a crap shoot. Save yourself first!! Going to college is SO GREAT for many people, it just wasn’t my bag. Regardless of what you decide, you don’t have to go to a super expensive out of state school to get an education unless your field is extremely specific. State schools, community colleges – they offer great inexpensive (comparably) options and you even get a real diploma when you graduate! 😉

    • Steve says:

      Awesome comment, Miss. Mazuma! Excellent point about actually being able to afford the loans that they are given, which is one of the reasons why we saw the housing collapse in 2008 and 2009. Too many people getting in way, way over their heads. We all suffered for it, even those of us who were more responsible with our money choices.

      Personally, I’ve never used my college degree. The things I did in my previous full-time job I learned on my own. College was a means to an end…to get my foot in the door. That’s it. A complete waste of time, but I still needed to go through it.

      Ugh… 🙂

  13. Buying a house as big as you can afford is something I’ve heard a lot. I agree with you that this isn’t the way to go for most people. I can see why they say this for someone who only plans on owning their one house and one house only. It’s to take advantage of their single leverage and forces them to save by putting equity into their home from their monthly mortgage payments. I’d rather live below my means and save up for an investment property…which brings me to the point that there isn’t “good debt” , but I would want debt for leveraging and purchasing investment properties when it makes sense.

    • Steve says:

      Thanks Oliver. It’s true…if you only own a single home your entire life, there could be a lot more wisdom in that statement. But most of us are more mobile today than ever before. And in my opinion, that’s a good thing. The more we see, the more we learn. Learning never hurts, especially when it’s free!

  14. Agree and disagree with the debt comment. Consumer debt-YA NO…Mortgage debt-YES. Why? The government subsidizes that debt on your taxes. It also can lock you into your housing costs at a fixed rate for 30 years, assuming you do not move. Paying a landlord just builds their wealth. Downside, you are not always mobile or the market will move down when you want to sell. Yes, people can lose money in owning a home. For most, you are either going to pay rent or pay a mortgage. Why not pay a mortgage and get the tax deduction? Why not create the freedom to tear down a wall or paint a room any frickin color you want. No can do as a tenant. Get aggressive when rates are low and back off when rates are high. Only borrow what you can pay with one family member’s salary. OK…..shoot away from all the renters 🙂

    • Steve says:

      It’s true that the government does subsidize a lot of our mortgages…no doubt about that. It definitely makes them more tolerable from a sheer financial perspective. But then again, most of us also don’t live in one place for 30 years. For those of us like me who like to move around, mortgages are a no-go. But then again…if you’re staying put in one area for half your life, then I definitely agree a mortgage is probably the best financial choice. 🙂

  15. TSR –

    Great article and list of BS. Others:

    “You should get a new car because yours is old” –> BS; if you go from A to B safely, then no need!

    “Paying off your debt is bad for your credit” –> BS; IRKS me every time I hear this!!!!

    -Lanny

    • Steve says:

      “Paying off your debt is bad for your credit” – Wow. I’m not sure I’ve heard advice quite this stupid before. But yes, it’s definitely a worthy addition to our running B.S. list here! 🙂

  16. The big one for me is equating that you should buy something simply because you can afford it. Insert cars, home, or anything else.

    • Steve says:

      True that, FTF – and there’s always a question of whether or not we really “can” afford that item anyway. But even if we can afford it…just because we can doesn’t mean we should!

  17. Mr. Tako says:

    Great list Steve! One of my least favorite is the “If you make X dollars per hour, then it isn’t worth your time to [insert your favorite DIY activity here].”

    Sooo much bullshit. Just because you make X dollars per hour at work doesn’t mean that’s what your free time is worth.

    • Steve says:

      True, Mr. Tako! Math can’t take into consideration circumstances like those. It only knows hard numbers. But really, it’s the meaning behind those numbers that really count.

  18. Emily Jividen says:

    YOLO.

    Okay, maybe that’s more of a justification than advice, but while you do only live once (unless you ride around in the TARDIS), you may live for a very long time, and actions have opportunity costs. Enjoy life now, but don’t forget that you want to be able to enjoy it in the future too.

    • Steve says:

      Actions can and do have opportunity costs, Emily. Very, very true, and excellent point. Nothing wrong with enjoying life, of course…and treating ourselves when appropriate. But, using YOLO to put yourself at a distinct financial disadvantage helps no one…especially yourself!

  19. Amy Blacklock says:

    Still hear these things from people today…
    It’s okay, everyone else is buying too.
    Today it’s on sale – a deal you can’t pass up, buy it now before it’s too late.
    You can take it home and enjoy it today, no payments for 30 days.

    • Steve says:

      Yeah, the instant gratification concept we have in this country is absolutely devastating. And honestly…Amazon probably does it the BEST. Their One-Click checkout doesn’t give people time to reconsider their money choices. One click, done! Money extracted.

  20. jasonedwards57 says:

    I think of the six there I would say that 1, 2, and 6 would be the things that would get me. I mean 10% is a good start, but that should be only the start not the end point. Unfortunately, I think if people think they are doing just that that everything will be hunky dory. One other thing that I would add is when people talk about “deserving” things. For example, people tell me I “deserve” a vacation because I worked hard. Well, doesn’t everybody? I created a financial mess and frankly I think I should get out of it before anything else occurs.

    • Steve says:

      “Unfortunately, I think if people think they are doing just that that everything will be hunky dory.”

      I used to think that, Jason. 🙂

      And I also got bamboozled into thinking that I “deserve” things as well because, you know, I work so “hard”. I go about my life and maintain a job, and therefore, I deserve to spend stupid money on myself. Right? 😉

  21. […] take from ThinkSaveRetire – this is money advice bullshit.  I tend to disagree with the 10% net income savings target.  Although it’s probably not enough […]

  22. Hin says:

    Can’t agree with you on the last item. There is good debt. For example, taking out a mortgage to buy a rental property that cash flows. Borrowing money to start a good business. Basically any debt that you can arbitrage to earn more money back is good debt. If you can borrow money at 4% and use it to earn 8% (assuming risks are reasonable) then that is good debt and you should get as much of it as you can.

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