Worst financial advice ever

By Slow Dad - January 02, 2017

What is the single WORST piece of financial advice you have received? A host of leading personal finance authors share their tips on what NOT to do.
I recently surveyed the best and brightest minds in the Personal Finance world to ask each for the single WORST piece of financial advice they had ever personally received. It turned out Mr Money Moustache, J.D. Roth, the Mad Fientist, Jim Collins, and Paula Pant were all lost somewhere in the wilds of Ecuador, but the day was saved by the gang from Rockstar Finance Forums.

Jim Collins, Mad Fientist, Mr Money Moustache, Paula Pant, and JD Roth in search of Chautauqua in Ecuador
Jim Collins, Mad Fientist, Mr Money Moustache, Paula Pant, and JD Roth in search of Chautauqua in Ecuador
With the season for planning financial goals having arrived once more, this timely list of personal finance traps and pitfalls best avoided should help everybody achieve a better financial outcome in 2017.

Jim from RouteToRetire, BigDaddyG and GeckoVision flagged this path to financial self-destruction:

“you only live once… spend it when you got it!”.
EdgarPickle quoted the classic:

 “easy come, easy go”.
Lindsay shared an expensive cautionary tale of not reading the small print, and trusting due diligence to a buddy rather than a suitably qualified professional.

BrandNewPapa suggested the urban myth:

 “buying a house is a great investment”.
Steve from ThinkSaveRetire upped the ante:

 “buy as big a house as you can afford”.
Until Savvy Family Finance trumped them both with:

 “buy the most expensive house you can now, because your income will always go up while the payment will stay the same”.
ChooseBetterLife contributed some old wives' tales:

 “student loans and mortgages are good debt”.
KeepThrifty questioned the wisdom of people not paying off their mortgages early because:

 “you're going to wish you had that mortgage interest deduction when it's gone”.
Mister_RIP from RetireInProgress opined the worst advice was the old family favourite:

 “renting is a waste of money”.
PaulM pointed out the common trap that people being laid off fall into, which is cashing out their retirement accounts.

FullTimeFinance, MrsBITA from BayalisIsTheAnswer.com and Shnugi all cautioned against the perennial defensive investor standby of

 “invest in gold”.
Shin from MoneyIsNotTaboo flagged the financial advisor gravy train, specifically that classic commission earner that is the right answer for almost nobody:

"Whole of Life insurance"
As many a liberal arts graduate has discovered to their cost, Amy questioned the conventional wisdom that anybody taking on debt to study will inevitably:

“enable you to earn more income always”. 
Seth Drebitko disapproved of a minimalist approach to diversification

“hold all your money in [Mutual Funds/Index Funds/Bitcoin?] and you’ll never need to worry about your investments for the rest of your life”. 
ApathyEnds was told the order a person loads up on consumer debt is important, meaning obtaining a car loan may max out your debt to income ratio to such an extent you couldn’t qualify for a mortgage.

 “make sure you take out a huge debt, before taking on a small (but still substantial) debt” 
HernandezPrime rounds out the worst financial advice ever received with the gem:

"Never invest in the stock market, you'll just lose all your money"
The prevailing theme that emerged from this survey was to be careful of whom you seek advice from, and always “trust, but verify” what you are told before making important financial decisions.

Unfortunately many of the bum steers and red herrings listed here underpin much of society's conventional financial wisdom. There is certainly a reason why so many folks today are feeling frustrated that they aren't getting ahead, while they are slowly being crushed under the weight of servicing all their mortgage and consumer debts.

I’d like to thank all these generous folks for their contributions. Not only do they know enough to recognise these anti-tips for the terrible advice they are, many of them freely share their hard won knowledge and experience of what actually does work when it comes to personal finance.

So what?

I’ve learned plenty from them, take a read of what they have to say and you probably will too.

I wish all the Cantankerous.Life readers a financially secure and prosperous 2017!

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  1. Great photo! ;)

    I still laugh at MrsBITA "invest in gold". So old school and (in my opinion) misguided. I'm still shocked that people consider it, the again, people still stuff cash in their mattresses!

  2. Thanks for stopping by Miss Mazuma!

    I guess in the case of those people cash really may keep them warm at night!

  3. Well I'd say I'm pro minimalist investing (I use everything in Betterment), but more that I don't think we should just stick our head in the sand as times change.

    For example, I'm using Betterment over a mutual funds because for the fees mutual funds don't offer anything compelling. That said I won't just stick to index fund investing forever, I'm sure one day something will rise to compete with them and I'll consider the pros and cons of changing strategies.

  4. Thanks Seth.

    We certainly need to change with the times. If that wasn't the case we'd all still be blindly stock picking or funding the yachts of high priced active fund managers, rather than lower cost investment vehicles such as index trackers.

    That said my take away from your worst advice tip was not to put all our eggs in one basket, which would be the ultimate in minimalist diversification.

  5. "It's not worth paying into a pension" said my friend/ex-colleague, who, now in her 40s is slightly regretting her own advice, having missed out on over 25 years' of company contributions.

    Good job I didn't listen to her.

  6. Good one weenie! Pensions? Aren't they just for old people? ;-)