Happy Thursday Everyone! To say we are living through history feels like an understatement at this point. Things are changing so rapidly, and a lot of things that we thought about the world a year ago are no longer true.
Same goes for financial advice, a lot of the lessons on saving we were taught don’t necessarily work in the world we’re living in today. So today I’m going to talk about 3 pieces of common financial advice that are no longer true, or are just unhealthy ways to approach money in the first place.
📰 In the Headlines
The business news stories we are watching & how you can follow along
🏛 Fallout From the Attempted MAGA Insurrection Continues
- More companies are pausing their political donations to representatives that did not certify the election
- The FBI has arrested over 70 rioters so far
- Why congress is moving forward with impeachment even though Trump will be out of office
🚂 ROBLOX is Going Public via Direct Listing
- A quick refresher on Direct Listings (IPO’s are so last year)
- How the company got 75% of American children ages 9 through 12 playing on their platform every day
- Why this could be the tipping point that makes using direct listings go mainstream
💼 The COVID Economy is Increasing the Gender and Wealth Gaps in the US
- New stats from the Federal Reserve show that unemployment for the lowest-paid workers in the U.S. is above 20%.
- Of all the jobs the U.S. workforce lost in December, 100% belonged to women
- Deep Dive: The Covid Economy Carves Deep Divide Between Haves and Have-Nots
🐍 You're Toxic
Over the holidays, I picked up an old book about personal finance that my parents gave me when I first went away to college. Skimming through, I realized just how much of the advice was out of date and just straight up toxic. This got me thinking about the financial advice I have had to unlearn since learning more about investing and financial systems.
Quick disclosure: I am not a certified financial planner and don’t know your particular needs & goals. This advice comes from my own experience and some other smart people happen to agree with it. It may not be the best fit for you right now, but either way its good to think outside the status quo once in a while.
☕️ Don’t pay for conveniences
The previous generation loves to demonize paying someone to do something you could do yourself. (I’m looking at you Suze Orman). The truth is that time, not money, is your most valuable resource, and sometimes it’s worth it to spend money to ‘buy back’ your time. Dropping a few dollars to outsource a task can give you extra hours to spend on your mental and physical health, or spend time with friends or family. The occasional $5 lattes or hiring someone to clean your house won't really affect your bottom line.
Also, you deserve to enjoy life. The reason you are doing things like reading this newsletter is because you care about and are paying attention to your finances. Life is too short to deny yourself a few extra hours with loved ones.
My thoughts: Take the time to set realistic financial goals, make a plan to get you there, and make sure you enjoy the process. When you budget and know where your money is going, it’s perfectly okay to spend it on the conveniences in life.
💳 Credit Cards are your enemy
Credit cards have a slippery slope, but if you are able to use them responsibly, you are actually giving yourself an incredible advantage. In the book, The 7 Habits of Highly Effective People, Steven Covey talks about how many people struggle with having a ‘Scarcity Mindset’, or live in constant fear of not having enough. They are more likely to think in short-term decisions and have trouble trusting themselves and believing in their own worth. Small things, like giving yourself the option to make a purchase on credit, changes your mindset from ‘can I afford this?’ to ‘is this really worth that much to me?’ As long as you fully understand the terms and fees associated with it, having ready access to credit can open you up to opportunities you might not otherwise consider, giving you the ability to make better long-term decisions
Also, when used responsibly, credit cards can help you earn awesome rewards which you can use to travel inexpensively, get product discounts, and even access exclusive events. I personally have flown to Europe using nothing but points I earned making work purchases using my personal card.
My thoughts: Get a credit card, but remember that's exactly what it is: credit. Use it to finance big purchases or pay your monthly bills to accumulate points. Just be sure to keep the balance below 30% of your credit limit, if not 0, every month to avoid interest charges. If you feel yourself starting to slip up, just pull out that pair of scissors and no one is the wiser.
🏡 Renting is just throwing away money
Homeowners “throw away” a lot of money, too. Mortgage insurance, property taxes, homeowners insurance, HOA fees, and home, property maintenance costs, the list goes on and on. Those costs almost always add up to far more than the cost of rent for a similar property.
Also, if you are buying a house as just an investment, here are two things to keep in mind. First is that home values appreciate slower than the markets, and second, gains in value are only realized when you sell the house. As long as you live there, you are not receiving any income off your investment, and you are even paying an opportunity cost of having to base large life decisions, like taking a new job in a different state, if you are worried about selling a home.
My thoughts: Unless you’re going to be living in the same place for five years, or your monthly mortgage payment is at least 25% less than what your rent would be, you should strongly consider renting, not buying.
If financial advice feels like it's rushing or shaming you, don't be afraid to question it. Everyone has different financial needs, and this advice might not be the best first for you. Learn to trust your instincts and do your research, you know more than you think you do.
Word of the Day:
(n.) What you are giving up by choosing one option over another. Example: If you chose to go to a concert instead of picking up a shift at work, the cost is the price of the ticket, but the opportunity cost is the money you would have made if you had worked instead.
Four Minute Finance Newsletter
Join the newsletter to receive the latest updates in your inbox.