Three experts weigh in on what not to do with your money
On one hand, being financially responsible is fairly straightforward: Never spend more than you bring in, save a little, don't buy lattes every day and...you'll be fine, right? Uh, no. If you're anything like us, your financial savvy is a cobbled together mish-mash of advice your mom and dad gave you, something you read in a Dave Ramsay book one time and that cousin who keeps telling you bitcoin will make you rich. Suffice it to say: There's a lot of confusion out there, so we thought we'd round up a panel of financial experts to share some of the most egregious advice offenders out there—and what you should be doing instead.
Bad advice #1: "You need to carry a balance on your credit card to build up your credit score"
Barry Choi is the financial expert behind the blog Money We Have, and this is his personal pet peeve. "That simply isn't true! You should never carry a balance." That said, he doesn't subscribe to another school of thought that says you should avoid credit cards altogether. "By using your cards, you build up your credit score and can earn rewards on your purchases. The key thing is to pay off your entire bill on time...every month."
Bonus good advice: "When I first started working the general rule was to save 10% of your income and you would likely do alright. With the increasing cost of real estate as well as the cost of living, I just don't think that's enough. I personally try to save 25% – 40% of my income. I realize that's not possible for some people, but I want people to know that saving 10% likely won't be enough."
Bad advice #2: "Don't worry about saving in your twenties"
We get it: When you're younger, you are generally earning less money and putting anything aside at the end of the month is a miracle. But it's worth fighting for, says Erin Lowry, author of Broke Millennial: Stop Scraping By And Get Your Financial Life Together. "The point of saving, especially in your twenties, isn't just about the amount you can put away but also about building the habit," she says. "It's much harder to reverse unhealthy behaviours, of any kind, so why put yourself on that path in the first place?"
Bonus good advice: "Just because something mathematically makes sense, that doesn't mean it's how people will behave. For instance, the debt avalanche method of paying down debt, in which you focus on aggressively paying off the highest interest rate debt first and work your way down, will save you the most money. But some people need to use debt snowball in which they pay the smallest balance first and work their way up to the largest balance. Getting that small win early on can help them stay motivated and focused. Just because avalanche is the mathematically correct way doesn't make it the right way because snowball may help keep another person inspired and on track to actually make it all the way to debt freedom."
Bad advice #3: "There's a specific formula to doing money 'right'"
Money is, at the end of the day, an intensely personal thing, and Laura Whateley gets that. This financial journalist and author of the forthcoming Money: A User's Guide says that understanding who you are matters more to your finances than cracking some code to the perfect mix of stocks and bonds in your RRSP. "Saving for the sake of it, because that's what you've been told is 'sensible' is not as smart as figuring out what it is that you are saving for," she says. "Being sensible to me is more about knowing myself and my weaknesses — for example, I know that if there's cash in my current account I'll spend it, so I have to set up separate pots to keep it out of sight."
Bonus good advice: "There is an ongoing myth that finance is difficult, and only for those who are mathematically minded, or super organized and a fan of spreadsheets. I am none of those things, but even I have got my head around it. Money is not as scary a subject as many assume and you are not born as someone who is great with their money, it's a skill and discipline you can decide to pick up and take on any time, like getting fit or eating better."