Most of us have little idea about what to do with our money. Those who are experts have either spent years of their life studying or have a knack for it the rest of us don’t. However, that doesn’t stop us trying to obtain advice from more successful people. The problem is we have to take a lot of advice on faith alone – since, naturally, we are not the experts.
Too often this advice might initially make sense, but actually be revealed to have the opposite outcome. Let’s examine some.
“Buy a house, never rent”
When you live in a house or apartment, you always have to pay for it – whether this is in terms of a bond or rent. This is usually done with monthly installments. A lot of people claim that instead of paying regularly into a landlord’s account (rent), rather put that money into the bank to pay off a mortgage (buying). After all, the money has to go somewhere so why not toward a goal that lands up with the place being yours?
This sounds like good advice. But there are some problems.
First, buying is not ideal for those interested in moving around. Young people in particular usually want to experience the world, travelling and working wherever the job takes them. Second, it can be beyond the price range of many people – especially these days – to buy a home. Interest rates have skyrocketed since the days of the previous generation, when houses and property were far cheaper in comparison to wages and salaries. Third, landlords are typically the ones who have to fork out money to repair property, not tenants. This reduces costs to you.
Patricia Jennerjohn, a financial planner who operates Focused Finances in California told Nerd Wallet: “Buying a home is not a rational financial decision…It’s an emotional lifestyle decision that has financial ramifications.”
“Always go to college”
These days we often hear stories about people in their late thirties still paying back student loans and other fees. Tertiary education is expensive and hard work. Not everyone is suited to it. Indeed, more employers are recognising that not all jobs require tertiary education. Many see more value in training individual employees, rather than waiting for someone to qualify from a university.
As one expert noted in the Times Higher Education Supplement: “No, not everyone should go to college…[But everyone] should have the option – really have the option – so we don’t miss talent based on prejudice masquerading as toughness.”
“Rent a car, never buy”
We all need to move around. The difficulty is knowing whether this means investing in a car or not. It could be that using public transport or renting a car could be sufficient, yet in the long run this won’t make sense. We can look at private car sales for good deals and, indeed, remind ourselves we can get something back when we’re done with the vehicle. It’s not simply money gone forever, but more an investment in ourselves and our mobile freedom.