Five Money Advice Tips You Should Forget

by Scott Sery on July 24, 2013

Money AdviceThe internet is loaded with advice; unfortunately there are no qualifiers as to who can give it.  Anyone with a keyboard can give tips, and what ends up happening is you get bombarded with money advice tips; many of them are complete rubbish.  We know the general rule of thumb, “if it sounds too good to be true, it probably is too good to be true.”  But some advice seems to stay prevalent, even though it is pretty lousy.

Buy Gold!

The latest recession saw gold skyrocket in value.  So much so that nearly every expert agreed that it was way over-valued.  But people kept rushing to buy more gold.  Why?  Because it was popular, and as everything else was going down it seemed to climb even higher.  There was a rush on gold, and that rush continued long after it was a good investment.  You can learn more on the psychology behind buying high and selling low by reading Carl Richard’s post on IWT.  By the way, most portfolios should have no more than 5% of their value in gold or other precious metals.

It’s All Willpower

How many times have you heard someone say, “You just need to save your money.  Just try a little harder”?  Saving, investing, and living a rich life is at most 10% willpower.  The other 90% is from the automatic systems that you have set up to do the work for you.  How many of you still sit down each month and write out checks for your bills?  You can automate those all online, and almost always for free.  How many of you still look at your bank account on a regular basis and think, “I suppose I can save $X this month”?  You shouldn’t even be looking at your bank account, it should all be automated.  Set it and forget it, then focus your efforts on earning more money by doing the things you are good at.

Save 10% of your income

Somehow, some smooth talking investment advice guy said that if you just save 10% of your income, you will someday be able to retire.  Unfortunately people took that as being able to retire at age 60 or 65.  Most people will not meet their retirement goals if they save less than 20%, and many will need to save much more than that.  Want to run a quick analysis?  Check out Mr. Money Mustache’s post on the Shockingly Simple Math Behind Early Retirement.

Credit Cards Are Evil

I charge every single thing I can possibly charge.  I almost never carry cash, I don’t have a debit card, and I keep 1 or 2 checks in my wallet for those times I go somewhere that refuses my card (I suppose if it keeps my costs lower Costco can still refuse all but American Express).  I rack up thousands of points each month, and I usually spend a good portion of them on a free travel to go visit a college friend every fall.  If you pay attention, don’t buy stuff you can’t afford, and keep track of how much you have spent, credit cards are an amazing tool to make life easier.

Go with an index fund

I may get a lot of flak for this one, but I really do not like index funds.  Sure the expenses are low, and you don’t pay sales charges, but in my experience you end up paying with a lower rate of return.  I have all my money invested in actively managed funds.  Historically (over the long period, I am not a short-term investor) my funds have outpaced index funds, often by several percentage points.  Index funds can be a tool, and if you are investing for the short-term they are probably what you want to use.  But I have found they are not nearly as diverse as many people think.

You can go anywhere to get money advice, and I could keep this list going for quite a while.  A quick web search and you will find advice that contradicts other advice, and at least half of it will contain grammar mistakes so bad your English teacher would weep.  If you really want the best advice out there, find a few credible sources, and read everything from them (nothing against Suze Orman, Dave Ramsey, and the like, but they are only marginally credible).  The best money advice?  Set up your automatic processes, then focus on the things you have control over (hint: it’s earning more money).

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Scott Sery

Scott Sery is a native to Billings, Montana. Within an hour in nearly any direction he can be found fishing, hunting, backpacking, caving, and rock or ice climbing. With an extensive knowledge of the finance and insurance world, Scott loves to write personal finance articles. When not talking money, he enjoys passing on his knowledge of the back country, or how to live sustainably. You can learn more about Scott on his website Sery Content Development
  • I agree with these except for index funds. Haven’t there been a number of studies showing that only about 1/4 of actively managed funds beat the market index? You might be one of the lucky ones, but active managed funds seem to be lagging behind index funds. If people want to invest, I would certainly suggest index funds, but diversification is key with any type of investing.

    • Scott Sery

      This boils down to blindly investing vs. doing your homework. Index funds are easy because they are straightforward and there is no manager making money off them. Actively managed funds are often pushed by brokers and advisors because they make more from them. But if you research out those 1/4 actively managed funds, why not use them? Personally I am 100% in the American Funds, although I do plan to move out of them when I become more conservative and start incorporating bonds into my portfolio because that is one are where they lag.

  • Common Cents Wealth

    I agree with your points above besides the index funds like Grayson mentioned. I don’t have a lot of experienced with active vs. index, so I don’t have a strong opinion either way. I completely agree on the gold point though. I’m not sure why so many people want to invest in it, it just doesn’t make sense.

  • Your Daily Finance

    I dont use index funds but I cant say not to used them. I do know that you 10% in my opinion is almost the bare minimum when you look at the average age people start saving. 20-30% is probably a lot better range. Let automation be your will power!!

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