The Worst Money Advice I’ve Ever Heard

The Worst Money Advice I've Ever HeardAs a personal finance blogger, I get asked many personal finance questions. Before I respond, I usually ask what they think they should do.

One of the first things I usually hear is advice they were given by someone else. Sometimes the advice is great, but other times I can’t help but cringe and then I have to try my best not to let my jaw hit the ground.

I really wish I made up the advice below, but sadly they are all true. Some I heard first hand, and some I heard from others asking me if the advice was something they should follow.

Below is the worst money advice I’ve ever heard:

 

1. You don’t need to save money when you’re young.

I’m all about living life and enjoying yourself. I also think money is meant to be enjoyed.

However, I think there is room to do that AND save money. Just because you’re young doesn’t mean you don’t need to save.

I’ve heard people say you don’t need to save money when you’re young because retirement is far away so you should spend all your money now and enjoy yourself. I’ve also heard that you shouldn’t save when you’re young because you can rely on others.

Both of those reasons just make me cringe. You can’t predict the future and who wants to rely on someone else for money just because they are young?

It won’t kill you to save at least a little bit out of each pay check. Plus, the more you save now, the less it will hurt later.

 

2. Just use your student loans for everything!

I recently heard a story that I still can’t believe. Sadly, I’ve heard it more than once and I actually know a few different people who do this.

This particular person takes out around $40,000 in student loans each year at interest rates of around 6% to 8%. They’ve done it for around 6 years now, so they have a significantly large amount of loans.

Thing is, they’ve never gone to an extremely expensive school. They take around $10,000 out for actual school purposes each year, and then they spend all the leftover money on vacations and multiple timeshares (they don’t use any of it for living expenses, as they work full-time and use that income to live off of).

So, they spend around $30,000 a year from their student loans on having “fun.”

NOPE, I’m not even kidding!

My mouth dropped. I didn’t even know what to say.

Sad thing is this person was telling other people to do the same.

 

3. Co-signing a loan doesn’t mean anything.

I recently heard about a person who has co-signed on several different loans. They don’t think it matters because they’re not the first person on the loan. They also thought it was okay to co-sign because all you’re doing is helping someone with their credit, and that nothing bad could come from it.

WRONG!

This advice honestly scared me. A lot of damage can come from this.

If you co-sign a loan for someone, you are liable for it if they fail to make payments on it or if they sadly pass away.

 

4. Buy anything and everything for your business because you can write it off.

Now that I have my own business, everyone keeps wanting to give me tax advice. The advice I find funniest is when someone tells me to start buying more stuff so I can write it all off on my taxes.

I just don’t get this way of thinking.

Just because you get a tax write off doesn’t make the item free. I understand buying stuff you need, but why would I buy stuff I have absolutely no use for?

 

5. Only people with money problems have credit cards.

I’ve had a credit card pretty much since the day I turned 18. I’ve always used them, have never carried a balance and I have never paid money towards interest.

A few years ago, I took my credit card out to pay for a purchase. One of the people I was with told me to put it away and that they would pay for it since I couldn’t afford it.

I looked at them confused…

I said: “What do you mean I can’t pay for it?”

This person started to tell me that only idiots carry credit cards and that I must be tens of thousands in credit card debt, and that they couldn’t believe my debt had gotten that bad.

They told me to get rid of my credit cards immediately and that I was ruining my life with them. They also said there was no way to responsibly use credit cards.

I remember standing there laughing because I had no idea where all of this was coming from. I tried to convince them I was okay, but I’m positive they still don’t believe me to this day.

Don’t get me wrong. I DO understand there are people out there who should only stick to cash, but I also think there is a way to use credit cards responsibly and to your advantage.

 

What do you think of the above? Would you follow any of the advice above?

What’s the worst money advice you’ve ever heard?

 

Comments

  1. Melanie @ My Alternate Life says

    That co-signing comment is dangerous! Also, plenty of people use their credit cards responsibly. I dislike when people focus all their advice on saving money and not earning more. I believe in frugality, but I speak from experience when I say you can only cut back so much. Earning more is the only way to really overcome some serious financial obstacles.
    Melanie @ My Alternate Life recently posted..How I Curb My Online ShoppingMy Profile

  2. Deb @ Saving the Crumbs says

    Wow, all these made me cringe, too! Thanks for helping to debunk some of these “financial myths”. Another one we get told a lot is, “I don’t want to pay off my mortgage early because the mortgage reduces my taxes.” But people often don’t realize that only the interest is deductible and only if you itemize (which not everyone does). But a simple way to look at it is, would you take out a mortgage for a paid off house just to help your taxes? Usually the answer is pretty obvious. :-)
    Deb @ Saving the Crumbs recently posted..7 Lessons as One-Year Homeowners: And paying it off in less than 3 yearsMy Profile

  3. Autumn @ The Barefoot Budgeter says

    #4 kills me every time I hear it. Sure, you can deduct any legitimate business expenses on your tax return, but that only saves your 30% (or whatever your tax rate is). It does not make the item free. I really think some people believe that if you deduct a business expense you get 100% of your money back.

  4. Kasi says

    Ah all of those do sound like some terrible advice! Especially the student loan one, it’s really sad that some people take out loans and don’t realize that they will have to pay all of that money back with interest.
    Kasi recently posted..Kiehl’s BB CreamMy Profile

    • Michelle S. says

      Yes, it is sad! I really don’t know what this person is thinking and why they think it’s okay that they tell other people to make the same mistakes as them.

  5. Christine says

    Working as a banker I hear all sorts of crazy money advice people have gotten. I’ve had quite a few people tell me that they were advised to carry balances on their credit cards because that’s the only way to build credit! So not true!!! I do the best I can to educate people but the ‘advice’ they get from family and friends is sometimes outrageous!

  6. Jayson @ Monster Piggy Bank says

    I am young but I was raised with the idea of the importance of saving. I’m not like others who spend too much on fancy clothes, phones, and other gadgets. I thinks it’s not what you wear that matters most, but it’s what’s in your pocket/bank (I am referring to saving). #1 worst advice when corrected will lead to a better future!
    Jayson @ Monster Piggy Bank recently posted..6 Tips for reading through contracts and the fine printMy Profile

  7. Prudence Debtfree says

    I have a daughter who is competing at a high level in her sport, and the expectation from coaches, athletes, and other parents seems to be that parents of elite athletes should make the big sacrifices to allow their children to reach their potential. It’s a TOUGH one to deal with while we’re getting out of debt. Of course I want my daughter to reach her potential, but we don’t believe we should go the route of taking out a second mortgage to finance her training and competitions. We also believe that she has to look for athletic scholarships, grants, and bursaries as well as work part-time to make it all happen. (We’re in Canada, and athletic scholarships don’t work the same way here as they do in the U.S.) She is stepping up, and things are coming together, but I don’t enjoy the “bad parents” label I think we have in the eyes of some people. I’ve learned it over and over again in this journey out of debt: “Do your best, and don’t give any power to what others might think.”
    Prudence Debtfree recently posted..Debt And Personality Type: Type A vs. Type B ( & our 11th slice out of Debt #3)My Profile

  8. Stephanie says

    Holy moly, these are awful! I opened an IRA when I was only 21. I put in something like $1000 or $1500 and just let it sit until I finished college and had a full-time job, but I figured an extra year or two for that money to start working for me was better than nothing!

    I have to admit, I did pull some shenanigans with student loans when I was in grad school, but I truly worked to my advantage. I got subsidized federal loans (didn’t start accruing interest until 6 months after I graduated) that exceeded my tuition by a couple thousand dollars each year. Instead of immediately paying back the excess, I put it into CDs (back when CDs were actually earning a decent amount of interest!) until the month before the loans started to accrue interest. Then I cashed out the CDs and paid back the original excess loan amount plus a few hundred dollars worth of interest!

      • Stephanie says

        I am doing well! Life got crazy for awhile after I went back to work full-time and I accidentally took a year-long blogging break! I didn’t write or read pretty much anything since last August, oops? But now I’m trying to get back into blogging and catch up with what everyone else has been up to. It looks like you’ve been doing quite well yourself! Congrats on the wedding and your successful venture into self-employment! :-)

  9. Kipp says

    Arrrg at #2. I don’t know many people who vacationed off of student loans, but there are probably quite a few I know that lived above a minimal existence being subsidized by student loans. Instead of working they were using it to buy food, pay for apartment (or house), or whatever. But… if you don’t have a job you should try to keep that crap to a minimum, like cheapest housing, or cheapest semi-healthy food, and they didn’t really.
    Kipp recently posted..Income and Expense for July 2014My Profile

    • Michelle S. says

      I will say that I took out extra a few semesters, but nothing too crazy. I think it was an extra $2,000 that was taken out accidentally (got a few extra scholarships at the last minute and I had already paid for the semester so I received a refund), but this person has taken out over $100K in extra loans which is INSANE!

  10. Shannon @ The Heavy Purse says

    #2 is a big problem for lots of students because they actually believe it’s okay and nobody tells them any differently. Until year later, as they are paying and paying and paying off those student loans. They now realize that all those trips, rounds at the bar, etc … shouldn’t have been paid with student loan money. And #5 – Wow a bit presumptuous on your financial situation. We can laugh and cringe at the bad advice people dole out but the worst part is lots of people believe this bad advice. Yikes!
    Shannon @ The Heavy Purse recently posted..Back to School Shopping Tips and InfographicMy Profile

  11. EarlyRetirementGuy says

    Ignore #1 and ignore years of compound interest! I’m in my 20s and know so many people yelling YOLO while they pile everything onto their credit cards and ‘live for the moment’. These are the ones likely to be working into their 60s and buried under piles of debt.

  12. Alicia says

    Oh my gosh, I am laughing at that credit card comment. I know loads of people who use credit responsibly.

    The opposite of your bad money advice: one of my friends took out way more student loans than they needed because they had full ride scholarships and lived at home. He then threw it in a decent GIC (10 years ago when they were OK), then paid it off when he graduated from university without paying a dime of interest. Talk about a smart thing to do in undergrad when I didn’t even know about that kind of stuff.
    Alicia recently posted..Sometimes Things Line Up…My Profile

    • Michelle S. says

      I had a professor who did that too. He said his student loans were at a 2% interest rate so he invested all of it. He was a finance professor and a genius so he knew what he was doing haha.

  13. Jon @ Money Smart Guides says

    I’ve heard the student loan advice before. Sadly, I’ve known a few people that took the entire amount they were awarded (even though they didn’t need it all) and blow it on unnecessary things. When they finished college, they questioned how college cost that much. It really didn’t they just blew a bunch of money in other ways.
    Jon @ Money Smart Guides recently posted..Disadvantages Of Mutual FundsMy Profile

  14. amanda says

    sometimes people make no sense.

    so many people are “hush hush” about money and the only way you can get a solid grasp on finances and such is by doing research. at 20 – that was the last thing on my mind. i always enjoy reading these types of posts now that i’m 28 and have realized how important money really is – aside from “buying things”.

    so thank you :)

    i just did a post today about money. it’s very broad but hopefully it’ll be the first of many!
    amanda recently posted..dollar dollar bill, y’all.My Profile

  15. Brandy @ Busted Budget says

    If I would have saved more when I was younger, I would be sitting pretty right now! I wish younger people understood the benefits of saving whether it be retirement or a savings account. Unfortunately, it’s too easy to feel as if you have so much time ahead of you to save money. It catches up to you quickly.
    Brandy @ Busted Budget recently posted..We found $5 and spent it on beerMy Profile

  16. DC @ Young Adult Money says

    I think this one’s a mixed bag -> “You don’t need to save money when you’re young.” Actually, not the advice itself, but the debate about whether it’s easy to save and enjoy yourself. I think it has a LOT more to do with income level than anything. If you have a high income it’s easy to throw a portion of your money in a savings account while still going out and doing things that cost money (travel, entertainment, etc.). If you make a low income you are forced to chose between the two or figure out what you can do for cheap or free.
    DC @ Young Adult Money recently posted..A Match Made in Heaven: Weddings and Travel RewardsMy Profile

  17. Amy says

    The worst piece of financial “advice” I received was late in college when someone told me I didn’t have to pay off my full credit card each month. I already knew this was technically the case, but I had never thought of it as something I could do myself. I wish I hadn’t taken this advice… :)
    Amy recently posted..School Shopping First-TimerMy Profile

  18. MomofTwoPreciousGirls says

    Well, I’m thinking instead of the government trying to “help” people with their loans and giving all the forgiveness, MAYBE they should be more diligent about how it’s used. Restrict it to send tuition right to the schools. And maybe filling student accounts for room/board, books and meals. Anything else is the students responsibility to pay for. Either by the bank of mom and dad (IF that’s the arrangement) or by (GOD FORBID) working for it. New debt would be cut significantly.

  19. Renee says

    Ugh! Horrible money advice! In college I was really young and naive and didn’t understand any of this and my best friend convinced me to take out an extra student loan for some trips (goodbye $6,000 plus interest now). She also helped me accrue the mindset of using credit cards because “anything you want for $200 a month is a great deal!”. Luckily as the years went on I realized this is NO WAY to live and my husband and I started paying off our debt and building a good savings.
    I had a conversation with her awhile ago and she told me to take a cash advance on our credit card to pay for some house repairs -absolutely not! Then she said that her and her husband plan to go up into their eyeballs in debt and when they cant handle it anymore they will just file bankruptcy-my jaw basically dropped to the floor! I would love to see a post on the process of filing bankruptcy since it seems like many people might in the same mindset as my friend, unfortunately!!!

  20. KK @ Student Debt Survivor says

    Sadly, I’ve heard most of these and know people who took out students loans to travel and buy “stuff”. As for the person who offered to pay for you because you must be in credit card debt if you have credit cards, ouch! I’d have a hard time not reacting negatively on that person. I use my credit cards for everything and I never carry a balance.
    KK @ Student Debt Survivor recently posted..Money bought me happiness…sort ofMy Profile

    • Michelle S. says

      Sadly, I’ve had more than one person offer to buy something for me because they thought I was too poor. Many like to think that just because I save money and have a budget that we have money problems.

  21. James Salmons says

    Yes, I have heard ALL of them, and the rationalizations are incredible aren’t they.

    One related thought to number 4 is not so much advice as a view of giving by those with businesses or more money: “It doesn’t cost them anything because they just write it off on their taxes.”

    Of course we know they only get to use the deduction to reduce their income, not the actual tax amount which is only a fraction of that, but people with these off the wall views don’t understand much about money…or math either for that matter.
    James Salmons recently posted..Financial Freedom in Half the TimeMy Profile

  22. Tennille says

    My mom gave me the advice of living off of student loans while in college. I fallowed it, but thankfully only to the tune of about $17,000! The money went towards necessities, and school. Nothing else. Personally who ever is spending money like that person did on timeshares is bordering on criminal behavior, but that’s just my opinion.
    Tennille recently posted..July Recap And August Financial GoalsMy Profile

  23. Kalen @ MoneyMiniBlog says

    That’s a lot of terrible advice! I have had someone ask me what I think about co-signed recently. I told them to run away from the person asking them to do it. lol. It’s so dangerous. If they need a co-signer that means the bank thinks they WON’T PAY. And the bank is often right about that. I even know someone that co-signed for their dad and his dad quit paying so now he is stuck with the payments for a car he never sees or drives.
    Kalen @ MoneyMiniBlog recently posted..The Myth of the Successful Money Manager [infographic]My Profile

  24. Natalie Woodworth says

    great post!
    Some people just like saying a lot of stuff they know nothing about, never checking their sources because they think they know everything about anything…

  25. spectre phang says

    the number 2 point is scary because student can end bankrupt if fail to find job on time to pay off the loan or interest

  26. Barrie says

    I married a man 9 years older than me who had a father who had him set up an IRA when he was immediately out of college. I started my IRA as soon as I finished my master’s degree. If not for my hubby, I don’t know when I would have started my IRA but I know it wouldn’t have been as it early as I did!

  27. Lisa E. @ Lisa vs. the Loans says

    Oh my gosh, these are all making me cringe! I know too many people who use their student loans for things other than being a student! I’m glad that my loans went straight to my school so i never had the opportunity to spend it on stupid stuff. I have a friend who took out student loans when she absolutely didn’t need to – her dad was a veteran, which meant her tuition was absolutely free! It makes me shudder…
    Lisa E. @ Lisa vs. the Loans recently posted..July 2014 Net Worth UpdateMy Profile

  28. Julie Wood says

    Taking out this much student loans and having that much debt and using it for pleasure is so stupid. It such a bad idea because it can ruin you credit and Student loans are only for school. Not saving money when you are young and not saving money at any age is so bad. People should learn that if they work hard and save that their savings can help them out when they need it!! Like getting laid off from work, getting sick and not being able to work. My savings in the bank help me have so much peace and I am not afraid that I will not have money to pay the bills.

  29. M.Clark says

    I agree, what you have listen above is very bad advice. I think if you have common sense you should be able to tell that if the advice you are being given is bad or not. Thank you for sharing this post.

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