6 Bad Financial Rules I Refuse To Pass On To My Kids
- Growing up, the #1 financial rule I’d heard was “save, save, save” – but I never learned to invest.
- I’ve also been told that student loans are bad, even though they do give you access to education, which I really appreciate.
- Another bad tip I’ve heard: Don’t talk about money, and cut back on “unnecessary” spending.
My generation – millennials – has an interesting relationship with money. We have come of age during the great age
, when all “safe” financial institutions were on the verge of collapse and conventional financial advice was called into question. In the years that followed, financial literacy movements aimed at empowering stressed people with accessible financial advice have emerged.
Since re-educating myself about money using resources from the FIRE (Financial Independence/Early Retirement) movement and elsewhere, I’ve come to realize that a lot of the financial advice I learned in my younger years was outdated and in some cases downright harmful. Here are all the bad financial advice I learned in my younger years that I refuse to pass up.
1. Save, save and save
Since I can remember, most of the financial advice I received emphasized saving more than investing. Most of that came from my immigrant family, which conveyed the importance of setting aside money for emergencies, buying a house, buying a used car with cash, etc. The financial education I received in my public school was not much better. For as long as I can remember, we’ve learned to save rather than invest.
So I put my hard-earned money into high yield savings accounts, APY negligible. This led to many missed opportunities for growth. Investing never even crossed my mind. Part of that was because I graduated from college during the Great Recession. It was scary to invest money in the stock market after millions of people lost their retirement from betting on it.
I eventually realized the importance of investing through various online financial communities and started doing it right away. I wish I had started earlier.
2. Save at least 6 months of expenses before leaving your job
Saving on expenses for at least six months sounds like solid advice. In my case, I never followed through on leaving the job and it got resolved every time. It’s terrible advice because it can prevent you from leaving a stressful job and prevent you from getting a higher salary as a freelancer or in another position. This advice is also no longer relevant, as the gig economy has created income opportunities beyond traditional jobs.
When I left my “dream” job with a six-figure salary last year, countless people told me I had made a mistake. I should save more and get another job before leaving. That’s what got me into this role after months of getting ready to go. But I soon realized that I was limiting potential income by staying in this job. Once I left, I not only got my monthly income back through freelance work (often beyond that), but I worked fewer hours and had more freedom.
3. Cut back on “unnecessary” spending
For years, $5 coffee has been demonized as the root of every millennial’s financial problems. In my twenties, I started cutting out unnecessary purchases like my daily habit of coffee and eating out. Results? I was miserable.
While these expenses aren’t necessary, they made my days working multiple jobs more bearable. Treating myself to a frozen iced coffee at the end of a long day gave me something to look forward to and helped me avoid fatigue. You can’t work just to survive – sometimes, you have to enjoy the fruits of your labor.
This was when I received contradictory advice from a financial expert: “Don’t spend less; earn more.” It sounds like “let them eat cake,” but it’s excellent advice. If your financial health depends on depriving yourself of a daily $5 purchase, it’s time to make more money.
Instead of cutting back on spending that improves your quality of life, try to find ways to generate more income. I realize that sounds easier said than done. But with today’s freelancing economy and the availability of countless side activities online, it’s not entirely out of the question.
4. Bad Student Loans
The student loan crisis is real and makes life difficult for many people. There is no doubt about that. But all too often, the narrative about student loans skews toward “all student loans are bad” and, in turn, “college is a waste of money.”
For me, college wasn’t just about acquiring a skill set. It was about learning to think critically, to be disciplined, and to improve myself. I come from a country, Afghanistan, where access to education is limited, especially for girls. Education has always been a huge privilege for me. I knew without a doubt that education was the reason why my family was better off than others in my country. The rhetoric about the benefit of a college degree has always been a privilege to me, because the fact that education was available at all (albeit at an exorbitant cost) was nothing short of a miracle.
Yes, you have accumulated $50,000 student loans. In return, I received an invaluable education that benefited me 13 years later, long after I had paid off my debts. Even in my lowest paying job, I earned more than I would have if I hadn’t graduated from college.
I can’t tell you how many times I’ve gone for a job interview and asked the interviewer to tell me they liked my educational background. He would often push me to the door. So I think this popular narrative that education is pointless and loans are bad is wrong. I used it then and am still using it now.
Building a side business into the business has been great. But if things go wrong tomorrow and I have to return to the workforce, my degree will provide a level of security and an unparalleled competitive advantage. Higher education is not a waste Getting student loans in moderation for a quality education can pay off if you have a plan to pay it off.
5. Don’t talk about money
We’ve heard this advice over and over again: It’s not polite to talk about money. We’ve heard it from our parents, employers, and everyone in between. But this advice is actually detrimental to our earning potential. I spent years at a job before realizing that I was making much less than my peers. A few years ago, I was interviewing for a job and received an offer that I thought was fair. After speaking with a friend who held the same position at a different company, I realized that the offer was well below market value and that I was short selling myself.
I did my research by checking Glassdoor, but these salary estimates are not always accurate and do not represent professional expertise. By talking to my friend and seeing what she was earning, I was able to negotiate a salary about $40,000 more than the initial offer, plus a $10,000 login bonus.
Conversations about money are essential, whether with your friends or colleagues (especially your colleagues). Talk to them, not just about how much they earn but how they manage it. Over the years, I’ve learned about investment opportunities from talking to complete strangers. And you see how big the gap is between men’s and women’s salaries when we follow this advice about not discussing money.
6. Having multiple credit cards is bad
Finally, my favorite tip to ignore: Having multiple credit cards is bad. This is far from the truth. Over the past decade, travel hacking has opened the doors to amazing opportunities with credit card sign-up rewards. I’ve taken my family on trips to Europe and Asia, booked an impromptu getaway in the Maldives, and taken an all-inclusive vacation in Mexico – all with points and miles.
Not only did I save thousands of dollars on travel, but I was also able to upgrade my experience and book flights that would otherwise have been completely out of reach. This wouldn’t have been possible without the credit card registration rewards, which have helped me earn millions of miles over a decade.
Right now, I have a dozen cards in my wallet and I know what you’re thinking:
Cabinets must be. Although a few accounts have closed over the years, my credit score is currently 760. Having multiple credit cards can improve your credit score, as long as you use them responsibly. This means keeping your usage rate under 30%, paying your balance every month, and avoiding late payments.