The holidays are coming, and your family and friends will be giving you gifts. But they’ll also be giving you other things — an earful on the election, perhaps the common cold and definitely some questionable financial advice.
‘Tis the season. You share a few details of your life, and suddenly your cousin or uncle is suggesting what type of house you should buy, what type of job you should take and what college you should attend. And the advice your cousin is giving you may not be bad at all. But advice is not universal. What’s a smart strategy for one person may be the worst idea ever for another.
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Consider this your friendly pre-holiday public service announcement — don’t take all the financial advice your friends and family give you to the bank. It may empty your bank account. At least that’s how these consumers feel.
Rent is a waste of money. You hear this a lot, and the fact is, for some people, rent is a waste of money. For others, renting is the smartest, shrewdest financial decision on the planet, especially if you aren’t certain you want to remain in an area for years and years. When you rent, you aren’t tied down. You can move relatively easily, and you aren’t stuck paying home maintenance costs.
A.J. Saleem bought a house in 2010, shortly before he started a tutoring business, Suprex Learning, which is headquartered in Houston and also serves Chicago and New York.
He’s still living there, but if he could go back in time, he would. When he was sharing an apartment with his brother and only paying $300 a month, he had a friend who kept telling him how much money he was wasting by renting.
After about six months, Saleem decided his friend was right and bought a home. But it was around this time that Saleem was launching his tutoring business. He’s doing just fine now, thanks, but all of the money he needed to buy and maintain a house, like for a down payment and various home improvements, would have been better served going into his business, Saleem says. For awhile there, money was tight.
“I eventually had to borrow money from my parents,” he says.
If there’s a lesson here, it may be that your friends mean well, but that doesn’t mean they know what they’re talking about, or know what’s right for you.
But Saleem puts it more charitably. “The one lesson I learned is to do your own research. I actually [dove] into the idea of buying a house rather than researching and calculating the costs of both. I still can’t blame my friend because I make my own choices,” he says.
[See: 10 Oddly Practical Things You Can Rent.]
Your stockbroker knows more than you. Actually, odds are, he or she does know more, maybe a lot more. But not every financial advisor is worth the commissions or fees they’re paid, and if they’re wrong about a decision, spectacularly wrong, you’re the one who will take the bath. So Richard Laermer, CEO of RLM Public Relations in New York City, has a word of caution for anyone playing the stock market — if you have a bad feeling about a stock, listen to your gut.
“In the ’90s, when I played the market a lot — hey, it was the go-go ’90s — I had a broker,” he says. “For some reason, he told me to buy Compaq as it was dying. And I did. A lot of it.”
Laermer watched his stock plummet, but then, to his surprise and joy, the stock shot up on rumors of a sale. It was almost back to where he bought it.
So he called his broker and told him he wanted to sell. The broker talked him out of it.
“This idiot wanted me to hold. I listened. I figured he knew what he was talking about,” Laermer says.
In many cases, the broker probably would have known what he was talking about. In most situations, Laermer wouldn’t have been foolish to listen to him. But in this case? Laermer ended up losing $50,000.
Condos are easier to manage than houses. It does sound great. You buy a condominium, and it’ll be easier to live in than a home. After all, you don’t have to mow the lawn or shovel the driveway. If your furnace or roof has a problem, you call the maintenance guy to fix it. A lot of people love the condo life.
But it isn’t for everyone.
Kim Beeler, who has her own company, Beeler Marketing in Lake Oswego, Oregon, bought a condo in 1999 and sold it in 2005; if she could undo having made the purchase in the first place, she would. At the time, she was freshly divorced and listening to her then-boyfriend, who urged her to move out of her house and buy a condo. Several other acquaintances also pushed that idea.
[See: 13 Money Tips for Married Couples.]
“I think there is, or was, a perception that since I’m a woman I wouldn’t want to take care of a house, yard, etc., by myself,” Beeler says. “There was a feeling that a condo would be easier and less costly to maintain.”
For many, that may have been. But Beeler didn’t feel that way. She didn’t appreciate the homeowners association fees (around $200 a month). She was also taken aback by the special assessments that would occasionally spring up (special assessments are extra money that condo owners have to pay for projects that, for whatever reason, can’t be paid via the homeowners association fees).
What did she learn from her experience? “Today, I believe big decisions like home ownership ideally shouldn’t be made during an emotional time or when you feel pressured into doing it,” Beeler says.
Beeler almost followed her own advice. She was going to move in with a friend who offered her a room for rent, so she could look around and think harder about her options, post-divorce.
“Looking back, that was great advice that I didn’t take because of pressure as well from the man I was dating. He wasn’t too happy about the idea of my moving in with a long-time guy friend while I tried to figure out where to move,” Beeler says.
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Money Myths Bite: What 3 People Learned From Following Bad Financial Advice originally appeared on usnews.com
