Popular Financial Advice You Shouldn’t Follow

Popular Financial Advice You Shouldn’t Follow

Sometimes it might feel as if there is such a constant stream of financial advice and new tips and trends1 floating around on the internet, that you may not always know which advice to follow. Especially now that COVID-19 and economic uncertainty have shaken up many people’s finances, there is more uncertainty than ever before for many people as to how they can best cope. Here are a few misconceptions that you should not follow when it comes to making the right financial decisions.

young woman on laptop

Credit is Bad
When used responsibly, credit cards can actually make you money – through rewards points, cashback and by helping boost your credit score, leading to lower interest rates on future loans and purchases. The key word here, however, is using it responsibly. It’s crucial that you make payments on time and try not to let your balances get too high so that the accruing interest doesn’t outweigh the rewards. If you have more than one credit card, that can also boost your credit score2 because you’ll have a higher total credit limit and keep your credit utilization lower.

Paying down debt is always the top priority
Debt is not all bad – there is good debt and bad debt. Knowing the difference is important, which is why we have a separate blog post written on that very topic. However, as important as it is to pay down debt, you need to first make sure you have some savings set aside. If you put all your money towards debt and have no extra money when your car or fridge suddenly die, then you are forced to add more debt in order to pay for it. Pay yourself first – build up a small emergency cushion, then put any leftover money into slashing those loans and credit balances beyond the minimum payment.

You shouldn’t keep investing during economic uncertainty
The temptation to stop investing in market uncertainty3 is stronger now we try to navigate the COVID-19 pandemic and prepare for its aftermath. The economy has fallen into a recession, but that does not mean you should stop contributing to your 401k or IRA. Retirement savings is a long-term plan that should be able to withstand the bumps that inevitably happen in the market. If you have shorter term goals, however, or are close to retirement, be sure to talk to a financial advisor before make any impulsive decisions to pull all your money out of the stock market.

There is a lot of financial advice out there, but the most important thing to do is figure out which methods work best for you. In the end, knowing yourself and determining your own path are the ultimate ways to increase your financial wellbeing.

For additional information and updates from Affinity about COVID-19, please visit https://www.affinityfcu.com/banking/we're-here-for-you.aspx

                                                   

This information is for informational purposes only and is intended to provide general guidance and does not constitute legal, tax, or financial advice. Each person’s circumstances are different and may not apply to the specific information provided. You should seek the advice of a financial professional, tax consultant, and/or legal counsel to discuss your specific needs before making any financial or other commitments regarding the matters related to your condition are made.  

1 Retrieved From: https://www.forbes.com/sites/ryanderousseau/2020/04/22/how-downturn-could-alter-fire-movement/#29e27ed95fa4

2 Retrieved From: https://www.thesimpledollar.com/credit-cards/blog/will-multiple-credit-cards-hurt-my-credit/

3 Retrieved From:  https://www.cnbc.com/2020/03/26/thinking-of-leaving-the-stock-market-amid-covid-19-youll-regret-it.html