Don't Let Outdated Money Advice Endanger Your Money

From Wise Bread
May 19, 2017 - 5:00am
We've all received unsolicited financial advice, often from well-meaning relatives and friends. In many cases, this advice is useful. But a lot of "classic" personal finance advice simply hasn't aged well, and is now viewed as flawed. It's just not applicable anymore in today's world. Before you blindly accept any money advice you receive, be sure to do some additional research to find out if the advice is outdated. Here are nine examples of financial tips that may no longer apply. "Find a good employer and stay forever" Many of us know an older relative that began working at a company as a teenager and then retired from that same firm four decades later. Often, they walked away with a sizable pension and even health benefits for life. (See also: If You're Lucky Enough to Receive a Pension, Here Are 6 Things You Need to Do) This doesn't happen much anymore. Job security is not what it once was. A decline in labor unions means that guaranteed annual pay increases are a thing of the past. And a pension? Forget it. There's a lot of evidence now that switching jobs periodically will result in higher pay increases. And with the introduction of 401(k) plans, retirement savings are portable when your employer changes. "Pay off all of your debt as soon as you can" This is not so much "bad" advice, it's just less than ideal. Yes, it's a fine goal to remain as close to debt-free as possible, but in the current environment, carrying some kinds of low-interest debt may be more beneficial for you in the long run. Let's say you have a 30-year fixed-rate mortgage and were fortunate enough to lock in a low 3.5 percent interest rate. Let's also say stock market returns are averaging 7 percent per year. Over time, you're going to be better off using any extra money you have to invest in stocks rather than pay off your loan early. Generally speaking, if your investment returns outpace current interest rates, there's not much incentive to pay off debt early. "Technology is a fad" There was a time when some of the most savvy investors dismissed many tech stocks because they didn't understand them. The bubble collapse of advertising-dependent dot-com companies in the late 1990s didn't help the image of this sector. But there's no denying the fact that investing in technolog


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