3 Dated Money Fallacies That Probably Won’t Matter in 10 Years

Keep on walkin’

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Mainstream financial advice these days either comes from your parents (by way of nagging) or from frantic Google searches akin to late-night cramming. And over the years you’ve probably experienced or come across some not necessarily bad advice but perhaps some advice that’s not that relevant to today’s digital world. A recent thread on Quora lays out perfectly some advice from back in the day that we may want to...leave there.

*Obviously, at the end of the day it’s your money and you can do whatever the hell you want with it. So you can take these with a grain of salt, but at least you’ve seen and read some potential alternative viewpoints.

1. FALSE: Buying is always better than renting

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What they say: Buy a house as soon as you can.

Here’s the thing: Unless you’re loaded or your parents are graciously helping you with a down payment (lucky!), you don’t necessarily need to rush from renting to buying. If we take into account the state of today’s economy, owning a home just might not be the smartest move to solidify your financial future. 

I don’t mean to get too conspiracy theorist on you, but Zach Pinnell, who originally answered this question on Quora, made a good point. He said, “Somehow, the majority of Americans still seem to believe home ownership is always more financially sound than renting (if you can afford a down payment).” Pinnell went on to explain that there is “a lot invested (try centuries) in the housing industry’s success and subsequent industries that rely on the idea that you have to buy a home...”

I could write an entire article on this topic and how we’ve all been brainwashed, but Pinnell explains it pretty simply:

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Zach Pinell

From Pinnell:

“Here we have a 30-year, $100,000 mortgage, 7.5% interest, taken out in 2010. Notice that in 2017, $90,678 still remains in principle after making ~ $65,000 in payments. So, in 2017, something like 93% of your payments have been interest. That changes over time… over 30 years.

“Who the hell owns a house for 30 years?

“I’m not googling it, but I’m guessing the average person sells their house after five years, paying a 6% commission to the agents (if you sell your house when you need to). Then there’s all that insurance you paid, the repairs and maintenance, closing costs, etc...”

So Pinnell makes a good point even based on 2010 figures. And let’s not forget that your home isn’t guaranteed to appreciate in value. Sure, the way the market is set up, chances are it will increase in value, but remember that it’s certainly not something you can fully bank on.

In the end, unless you’re planning on staying for 30-plus years (and in this day and age, most people aren’t) and nothing else in your life is changing, then by all means, buy that house. But if you’re the average person and you’re thinking that going from renting to buying is going to set you financially free, there’s a gamble at play because your owned home isn’t guaranteed to appreciate in value.

*One thing I do have to mention, though, is that the data above is from 2010, when rates were higher. Today, mortgage rates are at an all-time low: around 3.75 percent on a 30-year fixed loan.

2. FALSE: Invest in tech stocks

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Drew Angerer/Getty Images

What they say: Investing in tech stocks at the right time will make you rich

Successful entrepreneur Doug Armey honed in on a piece of financial advice that might be best left ignored and that is the “buy tech stocks” movement. Armey explains that during both giant tech booms, people were saying “tech is the future.” And in some instances and for some people it was, but the idea that “you can’t lose money in tech” turned out not to be true, because people did.

Suddenly some investors decided maybe it wasn’t smart to invest in companies that had a cool logo but no sales. Truthfully, tech was the future. Just not some tech companies.

So the notion that you should invest in “the next big thing” just because everyone’s gushing over it may not be the smartest idea every time. 

3. FALSE: Buying avocado toast makes your poor.

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What they say: Save money by avoiding expensive coffee or taking public transportation instead of cabs. 

Today's tactics: focused on figuring out how to discover multiple streams of income

This has always been a popular thing for people to say, (imagine an old person waving a cane is saying this to you), "if you want to be rich then you millennials need to stop spending money on $5 coffee's and $15 avocado toast." You've definitely heard it before. And while maybe spending $15 every single weekend on Avocado toast isn't the very best idea, the only way to truly be able to save money is to make MORE money.

That means that instead of focusing on curbing spending you should actually be focused on figuring out how to discover multiple streams of income. The more money you make, the easier it will be to save.

For example, if you're a teacher, I know you probably have extremely long days, but it might be worth it to work an after-school program to take in more money and/or tutor on the weekends. These aren't things you'll have to do forever, but with every industry, there's always more that can be done too.

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