Cliché Money Advice Financial Planners Say You Can Ignore

Cliché Money Advice Financial Planners Say You Can Ignore

  • There’s some cliché financial advice I’ve heard over and over that financial planners say to ignore.
  • “Renting is throwing money away” and “a credit card balance is good for your credit score” are examples.
  • The advice to max out your 401(k) and buy crypto also isn’t right for everyone.

Four years ago, on my 30th birthday, I set a goal that this decade would be the one that I’d clean up my finances. I wanted to stop making costly mistakes with my spending and lack of savings, and get on track for retirement and other goals.

Since I wasn’t the most financially savvy person, I decided to ask anyone I could for advice and document what they said in a notebook. After a year of doing that, I had a few pages of advice from friends and financial professionals. One thing I noticed was that a lot of the advice I was given was quite common and even a little bit cliché.

That made me wonder if frequently passed-along financial advice always rings true. It turns out that’s a big no. Just look at what these financial professionals said about cliche advicé they often hear and believe shouldn’t be followed. 

1. Renting is throwing away money

At least once a month, I have someone tell me I’m mismanaging my finances because I’m renting an apartment, and that’s practically like throwing money away. But that never seemed quite right to me. 

While there are perks to being a homeowner (like tax credits and equity), there are also benefits that come with being a renter (not having to pay


homeowners insurance

or property tax, and not having to foot the bill for repairs for starters).

Financial planner Danielle Miura confirmed my suspicions.

“Between the mortgage payment, maintenance costs, insurance, and taxes, renting might be a better option for most people compared to owning a house,” says Miura.

While some people have a goal of being a homeowner, Miura says that not everyone wants to do that. For some people, renting can be a better solution too if they are  trying to focus on establishing themselves financially, have plans to move within the next five years, or prefer not to do maintenance.

2. Crypto is the future 

Lately, all the financial advice my friends are giving me has to do with cryptocurrencies. They keep pushing me to put more of my cash into digital coins, but I’m hesitating to follow that advice.

Miura says that when you hear the cliché advice that cryptocurrency is the future, it’s important to take a step back and look at your own financial goals before rushing to invest in something that other people are pushing as the next best thing.

“This doesn’t mean that crypto can’t be a good investment, however it is important to analyze your investments before pulling the trigger,” says Miura. “Those who think that they can predict the future of an investment are usually wrong.”

3. Always max out your 401(k) 

When it comes to retirement planning, there’s popular advice out there around maxing out your 401(k) contributions before you do any other type of saving or investing. Financial planner Gary Grewal says that’s not well-suited advice for everyone.

Grewal advises that while 401(k) contributions can help you reduce your taxable income and save for retirement, it’s not always the best or the right option. That’s because some people have unimpressive 401(k) plans with high-cost funds, while others might be trying to pay off debt or get ready to buy a home, and that is currently more important to them.

“People should consider their financial priorities and fund them accordingly,” says Grewal. 

If possible, Grewal recommends focusing on getting out of consumer debt, building a three-month emergency fund, and then funding your 401(k). And then if there’s money left over, it’s best to direct it to your first priority goal that’s important to you.

4. Keeping a balance on your credit card will improve your credit score 

One of the financial goals I always have in mind is around how to improve my


credit score

so it can come in handy when I need it for a personal loan, apartment application, or to get a new credit card.

Financial planner Andrew Latham says that when you hear the advice that carrying a balance on your credit card helps improve your credit score, know that it is a complete myth.

While Latham says you do want to keep your accounts active, there is no benefit to carrying a balance. 

“Carrying a balance on your credit card actually increases your credit utilization ratio,” says Latham. “Since credit utilization is responsible for 30% of your credit score, it’s a good idea to keep it as low as you can.”

Instead, to help improve your credit score, Latham recommends using your card regularly but paying off the balance in full before it’s due.

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