I loved getting to be on the Stacking Benjamins show that dropped February 6. In a game show format, we weighed in on the worst financial advice we hear. You can listen here: https://www.stackingbenjamins.com/the-worst-money-advice-ever-1800/
We sure do hear a lot of bad financial advice at Aptus. Our clients have suffered the worst of the conflicted financial advice space, and then just the well-meaning advice that friends and family pass on that’s suboptimal for their money.
Here is my hot take list of the worst financial advice floating out there in rank order.
1. Stop throwing your money away in rent. Buying a house can be great. I sure own one. But not all the time. Everywhere. In all seasons of life. I can actually point to the moment I didn’t go under contract as the most important financial decision of my life. Inevitably, had I bought THE HOUSE, a major fixer-upper that was just on the upper edge of affordability, there would probably have been no Aptus. Instead of that house, I “threw away” $425 per month away in rent, keeping all my fixed expenses low, saving aggressively, and building a nest egg large enough to walk away from a good-paying job to start my company.
Physicians get a job in April and fly to meet a real estate agent in their new town in June. It’s the cycle that happens year after year, despite the fact that 50% of physicians change jobs within their first 2 years of practice and despite having crippling student loan debt and little saved in emergency funds to withstand large home expenses. Yes, physicians everywhere, I give you full permission to throw money away in rent. In many cases, that will make you rich.
2. Spend more to get rewards points. Credit card companies created rewards for a reason—to get you to spend. Every time I get lured in by hearing of someone with a free hotel room, I get reminded that my budget works because I have every incentive to spend LESS. I have a savings account that I fund for hotels, flights, and outings, and I fill it with the coffee I don’t buy in the mornings, with the eating out that I don’t do because of meal planning, and the impulse consumption I avoid from having a strong budgeting system.
Physicians often get caught up in the rewards schemes, but here is a reminder. When you are a physician working 50-80 hours a week, time is precious and finite. Not only do the rewards points encourage spending, they cost time. Time is precious when it comes to money—not just for leisure and fun in those hours not working. But we need time to “do money.” Meal planning, coffee brewing, and budget management have to be done in these finite hours. Or makingsure you are hitting your optimal savings rate and getting those funds efficiently into investments. These tasks have an outsized impact when compared to the hours pursuing and managing rewards.
3. Silence. Yep, the worst advice I have is to never discuss money. Even bad advice isn’t so bad because it means we are at least talking about money. Society has decided we can discuss spending at large—anything you can buy, you can tell. Buy a house? Tell your friends. Buy a car? Tell everyone. But open a Roth? Oh, now that’s taboo. We have to more openly be talking about money if we want to have a chance to get this right. When I talk to my kids about something they want me to buy (like a nice car or a bigger house), I don’t just say “We can’t afford that” or “That’s my business.” Instead, I explain that we have a budget. I explain the tradeoffs we have to make and what we prioritize.
Physicians will all get richer if you start talking to each other. How do I know? I see it at conferences like the White Coat Investor and Bogleheads. Physicians learn new ways to save, get reinvigorated on savings rate and enjoying the path to financial independence in community.
While I have plenty more advice that I wish would be erased – whole life insurance, anyone?—these are the big three.
What’s the solution to all “bad advice?” A simple plan. Who needs rules of thumb or FOMO or family members pulling you aside at Thanksgiving to give their two cents if you have a plan for all your dollars?
My favorite part of financial planning is watching our clients light up when they realize they don’t have to worry about money. They just have to stick to the plan.