Have you ever stopped to think about the one, crucial overlap between sharks and your favorite financial speakers and writers?
You probably haven’t, and while I don’t know who you gravitate towards, I am going to be so bold as to assume that I know what the overlap is.
We’re living in what I am calling the second wave of financial expertise. The first wave was surfed by the Suze Orman’s and the Dave Ramsey’s of the world, and it worked in a time when pensions were a thing and you could buy a house for $200,000 outside of middle America.
However, since the Great Recession, the birth of the gig economy, the death of the pension and the rise of the 401(k), THINGS HAVE CHANGED.
And by things, I mean money and the financial advice we give. And to continue to give advice from a world that literally no longer exists is dishonest, selfish, and dangerous.
Thanks, I Hate It; First Wave Financial Advice That Needs to Die
So, if you can hear me from my soapbox, I humbly submit to you three pieces of financial advice that can go die in a fire.
Three Pieces of Financial That Need to Die
Debt is good for your credit score
NO, NO, NO. I don’t want to yell but I do want you to leave this article crystal-freaking-clear that debt is in no way good for your credit score.
This is a persistent myth that seems to really thrive in communities of color, who of course, have historically been excluded from financial tools and means of access.
The thinking goes that if you have debt, you must make payments on it, and that paying off the debt helps your credit score. INCORRECT, my lovely readers. Rather, two of the biggest things that help your score are: using less credit than you have access to and making on time monthly payments. Debt had nothing to do with it, so don’t delude yourself into thinking that your credit card debt at 28% interest is actually a good part of your financial life.
Real estate is always a good idea
Listen, no it’s not. House are expensive to buy, expensive to maintain, and can be money pits. Not to mention that some people literally have their houses stolen from them, for a variety of reasons and scams!
Not to mention that not everyone wants to even own real estate, or that it might not be such a hot idea depending on where you live. Downtown Manhattan? Hard place to buy. The Florida coast? Might not be there in 20 years.
I’m not bagging on real estate. It absolutely can be a great way to stabilize your financial life and grow huge amounts of wealth. But to worship at the altar of real estate over all other financial decisions is hot nonsense.
Don’t invest until all your debt is paid off
Yes, Dave Ramsey is full of crap and I’m here to tell you about it!
If you love Dave, great. You can love Dave, I don’t care. But you have to know that this particular nugget of his is ACTUAL BAD ADVICE.
Let’s say you have $30,000 in student loans and $5,000 in credit card debt. (we won’t even get into the whole mortgage thing.) That’s a cool $35,000 in debt.
The 2016 real median earnings of men and women who worked full-time, year-round was $51,640 and $41,554, respectively. (Shout out that wage gap!)
Since we’re a woman focused company, let’s stick with $41,554 as our annual income. That’s $3462 a month, before taxes. We’ll subtract $7,000 for taxes, as a rough estimation. That leaves $2879.50 a month to live your life.
Assuming you pay:
$600 in rent, $150 in healthcare, $50 in gas, $75 in utilities, $50 in internet, $80 in car insurance, $50 cell phone bill, $65 to savings, and $200 in groceries, you’d spend $1,320 a month. Please note this doesn’t include drinks or meals out, retirement contributions, Netflix, cable, prescription medication, or childcare.
That leaves us with a cool $1559.5 a month! Awesome. In this fantasy world, you can throw all of that at your debt. It will take you 22.4 months to pay off your debt, not even including any interest payments. (Again, fantasy world.)
Do you want to sacrifice TWO YEARS of investing to pay off this debt? NO. NO YOU DO NOT, ESPECIALLY IF YOU ARE OF A MARGINALIZED GENDER.
Two years of investing is a lot of time! And for people who earn less and live longer, two years of investing could literally mean retiring OR NOT.
Some financial advice is total nonsense that will hurt you more than it will help you. We have to accept that in a changing world, financial advice needs to change as well.