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6 Pieces of Dumb Financial Advice That Sound Smart at First

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Financial Advice

If you rely on Google for most of your financial knowledge, you already know that the internet is abuzz with terrible financial advice. There are articles abound advising you to avoid using credit cards, to pour most of your money into that flavor-of-the-week stock, and to use personal loans for debt consolidation if you have bad credit, among some other true gems.

In this article, we’ll cover 6 pieces of financial advice that might sound smart at first but are actually quite dumb. Warm those hands up for some serious palm to face action because we’re getting right into it.

Financial advice you should never follow

1. Don’t use a credit card

Not using or owning a credit card can initially seem like a great tip. After all, without a credit card, you won’t be tempted to rack up debt/accrue interest, right? While that might be technically correct—and while not spending money you don’t have is a great practice—not using credit cards can also hurt your credit score. Plus, lenders look at whether you have a credit card and your credit history when deciding whether to offer you a loan.

2. Leave your money in savings instead of investing it

The average savings account APY is 0.04%, meaning that leaving all of your money in a typical savings account is about as helpful as burying it in a hole in your backyard. While no one can time the market and it’s possible you could lose some money in the short-term, being in the market pays off in the long run. Translation: Put down the shovel and get ready to invest.

3. Take out as many student loans as you need for your dream school

Sure, taking out a ton of student loans for your dream degree might sound great at first. But it’s important to carefully consider the pros and cons of student debt before you go into debt for school. With borrowers owing an average of $351 monthly for their loans, you should think about the ROI of your chosen degree and grant/scholarship opportunities before you blindly sign away.

4. Invest all your money in one high-performing stock

Why wouldn’t you want to bet all of your money on that one hot stock that’s promising a double-digit rate of return? Isn’t it way more exciting and promising than passive investing? Investing the whole shebang on just one stock is incredibly risky. If that particular company tanks, all of your money will vanish into thin air. To reduce market risk, diversify your investments. One way to do this is through mutual funds, which allow you to own small pieces of hundreds of companies. Ever heard of not putting all of your eggs in one basket?

5. Spend a lot with a 0% APR card (after all, it’s free money)

Some credit cards have 0% promotional periods during which you don’t have to pay any interest on purchases. Simply buying items because they’re interest-free can feel like found money at first, but this fiscal illusion will come crashing down once the promotional period ends and the regular interest rate kicks in. If you haven’t paid your card in full, you’ll owe high compounding interest on your unpaid balances.

6. Consolidate debt if you have bad credit

A debt consolidation loan is when you receive a loan from a lender and use it to pay off existing debts. It can help you lower your interest rates and simplify bill paying. But if you have a bad credit score, it probably isn’t a good idea. If your credit is bad, your new interest rate could be even higher than your old rates. And if you’re already struggling to make your monthly payments, debt consolidation won’t help you since it’s just relocating your debt, not actually eliminating it.

By Stefanie Gordon

Stefanie Gordon is a content strategist with over a decade of professional writing experience. She is a former financial journalist who has spent the last several years working in digital marketing. She specializes in content strategy and creation for large and small businesses in finance and technology.

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