‘Skip the latte’ & other terrible financial advice


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Reasonable sounding financial advice can be repeated so often that we come to accept it as truth. It’s only upon further consideration that we begin to rethink these financial platitudes.


What do we mean? We’ll take a look at several pieces of monetary wisdom that you’ve likely heard over and over – and maybe have even uttered to yourself – and explain why these cash credences are false.


Skip the Latte To Save for a Home or Retirement

This advice has been fairly popular for a few decades, but in the last few years, some financial advisors have pushed back. If you’ve been hearing this your entire life, you’ve probably accepted this as gospel. Maybe you’ve even preached it to your adult kids or younger coworkers.

The sentiment goes this way. Buying high-priced coffee at a coffeehouse is expensive, so instead of spending $5 or $7 on a drink, you’d be better off investing that money in a retirement fund. This belief does have merit.


According to data from the market-research firm, the NPD Group, an average cup of coffee costs $4.90. If you spend $4.90 every day, for a month, that’s $147, which may not sound bad until you realize you’re spending $1,764 per year on coffee. That’s a significant amount of money that could have been invested in your retirement fund. As any financial advisor will tell you, money invested will grow, thanks to the magic of compound interest.


For instance, if you run a compound interest calculator set for 147 months and a 5% rate of return, after ten years you would have $22,827, $17,670 from saved money and $5,187 from investment returns. Over 20 years, that same approach would net you $65,318. Not a small amount of money at all.


On the other hand, that’s 20 years. Do you want to forgo coffee shop meetups with friends for a good duration of your life? That’s 20 years of quality conversations shared over coffee, gone. With the median home sale price at $440,300, skipping coffee for 20 years won’t get you a 20% down payment on a home either.



Look for ways to trim your budget – but focus on expenses that aren’t going to remove joy from your life. How you spend your money is often similar to dieting. If you sacrifice everything you like, you’re probably going to give up on eating healthier. If all you do is save money, you may become discouraged and blow your savings on an impulse purchase.


So, instead of ditching your coffee, maybe you stop getting your car professionally washed and do it yourself – and put that money into savings. Or if you hate that idea, you could spend a day looking for new health insurance or comparison shopping for new car insurance, preferably purchasing plans that still offer quality coverage but are less expensive than your current plan.


Because your coffee habit is reinforced daily, it may be the first thing you think of to remove. However, considering less commonly thought of expenses, like your homeowner’s insurance policy, can help you save even more money.


The bottom-line is, if you feel like you’re overspending, trim your budget. But don’t be mean to yourself. You shouldn’t feel guilty for spending money on simple things that bring you joy.

Renting Is Flushing Money Down the Toilet

You hear that a lot from a lot of people – and it’s an argument a lot of renters make to themselves when they’re trying to justify spending a lot of money on a new house.


But whether you really are “throwing money away on rent” depends on where you are in your life. If you’re not ready to buy a house because you don’t have enough saved for a downpayment, you aren’t wasting your money on rent. You have to live somewhere, and people save a lot of money by renting – since the landlord or apartment manager will be taking on expensive and time-consuming tasks like replacing old appliances or repainting walls.


It’s true that a house is an investment; it will likely increase in value over the years, and one day you could sell it for a lot more money than what you initially paid. Also, if you have a fixed-rate mortgage, your mortgage isn’t likely to significantly climb over the years. It can still go up, thanks to things like property taxes, but chances are, if you buy a home, as time goes by, your mortgage payment will stay relatively steady. The same can’t be said for your monthly rent, which may significantly increase over the years.


So there are plenty of smart financial reasons to buy a house. But if you do it too soon, you could find that your salary isn’t sufficient to care for a home. You also lose the ability to be more mobile after you purchase a home. If you want to leave your community and move elsewhere, it tends to be far easier when you’re a renter instead of a homeowner.




Stop berating yourself for “wasting” money on rent. If you want a house, great, but there is no rule that you have to have one, or one right now, just because you think the timing is right. If you’re trying to figure out if you should be a homeowner, then you should do what everybody should be doing:

  • Keep saving money. If you want a house, you should start saving money for a downpayment. Banks and personal finance experts typically recommend 20%. Though you can buy a house with far less than this gold standard, you should evaluate if your salary is sufficient to make your scheduled payments. If you aren’t sure if you want to buy a home, save money anyway. You can never have too much money.
  • Try to pay down your debts. This will put you in a better financial place to buy a home in the future.
  • Work on building your credit score. If you have a high credit score, you’ll receive the best mortgage rate available.

In short, a solid financial foundation is the best bedrock for your future home.

You Don’t Need an Emergency Fund if You Have Credit Cards or a HELOC

It’s true that if you have a line of credit or credit cards with a lot of available credit, you could use that if you were in a financial jam. But it isn’t a smart way to manage your money.


After all, if you’re suddenly hit with a $5,000 car bill that you put on a home equity line of credit, also known as a HELOC, you have to pay the loan back. If you pay for those car repairs with your credit cards, again, you need to pay those back, too. Even if you have an 0% APR credit card that allows you a lot of time to pay off the loan before accruing interest, you still have to pay off the card eventually.


Ideally, you’re only going to use your credit cards for short-term loans. You’ll pay them off every month, and you’ll get cash-back rewards or miles in exchange for doing that. In other words, use your credit cards responsibly. Let your credit cards pay you back for using them.

Your home equity line of credit, if you have one, can be used to fund an emergency, home improvements, your kid’s college tuition or that $5,000 car bill, but you shouldn’t use a HELOC casually. You still have to pay it back, and because it’s a line of credit, you will pay interest on any money you borrow against the equity on your house.




Obviously, create an emergency fund. You could do it in an interest-bearing savings account, too, and then you’d make a little money as you put it away.


If you have $5,000 in a savings account, and you drain that to pay your mechanic, you only have to pay yourself back. And you should pay yourself back. That way, you have money for the next emergency that inevitably arises. Even if you take a while to pay yourself back, chances are you’re still going to be nicer to yourself about the delayed payment, than a credit card company would. And it’s just a hunch, but you probably won’t charge yourself a lot of interest, either.

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This article originally appeared on MoneyGeek.com and was syndicated by MediaFeed.org.

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5 ways to achieve financial security


We all have a vision for our financial futures, whether it’s a vacation home on a tropical beach, a completely debt-free (and work-free) retirement, or selling everything to buy a cabin on that cruise ship that travels the world. And while each of our dreams is uniquely personal, they all have one thing in common — they probably aren’t free.

Whether dreaming big, small, or somewhere in between, achieving financial security might be one way to make it a reality.

The government definition of financial security is “a state of being wherein a person can fully meet current and ongoing financial obligations, can feel secure in their financial future and is able to make choices that allow them to enjoy life.”

In other words? It’s being able to pay the bills (without having to check account balances first), and not being worried about where the next paycheck is coming from. But beyond the physical state of having the money when it’s needed, financial security is also a state of mind.

Related: Are you bad with money? How to know and what to do


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Perhaps the most important aspect of the definition above is the part that says “able to make choices,” because deciding what it means to be financially secure is entirely each person’s choice and how they answer one question: “What are you financially okay with?”

For some people, it’s all about the numbers — how much they own, how much they owe, the size of their portfolio, or their net worth. But for others, it could mean traveling the planet with all their earthly possessions in a backpack, working odd jobs wherever they land until they make enough money for a ticket to their next destination.

Talk about opposite ends of the spectrum.




For those who haven’t received a huge inheritance or won the lottery, achieving financial security is likely to involve lots of hard work, determination and a DIY attitude.

Why? One reason is because the safety nets intended to protect Americans in retirement are starting to unravel. The Social Security trust fund is on the way toward depletion sometime after 2030. And that may sound like it’s far enough in the future for flying cars, but the reality? That’s only a decade away.

The good news is, it’s never too late to get in the game. And achieving financial security may even help achieve emotional wellness at the same time. Win-win!

Here are a few smart strategies that could help with laying out a financial security plan.




Financial goal-setting can be like jumping ahead to the last chapter of a book. It starts with the endgame, such as paying for kids’ college, traveling, or upgrading a home or vehicle.

From there, “reading” goes backward by breaking those goals into bite-size steps until the arrival at chapter one — an overview of the current situation and a plan to meet those long-term goals.

Short-term financial goals could include things like paying off high-interest debt, student loans or car loans, increasing a credit score, or growing an emergency fund.

Once those are achieved, money could be shifted into longer-term planning, such as retirement, buying or upgrading a home, paying off a mortgage, or investing.

No matter how long it takes, checking something off a goals list can be a huge feeling of accomplishment, as well as motivation to start the next chapter.





As a good witch from the North once said, “It’s always best to start at the beginning.” And when outlining a plan for financial security, that can mean taking a refresher course on personal finance basics.

Getting reacquainted with simple concepts like avoiding credit cards, paying bills on time and creating a budget could be a good way to help focus on a plan that’s all about individual goals.

It could also help kickstart a habit of tracking cash flow, because creating a budget that curbs spending isn’t likely to work if where the money is going is a mystery to begin with.

And remember that joy of checking off boxes? Every time money that used to be spent instead goes toward a savings goal, it could trigger that same feeling of accomplishment.




This strategy isn’t about stashing cash under the mattress. In 21st-century terms, keeping money safe is more about making decisions that will protect an investment.

Tactics like diversifying a portfolio to include some low-risk investments, cash-based savings investments, or even commodities, can help keep that portfolio steady if the market has a bad day.

It could also be as simple as keeping finances organized so it’s obvious what money is where, knowing the penalties and late fees on each account, when bills are due and how much interest is being earned.

And when much of today’s money management is done online, keeping money safe can also mean protecting identity, passwords and offline financial documents.


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If those monthly credit-card payments didn’t exist, where would that money go instead? Paying off debt could free up a potentially big chunk of money to put toward those big dreams. And knowing calls from collectors will no longer be a worry can provide real peace of mind, too.

Creating a debt-payoff strategy can take just as much time and effort as creating a financial wellness plan, but if one is dependent on the other, it’s an essential step.

Two popular methods include the debt snowball, which calls for paying off the lowest balance first and then applying that entire amount to the next-lowest balance (on top of the minimum), and the debt avalanche, which is similar but focuses on the highest-interest debt first.




Saving and investing are two similar concepts but have many differences. One of the biggest is risk. One school of thought is that the shorter term a goal is, the less risk should be taken.

If, for example, someone wants to build an emergency fund equal to three to six months’ salary, they might decide that a high-interest savings account is the safest route (it can also provide the easiest access to money in a pinch).

For the longer term, there’s goals-based investing, which is different from traditional portfolio investing in that instead of focusing on which assets will give the best returns over a period of time, strategy is adapted to meet individual needs.

An investment strategy to save for a down payment, for example, is different both financially and psychologically from saving for retirement in 15 years or more.




The “How to Achieve Financial Security” list can be long and varied, but as the old saying goes, there are two ways to make money: You work for it, or make it work for you.

One way to put money to work could be to make investments that will earn the best returns. For example, contributing the maximum to a 401(k) that an employer is willing to match at 100%.

It’s like doubling an employee’s contribution. Add to that the magic of compounded interest, and money can seem to grow right before your eyes.

Learn more:

This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.

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