Where finances are concerned, we have this “tried and true” mentality that often keeps us from updating age-old financial advice. We believe that if it worked in the past—for our grandparents and parents—hey, it’ll work for us and our kids, too, right?
That’s not always the case. Times, as they say, are a-changing. While it’s true that many pieces of financial advice are eternal, there are some that just don’t work anymore. With changing economic bases, advancements in technology, and new ways of doing things, it’s just a different economic and financial environment we’re in.
Old advice doesn’t really cut it anymore. If we want to have a successful financial future, we’ve got to rethink outdated financial advice and update our playbook.
You can pre-order your copy of The Turnkey Revolution, the first book release from Memphis Invest chronicling the best advice on how to safely build a passive portfolio from real investor experiences!
4 Pieces of Outdated Financial Advice Investors Must Rethink to Succeed
Outdated: Always buy over leasing or renting.
Updated: Renting can be advantageous.
Once upon a time, the American Dream included homeownership. Today, there’s not quite as large an emphasis on owning a home as there used to be, but it is still a large part of the American success narrative.
There’s this idea that renting or leasing is “throwing your money away” while buying a home is an investment that will pay off in the long run. However, that’s not always the case. We’ve seen, for instance, the nightmare of being underwater on one’s mortgage and heartbreak and financial mess of foreclosure. It’s still fresh in our minds from the market crash circa 2009.
If you buy something you can’t afford, defaulting can damage your credit score for a long, long time. Renting, on the other hand, has the advantages of fewer maintenance responsibilities. Those fall to the landlord.
You can rent your home and instead buy, for example, an investment property and focus on earning passive income!
Outdated: Your home is your investment.
Updated: Income-generating investments offer the best returns.
Outdated financial advice tells us that your home is your primary investment. You buy it when you are young and some forty or fifty years down the line, you can rely on appreciation to come through for you and you’ll be able to sell your family home for a profit when you want to downsize (or upgrade) right around retirement.
This is an “all the eggs in one basket” approach to your financial future and it’s really not the best way to go about it. You’re hoping that one investment will pay off in one moment in time, sometime down the line.
Instead, it’s far better to invest now in properties that will generate passive income for you throughout your life and on into retirement. These properties don’t rely on appreciation and aren’t as beholden to market fluctuations. It’s a far more stable and diversified way to create income for your retirement.
Outdated: Pay off all of your debts before saving/investing.
Updated: Keep debt under control, but save and invest simultaneously.
Old, outdated financial advice tells us that our first priority is to eliminate all debt first. Don’t worry about savings or investing until you get rid of those debts. The new school of financial thinking tells us that not all debts need to be eliminated immediately, nor do you ever need to wait to invest or save money if you’re managing your expenses and debts.
Holding on to your mortgage can be a good thing (there’s leverage, plus the dropping value of the dollar means that paying in advance can be disadvantageous to you) and having a few smaller, consistently paid down debts can actually boost your credit score versus having no debts at all.
Outdated: Follow your parent’s advice.
Updated: Consult an expert who is dealing with today’s economic climate.
We understand that when our parents have had great financial success and we’re looking to succeed and don’t know where to begin, it seems natural to ask them for advice. There’s no harm in doing so, but we also have to understand that copying their methods step-by-step isn’t going to automatically give you a recipe for success!
Markets change and fluctuate over time and you aren’t operating in the same conditions that they were. Their success doesn’t predict yours.
Instead, it’s far better to recruit the help of an experienced financial planner who has experience dealing with today’s economic climate.
For your financial future, you’ve got to team up with the right people. Start with Memphis Invest, where our skilled portfolio advisers will help you develop the right plan to generate passive income to secure your best financial future!