Common finance tips that can backfire
Let’s face it, finance tips there is an overwhelming amount of information online surrounding the topic of financial advice, with billions of results on Google when searching for “financial advice”.
With so many experts out there pushing their own experiences and expertise, it is no surprise that, although the majority of the advice is positive, some of this information can also be detrimental to your financial health.
When researching online, you have to take what you read with a pinch of salt and apply some sense to the advice. Here at FJP Investment, we feel it is important to share some of the worst advice we have seen online so that you can keep your wits about you were you to see this elsewhere.
Being in debt is bad
The first and perhaps most frustrating piece of “advice” we see regularly is that debt is inherently bad. Debt, when used correctly, is a very common way to grow your overall wealth.
Debt allows you the greater financial flexibility to leverage larger purchases – think a mortgage. If limited and controlled, people can invest in wealth-building opportunities. On the topic of debt, a number of debt investment opportunities are surfacing in the alternative investment field, highlighting the value of debt to both a borrower and investor.
Invest in this ‘up and coming’ industry or stock
There are opportunities to get ahead of the curve and invest in highly profitable industries, a good example of this is in the rising market of cryptocurrencies, bitcoin being a standout example here.
However, these opportunities are few and far between, with many of the latest trends turn out to make a loss for many aspiring investors. Check the source of the information to ensure the recommended investment opportunity is not a paid advertisement and do your own research into the industry or technologies mentioned to make sure you know what you are investing into. You can usually gauge the viability of the investment by seeking genuine viewpoints.
This is relevant also for stocks. You see a jump in stock and assume this trend will continue. However, chances are if there is news surrounding the stock, you are probably too late to the party to truly capitalize.
Financial institutions monitor stocks on behalf of investors and are likely to have driven the price of the stock up or down before you have had a chance to purchase. If you are interested in investing in stocks, a financial institution with good previous experience will be the way to go to maximize your returns, though always poses a relatively high degree of risk.
Finance is black and white
Going back to the previous issue we have, many paint finances as being black and white. When researching you will find that you should “never do this” and “always do that”. However, for most, this is not always possible.
Taking debt as an example again. Sometimes life happens that affects our financial position, an unexpected hospital trip or redundancy for example, and you may find yourself in an unfavorable position that in all honestly can no longer be avoided. Most people will face this at some point in their lives.
Lots of advice will say you should never have debt and always pay credit cards in full, but this might not be realistic for you. You need to critically evaluate your current position and find ways to overcome this that will likely go beyond internet research. Speaking to your bank or a well experienced financial planner to aid you here will be highly beneficial.
Plan for retirement early
Simply putting money into your retirement without a plan B can often result in less financial dependence when you do reach retirement.
A better, more viable approach would be to have a multi-channel tactic to financial independence. If you were to invest the capital into alternative areas at an earlier stage in your life (or even soon before retirement) you are likely to be in a better financial position.
There are many examples of this. Investing in property, for instance, is a fantastic way to secure greater financial independence. What you choose to do with the property is up to you but using the additional property for rental purposes allows you to realize a steady source of income. Add to this the potential for capital gains on the property, inflating the sale value of the house, your money will go a lot further using this tactic.
Investing, if done wisely, will also increase disposable money over a retirement pot. As touched on earlier, investing in the rising number of alternative investments can yield well, yet should only be used with excess money – not what you rely on to live!
A form of debt investment, a loan note investment in the property sector is the fastest-growing investment in terms of popularity with good reason, some secured loan notes are returning as much as 15% over 12 months. Do your research here, but there is a lot of potentials to make your money go further than in a retirement pot.
Passive investing is the only viable option
With the financial advice, you find online generally broad and not customized to your personal situation, it is easy to clasp onto a bit of information that would appear relevant and roll with it.
With a lot of the attention currently on a passive investment strategy, although a viable option for some, is not applicable to everyone. Make sure that you critically analyze what surrounds a strategy being adopted by the mass and understand it is sometimes a better idea to go against the grain and do your own thing.
Many of those invested in the financial media space have higher levels of disposable income looking to secure better returns, this may not be the case for you (and many others researching this). Have a plan that works for you, weighing up risk and reward and choose what’s best for you following the above advice.