IFB55: The Worst Money Advice that Beginners Always Hear

Welcome to episode 55 of the Investing for Beginners podcast.  Tonight Andrew and I are going to discuss some of the worst money advice you can get.

* Invest 10% of your income
* Investing in a quick fad to make money quickly
* Try to get to cute and taking on more complexity just for the sake of it.
* Buy a ETF index fund and be done with it.
* Don’t get caught up in all the hype of the market.
* Budget till it hurts

Andrew: yeah so I kind of I kind of made a list here. It’s kind of long try that keep it I’ll try to be concise but you we always know how that goes right so.
You see all the time and the more that time goes on the more and more people go to the internet looking for advice on how to handle their money a lot of times you’ll have people talk about hey I got $20,000 I got $40,000 maybe I have an inheritance what should I do what should I do what should I do?
And then you get all these people come out of the woodwork with all their different biases and all their different ideas and beliefs and all their personal experiences and they all kind of throw it in there and some of it can be good but a lot of it’s bad.
We want to talk about why that’s bad what things that you’ll tend to hear and how to kind of process that and make sure you don’t fall into these same traps and that’s really important because this is a huge part of learning how to handle your money and that’s not even just about investing or financial freedom or personal finance it really comes down to money itself and if you think about all the time when we spend 40 hours a week most of us working for money and then a lot of us don’t even spend a couple hours within our lifetime to really learn what to do after we make the money.
It just kind of flows in the now and then it becomes just this pointless thing to put food on the table when there’s actually plenty of opportunity to make that do much more for yourself than there currently does and unfortunately like we a lot of people like to kind of bemoan the fact that’s not really discussed in school and it’s not taught in school. A lot of people don’t learn about it unless either you seek it out or you’re lucky to have somebody kind of bring that advice to you.
And so obviously financial education is really important and part of that is learning whether a lot of the common misconceptions whether a lot of the kind of average pieces of advice that people give out to beginners and what how can we interpret it and kind of tackle this tackle it and really make it useful for us instead of hurtful.
I’ll start with an easy quick one you hear this all the time you hear people say invest 10% 20% 50% of your income and if we’re really being honest it’s an unrealistic thing to expect of people because percentages when you’re talking about income that’s going to vary a lot depending on how much you bring in.
Somebody who makes twenty thousand dollars a year cannot invest 10 percent of their income because if they do that they won’t be able to pay the light bill. Whereas somebody makes a hundred thousand could easily invest twenty percent of their income and have a very cushy life style outside of that.
I think that’s something first and foremost this the percentages when you talk about investments and income and personal finance it’s one of those kind of rules of thumb that we really need to kind of put an asterisk on. I think a good general rule Dave we talked about in one of the episodes with the Richest Man in Babylon the whole 10% rule I think once you kind of reach over a certain point of poverty that becomes a good rule of thumb and there’s ways like 401ks and IRAs that we’ve discussed before in different ways that you can kind of best efficiently invest that 10%...