Where you should deviate from the pack will depend on your financial goals, but we’ve highlighted a few areas where it may be worth reconsidering what you know about money. What can you achieve by coloring outside the lines?
Debt And Savings: A Debate
Since savings accounts earn very little interest, most people will tell you to pay off your credit card and loan debt before you start trying to save. What many people don’t realize, however, is that for those who’ve gone through a sustained period of unemployment or have been working minimum wage jobs, it may take a long time to work all of that debt down. Couple this with expenses like rent that need to be paid from your checking account, and this ideal can start to fall apart.
By saving some money at the same time that you’re paying down debt, you may be able to move to an apartment with more employment options nearby or afford a car that allows you to travel to a better job. Sometimes you need to save – then spend – in order to achieve a position where you can effectively pay off debt.
Considering Your Balance
Another common piece of financial advice is to pay the balance on your credit card off each month, and while this is part of building a good credit base, realistically many of us would never get credit cards if we could afford all of the expenses we use them for on a month-to-month basis. This advice is similar to telling a company that they should only post marketing content in real time – there are a lot of effective things you can do beyond office hours, just like there are expenses that make sense even though they fall outside your budget.
When money is scarce or an emergency occurs, and your credit card is the only option, don’t worry. It’s okay if sometimes you can’t pay the whole thing as long as you can keep paying more than the minimum.
When you’re starting out as a young person, some financial advisers will tell you that the percentage of your savings in stocks should be 100 minus your age – and this may be some of the worst financial advice out there. For those still struggling to pay their bills or who have little market knowledge, trying to learn to invest is a poor use of time and money. On the other hand, there are young people who have substantial childhood savings and understanding a little bit more about stocks. Telling these two individuals to approach the market in the same way doesn’t take into account the knowledge gap, even if it’s based on resource proportions.
Stop holding yourself to other people’s financial rules and spend some time reflecting on factors like your personal income, debt level, and financial goals. It’s worth having rules, but they should reflect your spending and savings style, not the dictates of distant financial managers.