Getting your finances right has to be one of the hardest things to do and that’s before we throw poor advice into the mix. Depending on your upbringing, disposition and examples you’ve seen around you there’s a lot that can be misunderstood. There’s some bad advice that is passed around by people as good advice and many still believe it. Here’s a look at some of the most common bad financial advice, why it’s bad and what to believe instead.
Stay away from debt
Yes, in Zimbabwe especially this seems like good advice on the surface. Firstly this bad advice because a debt denominated in Zimbabwean dollars may decline in value given the exchange rate direction. Secondly and more importantly debt in itself is not inherently bad, what tends to determine what is good or bad debt is the underlying reason for the debt. Borrowing to buy groceries and pointless luxuries may not be such a good idea. Borrowing to increase your earnings, invest in your productive capacity or to better manage your situation with positive results may be worth it. It is important to evaluate the net effect of the underlying activity. Also while we’re here when looking at credit based agreements look at the total payment and not just the monthly instalment. You end up paying one and a half times the price on short term instalments and even more on longer-term lending.
You pay more for quality
This is seldom the truth. Please understand there are cases better quality products are priced higher in markets but the price is really an unreliable indicator of value. Price is what you pay while value is what you receive. The two are easily confused. Quality is the suitability of a product for its purpose, so quality cannot be generically defined. While one person may want a tablet for viewing video another may want a tablet for reading e-books. So each individual has their own definition of quality. Do not automatically pay more for something because it is higher quality as told by a salesperson. Ask questions, do the research, be sure you know the difference and what you paying extra for.
Invest in the hot new thing
Almost always this advice lands someone in a spot of bother. We’ve seen many cases with foreign currency trading, cryptocurrency, MMM and many other hot new investments that had people going crazy. I’m not against investing in any of these ideas, I simply encourage learning more about the investment and what makes it tick. Cryptocurrency, for example, has no underlying income-generating asset and therefore the only money in cryptocurrency is generated when holders sell crypto. Ultimately if you decide to get into crypto know that the only way to get money out of it is to grow the demand for it so you can sell high. This is why your friends who are into cryptocurrency are always pushing you to join. Knowing that this is how you will make your money, is that something you can commit to? MMM had a similar model albeit with a sinister core. Multi-level marketing schemes have the same profile. Whatever the investment learn about it first and understand how and where the money is made.
This has to be approached carefully. There is a time for diversification whether it’s in business or investment however it is seldom at the beginning of your journey. At the beginning of anything you most likely have a lot of energy and little resources. Diversification spreads your resources thin. Take the example of someone who has started a business recently and started to gain traction, then the opportunity comes to start a business in a different area. It sounds like a good opportunity but may not be. Yes Elon Musk heads both SpaceX and Tesla but he leverages his time through other people. You will have to divide your time between the two. Sure you can do that however it means you spend less time on getting the practice, education and experience that will make you great at either. Instead focus and dedicate yourself to mastering one thing. Dedicating your time, effort and resources to getting very good at ome thing and then diversify.
If you can afford it do it
Another Ricky one here. It’s very easy to fall for this one but it is also one of the concepts that wastes time and resources like no other. Not all ideas are equal. Many times you will come across ideas that look really good on the surface and since you can afford to pay for it you go ahead and make the purchase. Interestingly, the same can be said of how you spend your time. In some cases these purchases end up on a pile of unused stuff or you end up giving the things away because you realised only after purchasing you had no use for them. Yes you can afford to pay for it but is there a real use case for that thing in your life? Firstly do not make purchases in a rush. Ideas like the 90 day rule can help with this. Take time to evaluate if your desire is driven by a real need or just good marketing.
It’s never easy, especially in a world where everybody and their dog has financial advice for you. Have you come across any of these pieces of advice lately?