The people in your lives will always have opinions about how money should be used and spent. Whether you're hearing this from your financial advisors or from your friends, you should always take their advice with a pinch of salt. Not all their advice is going to work for you.
Here are eight common pieces of money advice you would be better off ignoring, or at the very least, assess thoroughly for yourself before you follow it.
1. Don't spend using your credit cards
This one is an evergreen. People always advise you to only use your credit card in emergencies. Or they say that credit cards are like drugs; Evil things that only the desperate would use often.
We object to this advice. The only circumstance when you should not use a credit card to make a purchase is if you are incapable of self-control and will definitely rack up debt that you cannot afford to pay.
Other than that, credit cards are great - they give you interest-free money for a month and reward you in the form of points, rebates, discounts or air miles.
2. Buy interest-free household items
Buying your whole home on interest-free loans from Courts when you just get married is something we don't advocate. This habit of buying on credit may get out of hand very easily.
Apart from this, there are also some very real problems you have to deal with including:
1) you lose track of your monthly expenditure requirements as you rack up more debt;
2) your credit card limit will be reduced by the amount of your purchase;
3) you probably won't enjoy any reward points on such payment plans;
4) you have to pay administrative fees even if you think it's interest-free; and
5) you'll probably be stuck with the annual credit card fee as you can no longer threaten to cancel your card.
So think twice when you're decided to buy anything interest-free again in the future.
3. Buy in bulk to save money!
This is intuitive right. You buy more, you pay less per piece of product. But the merchants do not mind this as they earn more profit per customer. Win-Win.
If you're going to buy things that you won't use often just because they're cheaper in bulk, what will happen is that 70 per cent of it will get lost in storage and become junk after a while.
So only apply this rule to products that you use very regularly or can buy with friends and family to enjoy the bulk discount.
4. Just invest in blue-ship stocks and forget you even have them for the next 25 years
This seems like very smart advice financial experts may give you. But doing this will severely harm your portfolio. Here's why:
You need to rebalance your portfolio to ensure you're taking on risk that you are willing to be exposed to. You can be investing in index-linked ETFs rather than one blue-chip stock. This will expose you to less risk and just about the same amount of returns.
5. Top up your (CPF) Special Account from your Ordinary Account
This advice could be great…for other people. You need to assess whether doing this will suit what you are aiming for in life. If you're planning on buying a home or a residential property for investment in the near-term, then you need as much money in your CPF Ordinary Account as possible so you don't have to fork out more in cash.
Some advice can make a lot of sense and be really great for other people. That doesn't mean it works for you.
6. Automate all your bill payments through GIRO
GIRO is one of the most convenient ways to settle all your payment responsibility hassle-free. However, using GIRO also means you may slowly lose track of what you're paying for. Some repercussions of this may be continuing to pay for a useless magazine subscription you applied on a credit card you don't use anymore or losing track on how you're spending your money in order to rejig your lifestyle to suit your current requirements.
7. Pay off your home mortgage as fast as you can. Save up extra money and repay in bulk every few years
On surface, this seems like a well-intended piece of advice that should be a no-brainer. But with your mortgage loans at 2.6 per cent, we think it is quite possible to find investment opportunities that beat this rate.
In fact, the STI ETF has returned an annual average of 4 per cent per annum, beating the 2.6 per cent mortgage loan rate.
8. You can't take your money with you when you go, so why worry so much about saving?
I bet all of us have heard this from a friend or family member who's always travelling or shopping. These people also like using the hastag #YOLO (You Only Live Once). And they use it against you like you don't possess an ounce of logic and are bereft of sense.
We're not saying that we've found a way for you to take money into the next life. You can't take money with you when you're gone from this beautiful world, but this habit will catch up with you, and like any other bad habit, it will always cause some havoc in your life.
We're also living to ripe old ages of 80 to 85 now, and we don't want to be left in a situation where we've planned to have money till 65 but continued living broke and reliant on our family members for another 20 years.
In essence, we're telling you to think about the suitability of any advice from friends, family and experts out there. Advice that you get from anyone else will most likely be something you can ignore or not catered to your situation. After all, it is you who are going be responsible for your decision.
DollarsAndSense.sg is a website that provides bite-sized and relevant articles to help Singaporeans make better financial decisions.