The internet has given us many things of import—namely, memes. It has also given rise to a proliferation of financial advice from all sorts of folks: those who want to retire early, personal finance buffs who’ve learned from their financial missteps, and a bevy of advisers—robo and human—that dispense personalized guidance. Then there’s all the advice disseminated through more traditional channels, from parents and well-intentioned friends and family.
While there’s no shortage of advice, that doesn’t mean it’s all useful, of course. It’s little surprise, then, that even people who specialize in financial advice have been the recipients of poor counsel (and some have even acted on that advice). Here’s some of the worst financial advice that nine personal finance bloggers and financial advisers have received through the years.
Buying a house is always an investment
Zack Friedman, who started a personal finance site and is the author of The Lemonade Life, was advised by an investment banker to “buy as much house as possible.” This was prior to the housing crash; the banker said real estate was “an appreciating asset” and that Friedman could borrow money to increase returns. “I didn’t take the banker’s advice, but the banker missed a fundamental point that so many people miss,” Friedman says. “A house is not an asset; it’s a liability. A home can increase in value, but the reason you should buy a home is for a place to live and build memories with loved ones.”
Friedman points out that unlike a rental property, a home you plan to live in doesn’t produce positive cash flow, since you’re saddled with a mortgage and the price of upkeep. “The home can still appreciate in value, but the potential value increase of course depends on multiple factors and may be regionally or locally specific,” he says.
Max out a credit card to build credit
When personal finance blogger Nicole Durham got this advice from an ex, she was too young to know better, so she ended up maxing out a credit card. (“He’s an ex for a reason,” she quips.)
After racking up more than $5,000 in credit card debt, she realized it was time to stop swiping. “In a way, I really should be grateful for the bad advice I received because if it hadn’t been for that wake-up call, I wouldn’t have found my calling for being a personal finance blogger,” she says. “I never want anybody to have to feel like they’re stuck in a debt with no way out.”
Financial planner Logan Allec does point out that cautioning against using credit cards altogether isn’t always sound advice—an approach recommended by personal finance guru Dave Ramsey, for example. “The reality is that credit cards, when used responsibly, can be a great way for people to build their credit and earn rewards,” Allec says.
Buy a new, big car for a tax deduction—or motivation
Even financial advisers can give questionable advice at times. “A few years ago, I was told I should buy a new, big vehicle—like a big truck or SUV—that would qualify me for a tax deduction,” says financial adviser Russ Ford. “This would be great advice if you truly needed a big vehicle like that for your business. However, the advice was being given to me by other financial advisers, and I was also running a financial advisory business—not a business where I needed a big vehicle.”
At the time, Ford was driving a car he had already paid off, and he stuck with it. “Not having a car payment provided me—and still provides—a heck of a lot of financial freedom,” he says. Sometimes, he believes advisers give misguided advice to spend on things for a tax break, even if that requires spending money in the first place. “Don’t get me wrong,” he says. “Tax breaks are great. But you should only pursue tax breaks that really make sense with your goals and situation.”
Like Ford, Janice Pierce also received interesting counsel upon becoming a financial adviser. “When I started in the business, the advice to new advisers was to ‘burn the boats,'” she says. “By this, they meant to buy a new—preferably flashy—car your first few months and commit to a car payment.” The idea was this would serve as motivation and encourage the adviser to make enough money to deliver on the car payment. “Many advisers start on commission or a small salary until they build a book of business,” Pierce says, “and about 80% fail in the first three years.”
Stop spending, and pay off your student loans
Some of the worst guidance financial blogger Danetha Doe received was from the CEO of a public Silicon Valley company—someone with “an incredibly high net worth.”
“His advice was to anyone with student loans, to focus on paying them off as soon as possible—by paying double or triple the monthly minimum payment—so you can save money on interest payments,” Doe says. “On the surface this seems to make sense, until he suggested cutting out gym memberships, hair appointments, and eating out in order to make that happen.”
By that point in her life, she knew not to blindly follow that advice. She recognized it wasn’t a realistic or healthy way to live for her. “I’ve found in my personal life, and working with clients, that cutting out joyful experiences is not sustainable,” she says. “Instead, the focus needs to be on practicing conscious spending and developing the skills needed to increase your earnings.”
Pay off your mortgage, don’t invest
Financial blogger Leif Kristjansen says his family—who he describes as conservative—encouraged him to pay off his mortgage rather than investing his money. Seems like sound advice on the surface. But Kristjansen says the reason he’s in a better financial position now is because he invested in a rental property, which he says yielded six-figure profits. “I did some research and realized that paying down your mortgage is in fact not so great because investment earnings have always far outstripped any interest payments you might incur,” he says.
His parents, on the other hand, believed in putting all money toward paying off debts. “I get where they are coming from—it is very safe advice to pay off debt,” he says. “But I would not be financially in the great place I am today if I had followed their advice.”
Don’t buy a house until you’re ready to settle down
In 2013, financial planner Ron Strobel was looking to buy a home in the Seattle area, when starter homes were about $300,000. “My friends, family, and every online blogger insisted that I must wait to buy a house until I was sure I wanted to stay in Seattle long-term,” he says. They also claimed he should only buy a home when he could afford a 20% down payment, to avoid paying for private mortgage insurance.
“That was a huge mistake,” he says. “I spent the next five years renting and paid well over $70,000 in rent. The price of those $300,000 homes nearly doubled.” Last year, he moved to Idaho and spent $270,000 on his first home. Had he bought a home in Seattle in 2013, it would have appreciated, and that money could have paid for his new home in Idaho.
Strobel sees that as bad advice in part because of timing. “The economy was still recovering from the Great Recession,” he says. “It was a great time to buy, simply because the housing market had been in such a slump.” His family and friends offered “conventional wisdom” that didn’t quite apply in that moment. “That’s the problem with following general financial advice,” he says. “It’s not time-sensitive or tailored to you personally.”
Change your paycheck withholdings to $0
“When I started my first job after graduating from college, my coworker gave me some some terrible financial advice,” says financial blogger Jerry Brown. “He told me to change my exemptions on my W-4 so that no taxes would be withheld from my paycheck.”
Brown was young, and it seemed like reasonable advice. At first, it felt good to keep more of his paycheck. But the following year, Brown realized he owed $800 in taxes—an amount he couldn’t afford to pay in one go. “I had to setup a payment plan, which involved me paying more money,” he says. “From this experience, I learned that you have to do your due diligence. Don’t just accept financial advice from anyone.”