I’ve always had a love for personal finance. For me, creating budgets and crunching numbers is fun.
So when I really got serious about improving my financial situation, I’d spend my free time reading personal finance books and blogs. Some authors wanted me to follow their financial advice to the letter. Others would just highlight what worked for them. But I always found a few nuggets of recurring information and common financial advice.
To be honest, some of it just didn’t click for me. Here are three examples of common financial advice that I refuse to follow:
Failed advice #1: Set up automatic bill pay
When almost all of my favorite blogs were talking about how great automatic bill pay was, I just had to try it. I switched a few of my bills to auto pay, and for the first couple months everything was fine. Then I got a bit lazy…
As a freelancer, I get paid by several different clients. And I like to let my money build up before transferring it to my checking account, so I’m not tempted to spend money I shouldn’t.
Once I forgot to transfer money to pay a bill, overdrew my checking account, and was charged a $30 fee! (Which I later got waived.)
After this incident, I quickly took my bills off auto pay and went back to receiving a statement in the mail. Unlike a lot of others, I actually prefer to pay my bills by check. By doing this, I feel the sting of money coming out of my bank account, and I keep better track of my account balance.
Failed advice #2: Use credit cards for their rewards
This has become a huge trend over the last few years. You earn rewards that can be used for amazing vacations or extra cash — all for spending like you normally do.
When I tried to use rewards credit cards, I had this overwhelming feeling I was spending more money than I would have with my debit card. I fought it.
Then my credit card statement came, and it was like a punch in the face. I’m not sure I spent more because of the credit card — but I knew one thing: I didn’t want to pay that bill! I ultimately decided that using a credit card wasn’t for me, so I ditched the idea of racking up points.
And just in case you’re wondering, studies have shown that using a credit card makes you spend more. (Here’s one from the American Psychological Association.) While it might not be true for everyone, it’s more common than you think. Many people probably just aren’t willing to admit it.
Failed advice #3: Don’t get a tax refund
I stand firm on this one; in fact, I’ve received a tax refund of at least $800 every single year I have worked. Personally, I’d rather let the government hold on to some of my money for the year than owe taxes. And for many, a tax refund IS a good thing.
- You get back a lump sum of money: Even if you received your tax refund disbursed in small increments throughout the year, it doesn’t have the power a lump sum of money does. Many people will blow an extra $25 a week — but when they get back $1,500, they feel like they can do something with it.
- Interest rates are super low: The argument against getting tax refunds is that you’re giving the government an interest-free loan. So what? Put that same amount of money in checking, and it will get spent. Put that money in a savings account, and you’ll earn less than 1% interest.
- Some of us aren’t good savers: Not everyone is going to save that extra tax money each pay period. It’s just a lot easier to have the government save it for you. It requires no willpower.
The bottom line is we’re all different, and there are no set-in-stone rules to personal finance. At the end of the day, you have to do what works for you.
Is there any common financial advice you refuse to follow?