Why You Should Avoid These Money Saving Tips

One of the more common reasons you can’t lose weight doesn’t always center on time, commitment or money.

Instead, all of those things are apparent and present, but a lack of understanding the “how” ends up resonating louder than any time frame or checkbook ever could, and thus weight-loss goals and losing a few pounds ends up lasting as long as it takes to binge watch a sitcom on Netflix.

You could argue the same principle for saving money, since the idea of it (much like exercising) seems pretty straight forward but statistics would argue that the simplicity of it is highly questionable.

In short, no one can save money, we love to spend, and the idea behind tracking expenses and income is wishful thinking, at best.

More than half of the population has less than $1,000 in a savings account, and 34 percent have not one dollar saved, a statistic that is on the rise.^[1]

While some studies show that balances can range anywhere between $1,000 and $10,000, the overall average leans more toward the former rather than the latter.

A more recent study has the percentage at around 39, which is the percent of people who have enough money saved to cover a $1,000 expense, should one arise.^[2]

Even more alarming in the aforementioned study is that if 39 percent of the population has $1,000 for emergencies, how do we expect to pay for something of that nature if it were to arise? Credit cards, of course. That same study said 19 percent of the population would use credit cards for emergencies, only adding to a growing debt concern.

What should be happening is the ability to budget expenses, spend and have fun, too, but also be putting aside household income in order to grow your financial security and simply save for those unexpected expenses, but also keep in mind things like retirement and medical bills, just to name two more common concerns.

Instead, we’re seeing fewer being able to save from their paychecks to the tune of 19 percent not being able to save anything at all from their annual income to 21 percent being below the 5 percent mark and 25 percent between 6 and 10 percent; keep in mind you should be at around 20 percent, and that percentage is only 16.^[3]

This information doesn’t serve as blame or wondering aloud why we’re so bad at saving money, but maybe the exercise analogy plays in this scenario.

Are you following bad financial advice? Is someone suggesting how you should be saving or are you following common practices, for example, that are outdated and don’t translate whatsoever in terms of real, sound, practical advice.

One telling figure that wasn’t mention is worth doing so: 16 percent of the population, reportedly, doesn’t save money because they are too lazy, citing that it’s not of the highest priorities.^[4]

Often times, that reasoning is rooted in ignorance, so rather than admit candidly you don’t know what to do, you simply opt for the “I’ll get around to it” commentary instead.

Here’s a better way to look at money, and that’s taking a longer, harder look at what you shouldn’t be doing. Steering clear of the following would be in your best interest:

“Credit cards aren’t a big deal; everyone has debt”

You hear this a lot when talking about debt, credit cards and the logic behind using them being as practical and accepted as brushing your teeth twice a day.

The fact is the credit epidemic (and yes, that’s a strong word but needed in this case) is real with 92.2 billion dollars in credit card debt in 2017 and 21 percent of Americans saying they have more debt via credit cards than money saved.^[5]

Credit card debt as of 2017 close was up nearly 3 percent, to about $6,300 per person.^[6]

Those numbers are highly suggestive, and arguably is telling the general public that they’re relying too heavily on credit cards as a means to buy what they want.

This advice stemmed from those who said credit cards are meant for emergencies only, and that led to credit cards being used for that “emergency” furniture purchase or “emergency” vacation.

The key to minimizing debt and avoiding credit cards all together is to simply not use them. Now, that isn’t a full-sale piece of advice to cancel all the ones you have but instead put them aside for now.

The debt you have at the moment should be tackled in one of two ways: pay down and focus on the highest interest rates first or take the lowest balance, pay it off and then work your way toward the bigger ones (inverted pyramid). With the latter, once you pay off the lowest balance, then take that payment and apply it to the next lowest balance, while continuing to pay minimum on everything else you owe.

If you are going to use credit cards, then make it no more than a 30-day cycle payoff; everything you buy, pay it off when the next bill comes, no questions asked.

“Credit scores aren’t as important as you think”

This just in: credit scores are at an all-time high.

So, worry about them much, right?

The national FICO average has hit 700, and the scores are on the upswing in recent years.^[7]

This would suggest that we’re doing a better job of managing debt, expenses but really isn’t an indicator of saving money.

That said, you should be rejoicing and not worrying a lot about credit scores at the moment. Even more so, credit scores, as some put it, aren’t all that important anyway.

Wrong again.

The credit score is like the first impression you make on a job interview: everyone sees it, and you can’t run from it.

The better your credit score, the better rates you get on loans and the easier it is to get approved in general for said loan. A better credit score means you’ll also be able to buy a home, rather than continue to rent and have the wherewithal and comfort, for instance, that a car loan is possible, rather than jumping through those proverbial hoops or waiting it out feverishly and getting stuck with a huge interest rate.

The aspects that make up a good piece of your credit score include credit card utilization and payment history, both of which are a must for “good” credit. Utilization is how much balance you have on your credit history at any time, and that should be kept at around 30 percent, factoring in total balances versus total amount owed in relationship to the former.^[8]

Obviously payment history also is greatly impactful on your score, with missed payment being a massive chunk of points taken away from that overall score.

“There's good debt and bad debt”

This one is always laughably bad if for no other reason than it has some validity to it, but is extremely misguided in how it is prefaced and ultimately delivered from one person to another.

Good debt versus bad debt is an age-old battle that is hardly producing winners on top of winners, but rather is more of the same kind of bad advice you’d get from a personal trainer who tells you weight training makes you bulky.

Yes, and no.

The bottom line is good debt really is rooted on increasing your wealth over a course of time that makes sense to borrow, such as a school loan or a mortgage payment.

This type of debt has some reasoning behind it; you’re borrowing in the hopes that you’ll not only be able to pay it back but it’s being put toward making you financially more successful and stable.

But buyer beware, too, because two other bad pieces of financial advice are that you have to go to college and renting is throwing money away.

The average college student leaves their university or college of choice owing on average $37,172 a $20,000 increase from 13 years prior.^[9]

In addition, those who are telling you that renting is wasteful spending might be doing that out of habit, but bottom line is if you can’t afford a house, then renting at a lower rate of monthly expenses still is the better option.

No smart financial advisor or person is going to tell you to trade in $600 per month in rent with utilities include to a mortgage that is double that, plus utilities and other “owning a home” factors and financial responsibility plays into that as well.

Bad debt would be debt that is accumulated that is unsecured in nature, such as charging a vacation or spending money or borrowing to pay bills or buy groceries, any sort of debt that really isn’t doing anything to create financial wealth or prosperity.

Some argue that saving money, much like weight loss, is more about finding a trusted source or method and than seeing a plan through, rather than balking at it or opting out the moment it becomes difficult.

But the marathon that is learning how to be better with money can’t be fixed overnight, but what can derail your efforts 10 times out of 10 is trying to figure out how you can take bad advice and make it practical in your day to day money efforts.

Won’t and can’t happen.

Now, the arrival of 2018 in some circles has offered us proof that we’re getting better at money, with a poll in February of this year saying 58 percent have more money saved than they do credit card debt, based on the new national average of $6,000 in credit card debt.^[10]

Again, when you talk about averages, you have to understand that’s exactly what they are: best guess between the good and the really bad.

This encouraging tale is much like stepping on to the scale for the first time since a week of dieting and seeing a loss of about a half pound.

Sure, it’s nothing overly exciting but at least it’s proof that you’ve found advice or a plan that is working.

If you can find that sort of moderate success. money wise, stick to it and realize that all the talk of impossibilities that come with getting in shape or saving money can be overcome.