There's a lot financial advice from experts and much of it is contradictory. Don't buy a new car; only buy a new car. Rent instead of buy; buy instead of rent. It's overwhelming and for a lot of people, it's not applicable. Here’s the good news — even money experts, financial writers and early retirees break the rules sometimes.
Whether you’re feeling guilty because you’re not living up to an imaginary financial ideal or are tired of being bombarded with what you should and shouldn’t do, it’s time to break the rules and create a financial life that works for you.
Five money experts weigh in on the standard financial advice they ignore and what they do instead.
Bonnie Truax, a 45-year-old early retiree in Argentina, doesn’t budget. Even though keeping a budget is often touted as the most important thing a person can do for their financial health, it isn’t necessary for Truax.
“I am frugal by nature and always saved everything I could,” Truax said. “I never saw the point of budgets for myself because they wouldn't change my behavior. Everyone is different, and for many, a budget really might help curb spending.”
If you go without a budget, be careful not to see it as a licence to spend. Just because there is money left over in a category doesn't mean it needs to be spent. For those who don't keep a budget, don't feel guilty about about it if you already know you are frugal. If you are not sure whether you need a budget try tracking your money for a month or two.
2. Buying a house
Adam Fortuna, a 36-year-old financial analyst in Salt Lake City, recently sold his house and he has no regrets — financial or otherwise.
“Buying a house is often seen as an investment in your future,” Fortuna said. “I tend to disagree. After living in my house for 12 years, I recently sold it and started renting an apartment. The difference in my stress level has been night and day. By making this switch, I opened up my scarcest resource: my time.”
“If you're already living in a house, but are becoming disillusioned with home ownership, consider taking small steps towards your next location. For years we thought about moving, and we took that time to slim down our possessions. While this meant our very large house had a lot of unused space, it allowed us more flexibility in choosing our next place,” said Fortuna. (Even if you don't own your home, you still need to protect it from harm. Be sure to compare prices for renters insurance.)
3. Maxing out retirement accounts
Megan Brinsfield, a 34-year-old certified public accountant and certified financial planner in Alexandria, Virginia, doesn’t max out her retirement accounts, even though she could.
“I know I want to retire before age 59 1/2, so I focus on tax diversification while in my saving years. I'll put enough in my 401(k) to get the employer match, but after that I focus on funding Roth accounts and taxable brokerage accounts. That way I don't have to worry about a penalty to access my retirement funds before age 59 1/2. I never see the extra money because I set up direct deposits from my paycheck to the other investment accounts,” Brinsfield said.
“If you are maxing out your 401(k) and don't have savings elsewhere, you may be setting yourself up for higher taxes and lower flexibility in retirement … It's worth looking over your numbers to see if paying the taxes today (instead of deferring taxes until retirement in a 401(k)) would make more sense,” said Brinsfield.
4. Using credit cards
When it comes to spending money, standard personal finance advice is simple: Cash is king. But for Ben Luthi, a 31-year-old finance writer in Eagle Mountain, Utah, that saying doesn’t apply.
“I use my credit cards for everything,” Luthi said. “I typically have $20 or $40 in cash in my wallet, but I often go months without ever touching it. By doing this — and using multiple credit cards to maximize my rewards — I've racked up almost $700 this year in cash back.”
“I only use my credit card when I'm planning to spend that money anyway. I track my expenses and stay within my monthly budget. Credit cards are great tools if you can manage your money wisely and practice discipline in your spending,” said Luthi.
5. Purchasing a new car
If there’s one thing the majority of financial experts agree on, it’s that consumers should never buy new cars. But for Marc Andre, a 39-year-old money blogger in Pennsylvania, that advice just didn’t make sense.
“The first few cars I owned were used and I was constantly putting money into repairs,” Andre said. “After being stuck in another state for three days when my car broke down, I decided to buy a new car instead of a used car. Our approach has been to buy a new car that is basic and low cost. The prices we've paid have been hardly any more than we would have paid for a used car with reasonable miles. Plus, we've put almost no money into repairs, aside from routine maintenance.”
“My advice is to consider the total amount of money you are putting into a car, not just what you are paying for it up front. If you stick to the lower-priced makes and models, and you find a good deal, it's very possible to get a new car that will wind up being a good purchase,” Andre said.