Outdated Money Advice That the Middle Class Can Ignore
Written by
Cindy Lamothe
Edited by
Carly Brashears
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When it comes to managing your money, there is no shortage of advice. It seems as if everywhere you look, tips are cropping up on what to do with your finances.
However, some of these tips may no longer apply to the middle class. If you’re part of the middle class, experts say it’s important to keep a discerning eye and avoid outdated advice that can prevent you from growing your wealth.
Here are outdated tips you should ignore.
One Stable Job is Enough to Secure Your Financial Future
In the past, having a stable job with benefits was often enough to ensure a comfortable retirement and financial stability. However, Ricardo Pina, finance expert and founder of The Modest Wallet, says that with rising costs of living and unpredictable economic conditions, relying solely on your job for financial security is no longer realistic.
“Adding another full-time paycheck can provide additional income and act as a safety net in case of unexpected job loss,” he explained. “Maybe you can start a side hustle, turn your hobby into a business, or even invest in the stock market to diversify your income streams.”
A College Degree Guarantees Financial Success
“There was a time when having a college degree almost guaranteed a high-paying job and financial success,” said Pina.
But with tuition and living expenses rising, he noted that many graduates are burdened with student loan debt and struggling to find well-paying jobs in their fields.
“So, as previously mentioned, adding another full-time paycheck can help alleviate the financial stress and provide more options for paying off student loans or investing in further education,” Pina said.
“While education is crucial, the notion that a four-year degree is the only path to financial stability is outdated,” said Sherman Standberry, licensed CPA and managing partner at My CPA Coach. “Trade schools, apprenticeships, and online learning platforms offer viable alternatives and can lead to lucrative careers without the burden of hefty student loans.”
Stick to a Single Income Stream
In the past, holding down one steady job was seen as the norm, Standberry explained. However, the advent of the gig economy and remote work opportunities has made it more feasible and attractive to have multiple income streams.
“This can provide additional financial security and open up opportunities for saving and investing,” he said.
Buying a House is Always a Good Investment
“It’s one of the biggest signs that you’ve ‘made it’ in terms of financial success,” Pina said. “However, with the housing market constantly fluctuating and the expensive costs of home ownership, many people are realizing how owning a home can also be a financial burden.”
Warner Quiroga, founder and CEO of Prestige Home Buyers, says that while owning a home is often seen as the ultimate goal for many middle-class individuals, it’s important to consider the financial implications and responsibilities that come with homeownership.
“Renting may actually be a more financially savvy option in certain situations, such as in high-cost cities or for those who have a more transient lifestyle,” he said. “It’s important for individuals to carefully analyze their personal financial situation before making the decision to purchase a home.”
Work Hard and Save Diligently
It used to be that working a steady job and saving every penny was the path to financial security, said Quiroga. However, with inflation rates outpacing wage growth, he said that simply stashing away money is no longer enough to secure a comfortable retirement.
Instead, it’s important for the middle class to diversify their income sources and invest in assets that can provide long-term growth. Standberry notes that many people in the middle class tend to stick with a “save only” mindset. While saving is valuable, he says it doesn’t take into account the importance of investing.
“With historically low interest rates, money saved in a traditional bank account may lose value over time due to inflation,” he explained. “Investing a portion of your savings in the stock market, real estate, or retirement accounts can help your wealth grow.”
Pay Off All Debt Before Investing
While it’s important to pay off high-interest debt as soon as possible, not all debt is created equal, Quiroga pointed out.
“Low-interest debt, such as mortgages or student loans, may actually be beneficial in the long run due to tax deductions and potential investment returns.” He added that it’s important for people to carefully consider their financial goals and priorities before prioritizing debt repayment over investing.
Follow Your Parents’ Financial Advice
Quiroga observes that even though our parents may have imparted valuable financial lessons, it’s important to remember that their circumstances and economic landscape may be vastly different from our own.
“The middle class should seek out current, unbiased financial advice from professionals who are well-versed in the current economic climate and can provide personalized guidance,” he said.
Save for Your Children’s Education Before Saving for Retirement
Experts agree that while it’s natural for parents to want to prioritize their children’s education, they should remember that there are other options available, such as scholarships, grants, and student loans.
“It’s crucial for parents to prioritize their own retirement savings first,” said Quiroga, stressing that it will not only benefit them in the long run but also prevent them from becoming a financial burden on their children in their later years.
Avoid Risk at All Costs
Being cautious with investments and avoiding unnecessary risks is important, but experts say playing it too safe can actually hinder your financial growth. Quiroga notes that it’s vital for the middle class to take calculated risks and diversify their investments in order to potentially generate higher returns.
“Working with a financial advisor can help individuals strike the right balance between risk and reward,” he said.
You Have To Be Rich To Invest
“Investing is no longer reserved for the wealthy elite,” Quiroga emphasized. “With the rise of technology, there are now more affordable and accessible options available for the middle class to invest in, such as robo-advisors and micro-investing apps.”
Finally, he noted that it’s important for people to educate themselves on the different investment options available and start early to take advantage of compounding interest.
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