I Asked ChatGPT What Frugal Advice Has Aged Poorly

wavebreakmedia / Shutterstock.com

Commitment to Our Readers

GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.

20 Years
Helping You Live Richer

Reviewed
by Experts

Trusted by
Millions of Readers

As economic conditions change over the decades, so should the advice on what it means to be frugal. While baby boomers might have been able to purchase homes and put children through college on a single income, that is no longer a reality for most younger generations. Being frugal once may have been synonymous with making small spending habit changes but is that really true anymore?

To get a clearer picture of what frugal advice has aged poorly, I asked ChatGPT to help me take a deeper look. Here’s what it said, and what it recommended people do instead.

Always Pay Off Your Mortgage Early

Even as recently as 2019, finance experts like Kevin O’Leary were recommending that Americans pay off their mortgages early due to tax law changes and more. However, ChatGPT pointed out this advice assumed relatively high mortgage rates and limited tax-advantaged investing options. Today, especially for homeowners with fixed-rate mortgages below 4%, aggressively paying down a low-rate loan just isn’t a wise use of other funds that may be earmarked for retirement or emergency funds.

Instead, ChatGPT suggested maxing out tax-advantaged accounts such as 401(k) plans, IRAs or health savings accounts (HSAs) and keeping a solid emergency buffer. Extra mortgage payments only make sense after those bases are covered.

Avoid Credit Cards Completely

Some finance gurus like Dave Ramsey are vehemently anti-credit card, suggesting that the propensity for debt accumulation is too dangerous and that there are ways to function without them. ChatGPT said that it isn’t realistic advice, given that credit scoring heavily influences borrowing costs for housing, insurance and even employment screening. Avoiding credit entirely can hurt long-term financial flexibility.

Instead, the AI said people should use credit cards strategically for predictable expenses, always paying balances in full monthly. Also, learn to leverage rewards and utilize fraud protections without carrying interest.

Buy the Cheapest Version of Everything

The frugal advice that points consumers to buy the cheaper version of all products can be misunderstood, ChatGPT said. There’s “affordable” as in generic products, store label and bulk products, and then there are “cheap” goods — the kind that are made from poorer-quality materials, destined not to last. The AI warned that ultra-cheap goods often fail faster, require replacement and increase long-term costs. This is especially true for appliances, tools, shoes and mattresses, it said.

Instead, ChatGPT recommended consumers apply “value-based frugality” — spend more on high-use, long-life items and cut low-impact purchases. This can include shopping second hand, as well.

Retire as Early as Possible

For a while there, a movement known as FIRE — financial independence, retire early — was all the rage, with young entrepreneurs figuring out how to retire well before even the earliest official age of 62 — sometimes in their 40s or 50s. But even urging people to retire at 62 ignores longevity risk, healthcare inflation and Social Security claiming penalties, ChatGPT said. Retiring too early can permanently reduce guaranteed income and increase portfolio withdrawal pressure.

Instead, if possible, work longer or semi-retire. Even part-time income can boost Social Security benefits, reduce early withdrawals and delay Medicare costs.

Cash Is King — Keep Savings in a Bank Account

Financial experts still agree that every person needs an emergency savings with between three and six months’ worth of income saved for the unexpected. However, there’s such a thing as keeping too much cash, and keeping it in the wrong kinds of accounts, ChatGPT warned. Savings accounts that don’t offer an interest rate above the inflation rate are essentially just eroding purchasing power. Traditional savings accounts often fail to keep pace with rising costs, especially during inflationary cycles, the AI said.

Instead, keep emergency funds in high-yield savings, Treasury bills or money market funds for short-term reserves beyond true emergencies. And don’t keep too much money in liquid savings, especially at the expense of investment accounts.

Share This Article: