8 Outdated Boomer Money Tips
Written by
Ashley Donohoe
Edited by
Daria Uhlig
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Whether they’re your parents, colleagues or peers, baby boomers — those born between 1946 and 1964 — sometimes offer money tips that no longer fit with the current economic situation or best practices. This is especially true when it comes to major decisions about your housing, career, retirement planning strategy and post-secondary education.
Here are eight outdated boomer money tips along with some important considerations for your financial situation.
1. Homes Are Guaranteed Good Investments
Homeownership can help you build wealth because your payments go toward building equity and you could enjoy appreciation. A house isn’t a great investment for everyone, though, and the place could lose value or become costly to maintain. Elevated property prices and mortgage rates and potential changes to how real estate agent commissions are structured also warrant taking a closer look before you decide to pursue homeownership.
2. You Must Eliminate Luxuries for Financial Success
You’re likely familiar with comments that extras such as coffee runs are why you haven’t achieved your financial goals. While overspending hurts your budget, cutting out all the enjoyable things will likely demotivate you and still not provide enough cash.
Personal finance expert Ramit Sethi instead proposes a “conscious spending plan.” This automates saving and investing and allows you to spend 20% to 35% of post-tax earnings on your favorite things.
3. College Is a Must for Success
Traditional wisdom views getting a college degree as a clear path to success. While graduates can enjoy higher lifetime earnings, lower unemployment rates and more career opportunities, these aren’t guarantees.
And since boomers were of the typical college age, tuition prices have increased significantly, which makes taking steps to save on college crucial. Pursuing a high-paying, in-demand trade or taking another path could seem more attractive to you than accumulating thousands in student loans.
4. Don’t Waste Your Money Renting
Some baby boomers see renting as a waste when you could be making mortgage payments. However, it can be a more financially sound choice than buying when your finances don’t yet support all the costs of homeownership along with the upfront purchase costs.
Dave Ramsey agrees that renting isn’t a waste, especially if you’re working on getting your finances in order. You should also consider that renting could be the financially smart decision if you move often and won’t break even if you buy a home.
5. Stay Put at Your Job
Job loyalty is a common theme for boomers who might recommend staying at a specific company, moving up over the years and enjoying a pension upon retirement. But pensions aren’t common for most jobs these days, and you might need to change employers to get your preferred salary or take on a better position. Just be strategic about building experience, and avoid changing jobs too often to avoid concerns about reliability.
6. Rely on Social Security for Retirement
Although many plan to live off their benefits, the Social Security Administration actually warns against not having other retirement income sources. You can generally expect Social Security to provide only 40% of the money you made before retirement. Additionally, concerns about the program’s future further emphasize the need to plan on having sufficient savings as well as considering earning passive income or taking a part-time job.
7. Always Use Cash
The traditional idea of using cash over credit cards has some good reasoning behind it since you could avoid overspending, debt and interest charges. But it also means giving up convenience, security, potential rewards and a way to build credit for future needs, such as a mortgage. Having the right card that you use wisely and pay off monthly lets you get the perks and avoid the pitfalls.
8. Stick With a Safe Savings Account
Leaving money in savings accounts might seem wise since they don’t involve the risks that come with investments. The problem is that it’s an easy way to miss out, especially since average account has a very low rate that doesn’t match inflation. While having emergency savings in a high-yield account makes sense, consider bonds, stocks and other investments for a better return on your extra cash.
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