3 common financial advice that you should not follow

When it comes to personal finance the advice that you get is in abundance. Every Tom, Dick and Harry gives you some sort of advice related to personal finance. Then be it in the form of a blog or a website or product distributors or any other means. Though there are certain websites and blogs that give you insightful information, they are very few. However, it is always better to consult your fee-only financial planner before taking such advice. They can guide you and work in your best interest, as they are fiduciary and have no conflict of interest and they only get paid for the advice they give you rather than charging a per cent on assets or receiving commissions from product companies. Also ensure that your fee-only financial planner is well-experienced, qualified and certified in personal finance space. Though, there are various intermediaries who call themselves financial planners. So, think before dealing with them. Nonetheless, following are 3 common financial advice that you should not follow, even if you get it from a fee-only financial planner.

1. Avoid the use of credit card
When it comes to debt the use of credit card is something many financial advisors’ advice to avoid altogether. The reason they put front is they are the most expensive consumer debt available in the market. However, avoiding it altogether is not a solution to the problem. There are some online payments that demand only payment via your credit card. Also, in this digital era you cannot completely ignore credit card. In this case, the proper advice must be to avoid irresponsible use of credit card. The famous American actor Will Rogers once said, “Too many people spend money they haven't earned, to buy things they don't want, to impress people they don't like”. So, it's not that the credit card is bad, it is a tool and how you use the tool is important.

2. To make money from investing you need to take huge risk
Yes, it is right that more the risk you take more is the probability of earning higher returns. But this is just one side of a coin. The other side of the coin is that you can even lose money and may be exposing yourself to higher risk. Many advisors these days asks people to increase their risk appetite and also ask them to extend their exposure to risky assets. However, high-risk appetite and higher returns are not the only determinants of achieving your financial goals. Even how you can mitigate risk is important. Anyways, risk is something which not only depends upon your measurement of risk based on quantitative factors such as your income, expenses, assets, loans, etc. but also based on your qualitative responses which are based on your psychology. Changes in quantitative factors are possible, but shift in psychology is very difficult and it can happen after experiencing something which may take years. So, mitigating the risk is very important apart from earning higher returns.

3. Your credit score determines your financial health
First of all, it is a big myth that if your credit score is good your financial health is also good. It is important to understand that credit score only tells your ability to take more debt. When people talk about improving finances, they more often think to improve their credit score, rather than saving and investing in a proper and disciplined way. But then to improve your finances you need to first concentrate on saving and investing rather than improving your credit score. There is nothing wrong with taking the credit if you want to buy your first home or first car, but taking credit for everyday stuff makes it a costly affair. Rather than making credit as your first option to achieve your financial goals, try saving and investing for that financial goal and if there is some shortfall then you can consider taking credit for that shortfall rather than taking credit for the whole thing. This will help you to reduce the burden and higher interest payments.