As times change, money best practices may change with them. That’s because the conditions and circumstances that made something true once may no longer be present. In other situations, inaccurate information may have been passed down from generation to generation based on misconceptions. Regardless, it’s important to think critically about some of the information you’ve taken in over the years and verify whether it’s still the best practice – or whether it should be left behind in 2023.
Say goodbye to these 5 pieces of outdated financial advice
1. Skip the avocado toast
In a 2017 interview, an Australian millionaire reflected on his success and pondered what was keeping young generations from achieving homeownership. He concluded the culprit was takeout coffee and avocado toast.
While there’s a grain of truth to the sentiment behind this, the reality isn’t so cut and dry. You can still spend money on the things you enjoy, like brunch with friends, without throwing financial goals off track. Accomplish this by building a budget and sticking to it. In doing so, you’ll know exactly how much disposable income should be set aside for saving and how much you can use for fun!
- General Electric Credit Union (GECU) members who use Online Banking or our mobile app have access to Money Management! This intuitive visual tool will help you create a budget, send you notifications when you’re close to overspending in your spending categories, track goals, and so much more.
2. All credit cards are bad
Credit cards are not inherently bad. In fact, the responsible use and management of them can actually help you during many stages in life. The keyword here is “responsible.” A history of on-time payments along with a diversified credit portfolio will signal to lenders that you are a responsible borrower. As a result, you’ll qualify for borrowing products with better rates, terms, and perks!
With all that said, there are certainly features that make some credit cards better than others. For example, many store credit cards have a high annual percentage rate (APR) after any promotional APRs end. When you carry over a balance, that high APR can quickly cause your balance to snowball. You can ensure you won’t get dinged with an interest charge by paying your balance in full each month, but it’s also wise to look into transferring your balance to a low-rate card to avoid paying more in interest.
3. Cash is king
When choosing between cash or a credit card, some people opt for cash because it helps them avoid spending money they don’t have. This is a valid concern for those who have a problem with impulse spending. But if you know you can afford to pay borrowed funds back, you should have no issue keeping your budget in the green and enjoying all the benefits of credit cards.
Security is also a big perk of credit cards, as many come with purchase protection and zero liability for unauthorized charges. If you suspect fraudulent activity, you can report it to your financial institution and remedy the situation with their help and guidance. Cash, on the other hand, is difficult to trace. If someone were to get a hold of your wallet or defraud you out of money, such as through a charity scam, there’s often no recovering your funds.
4. Don’t talk about money
Talking about money may feel taboo but can be advantageous both to you and to those in your network. In doing so, you can source advice for big purchases, like buying a home or car, or gauge if you’re being fairly compensated at work.
When it comes to estate planning, having these conversations becomes even more crucial. Loved ones should have the information they need to navigate money matters upon your passing. And if they’re set to inherit assets, they should have the time to prepare themselves for managing them.
5. You have to put 20% down on a house
The thought process behind making a 20% down payment is that it will help you pay less in interest over the life of the mortgage loan and avoid having to pay private mortgage insurance (PMI). But this option may not be realistic for many potential homebuyers today. That’s because the price of homes is outpacing wage growth. Since 2012, housing prices have risen 86% while income among millennials has only risen 24%.1 As a result, individuals may not have the disposable income to save 20%. As with many money matters, what’s right for you will depend on your unique situation and needs – and mortgage down payments are no different.
We hope this guide helps you navigate money matters in 2023. Whether you’re trying to manage your finances more responsibly or achieve homeownership in the new year, GECU has the products, services, and support to help you reach the finish line. Score a great rate on borrowing products, grow your savings faster with an interest-earning savings account, and track your spending and goals with Money Management. All of this and more is available to you as a Credit Union member. Not a member of GECU yet? You can bank with us if you live or work in the Tri-State. Confirm your eligibility, then apply online in minutes.