If your mom ever told you to avoid swimming after eating because the cramps it would cause would surely result in your drowning, you've probably known for a long time that not all advice is good advice.
We all want what's best for our finances, but sometimes it can be tough to tell what's right and what's wrong. Finance can be a tricky topic, and there's plenty of great advice out there to help you make the best decisions with your money. But although most advice may be well-intentioned, not all of it will improve your financial health. In fact, some of these tips are better left ignored, because they may actually do more harm than good.
Image source: Getty Images
1. Play it safe with your investments
On the surface, this sounds like exactly what you should do with your investments. Especially for those whose savings took a hit during the Great Recession, not many people would argue that you shouldn't play it safe with your money.
That being said, there is such a thing as being too safe. If you're worried about losing your money in the stock market, you may be tempted to stash your cash under your mattress (or at least in a savings account). The problem with that, however, is that savings accounts and other not-so-risky investments like CDs and money market accounts have lower rates of return (usually hovering around 2% to 3% per year). At that rate, your savings are barely keeping up with inflation, meaning that your money may actually lose value in the long-term.
That's not to say you should throw all your savings into the next up-and-coming tech start-up, but it is possible to invest in the stock market while still limiting your risk. Index funds and mutual funds are collections of dozens or hundreds of different stocks, bonds, and other assets, and investing in these types of funds allows you to limit your risk while still reaping higher returns than you'd see with a savings account.
Of course, the stock market will always have its ups and downs. But over time, you should see an average return of anywhere between 7% and 10% by investing in relatively safe mutual funds. The key is to start saving early so your money has plenty of years to grow -- and if there is a market downturn, your savings have time to bounce back.
2. All debt is bad debt
While debt in general isn't great, not all debt is equal. In fact, some debt can actually improve your financial health and help you achieve your goals.
For example, unless you have mountains of cash lying around, you'll probably need a loan to buy a home, and you may need to rely on student loans to get through college. But homeownership can increase your net worth, and a college education can help you earn a higher-paying job (thus also increasing your net worth).