Tips | October 20, 2014

“Pay your smallest debt first” – and four more bad money tips to avoid

There are plenty of personal finance tips that focus on what to do. But it might pay to think about money tips to avoid as well.

Bad money tip #1: “Pay your smallest debt first” When prioritising which debts to pay off fastest, take a look at the interest rate being charged on the loan rather than focussing on the size. It makes sense to make extra payments on a big, high interest credit card debt ahead of a smaller, lower interest personal loan.

Bad money tip #2: “Only focus on spending (not income)” Many tips for improving an individual’s financial position focus on where spending can be cut – but look at the other side of the budget ledger as well. Can income be increased? Earning an extra EUR100 a month might take less of a toll on lifestyle than cutting the same amount from spending.

Bad money tip #3: Pensions are for “old people” Time can be a powerful force for long term savings goals, such as retirement, as it allows compound interest and other financial tools to grow money. Getting started early is important, so encourage thinking that pensions and retirement planning are for “young people” too.

Bad money tip #4: You can do it tomorrow Procrastination – or putting off tasks – is a major problem associated with saving. It can tap into our love of instant gratification at a cost to personal finances. Tips to cut procrastination are here.

Bad money tip #5: Only take advice from family and friends Word-of-mouth and recommendations from loved ones are helpful but – remember – they are only part of the picture, and getting financial advice from a range of sources can be a better strategy. As this eZonomics poll analysis explains, parents and grandparents will likely have, for example, lived through different market conditions that might skew their views and experience. Added to that is the tendency to block out bad memories in favour of good ones, which could have unintended consequences.

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eZonomics team
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