The internet has a lot of great information to offer consumers who are looking for help with their personal finances, but not all of the advice available on the internet is good.
Without naming the specific sites (no need to start a flame war!), here are some bits of bad advice we’ve seen around the internet:
1. “Don’t use automatic bill pay.”
The author’s rationale is that you won’t always know about your budget shortfalls if the bills are being paid automatically. Better advice would be to use a financial institution with online banking and be sure to check in monthly or bi-weekly to make sure your bills are getting paid. That way you get the benefit of automatic bill pay and you still are up-to-date on what you’re spending. Automatic bill pay is one of the best tools available to help you improve your credit rating, and shutting it off is a bad overreaction to a minor potential problem.
2. “Don’t pay down your debts, focus instead on saving.”
Long-term debt is always going to be more costly than the earnings from savings. The best advice is to always focus on both paying down debt and contributing to your savings fund. If you must focus on one over the other, aggressively pay down those debts to free up more income for savings. It’s bad advice to do it the other way around.
3. “Don’t buy a house, rent instead.”
The recent housing crisis has turned many financial experts off from homeownership, and that’s too bad. The problem was with using homeownership as a “get-rich-quick” investment. The typical consumer should still think of homeownership as good advice for the long term and an essential part of one’s retirement strategy. If you spend your entire working life paying your landlord’s mortgage payment, then get to retirement and still have to pay rent, you’ll be well behind the retirees who chose homeownership.
4. “Don’t use coupons, don’t follow retailers on Facebook, etc.”
There have always been experts who think coupons do more harm than good. They think coupons lead people to buy products they don’t need (indeed, the whole reason manufacturers and retailers offer them is to get you to try new products). They also complain that using coupons is time consuming, leads to waste, and doesn’t really save money. None of these things is necessarily true. Using coupons wisely will indeed save you money, you just have use some good judgment to know when your coupon purchase is worthwhile. Similarly, following a retailer on Facebook or Twitter can help you know when things go on sale, saving you a lot of money. Not every message they send will be designed to save you money, but if you’re sophisticated enough to follow companies on social networking sites, you should be able to resist messages that urge you to spend recklessly.
There’s plenty of bad advice floating around on the internet, so you should approach everything you hear with healthy skepticism. Here at credit.org, we’ve been helping people pay down their debts and better manage their personal finances for over 38 years. That legacy of trust continues to this day, through this blog and all of our other services.