I’m a Financial Advisor: Here Are 6 MoneyMyths My Clients Most Commonly Believe

April 5, 2024

 6 MIN READ

Written by Laura Bogart

Edited by Molly Sullivan

Forgoing a latte a day keeps the debt collector away. A tight budget is an instant cure-all for all money woes. If you don’t have over $1 million in savings, you can’t retire. Financial planners have heard a whole lot of money myths.

While there might be some truth in a few myths (it’s not exactly financially sound to spend $100 on coffee every week), other myths are like the tales of BigFoot. That is to say, decidedly untrue.

To get the real scoop on common money myths that financial experts would rather you no longer believe, GOBankingRates went to several financial planners who were more than happy to relegate certain stories to the land of Sasquatch himself.

Your Budget Is Static

You may think that creating a budget is a one-and-done solution to your financial well-being. Once you know what you can afford to spend and where your money is going, you should be set for life, right?

Well, not quite. According to Erika Rasure PhD, chief financial wellness advisor and client financial therapist at Beyond Finance, having a budget is “a tool, not a fix-all.” Rasure said that a budget is only helpful if you’re consistent with it, and if you develop one that works for you.

“It’s easy to be scared of — or feel restricted by — a budget. Yet, having one gives you freedom. With a budget, you know exactly where every dollar is going,” she said. “It creates a plan and empowers you to make saying ‘yes’ or ‘no’ easy. If a particular expense is not in the budget, it’s off the table.”

To keep your budget fresh and reflective of your needs and values, she recommended creating a monthly budget — and to let go of any shame around budgeting.

“I encourage everyone I work with to be open-minded and flexible regarding budgeting. It’s easy to let shame get in the way here,” she said. “People often get upset when they inconsistently check their budget, so commitment is essential.”

Following Every New Trend Will Build Wealth Quickly

As an experienced financial professional, independent wealth and insurance expert, and founder of Jay’s Money Secrets, Javarah “Jay” Joseph, CRPC, has encountered more than a few money myths.

One he’d like to dispel is the idea that investing money into every new fad will help you earn money overnight. “Stay focused on your plan and avoid speculative distractions like meme stocks or cryptocurrencies,” he said.

Investing Is a Pastime for the Wealthy

For Dan Lear, CFP, BFA, partner, and financial planner at Affiance Financial, one of the most frustrating money myths that has taken root among people is that they need to be wealthy to start investing.

“This dangerous myth suggests that investing is only for the wealthy, but disciplined investing can be a way for many people to build wealth,” he said. “Investing does not require a large sum of money and time is a critical component. The sooner you start investing, the better.”

Lear recommended that you start building solid investing habits by systematically investing in the market — either every month or per paycheck. He added that you can accomplish this goal with a qualified retirement account, such as a company-sponsored 401(k) plan.

It’s Best To Split Your Investments Between Advisors

Brendan Halleron, CFP, AIF, BFA, partner and financial planner at Affiance Financial, understands why people might think that dividing their investments between multiple advisors reduces risk. After all, wise investors suggest that diversifying your investments can help reduce your risk exposure.

“But when it comes to financial planning, it’s critical that your advisor has a view of the full picture of your finances,” he said. “In a multiple advisor scenario, it’s likely that the right hand won’t know what the left hand is doing, which can actually increase risk and potentially harm the investor.”

All Bonds Are Safe

Thomas Brock, CFA, CPA, and expert contributor for Annuity.org, knows which money myth he finds most frustrating. Namely, that all bonds are safe investments. Brock said, “this could not be further from the truth.”

He shared that some bonds are actually exposed to significant risk, especially credit risk and interest rate risk.

“Credit risk is greatest when you purchase bonds from companies and government bodies that are financially weak and could fail to make promised payments,” he said. “Interest rate risk is greatest when you buy bonds with relatively long terms. With these instruments, bond prices can decline significantly when interest rates rise.”

Buying a House Is Always Better Than Renting

Odds are you’ve heard that old financial chestnut that renting a home is akin to tossing money away on a property you’ll never own. 

However, John Foard, CCO and co-founder of Crown Advisors, LLC, challenged this assumption, sharing that this nugget of wisdom is “not always true, especially if interest rates are high as they are now.” 

While owning a home can be a great way to increase your wealth and net worth, homeownership does come with financial challenges — the wisdom of buying instead of renting is highly dependent on your current situation. Foard added that if you’re required to deplete your savings or emergency fund for a down payment, buying a home might not be the best choice for you. 

He shared that the term “house poor” exists to describe people whose mortgage payments and general home maintenance costs have left them unable to do anything else financially. 

“If purchasing a home puts you in a position where you cannot afford to do anything outside of living in that home, you might want to rethink this decision,” he said.

“Renting might be the better choice until other factors improve such as interest rates to borrow money or your income significantly improves.”

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