1. Do not start investing until all debt is repaid
I cannot tell you how much this piece of financial advice annoys me. Compound interest can work against you but it can also work for you. Income can technically be unlimited but time is not.
There is an ample amount of data demonstrating that starting to invest, even small amounts can compound. If you take 5 years to pay off your debt, then you have lost 5 years of investing and having that compound, an average rate of 7% annually. My advice is to focus on paying off high interest debt, but to also invest a small amount monthly, even if it is $5 a week/month.
In addition, if you are in the U.S. and have 401K matching at your job, you are losing FREE money if you do not invest. If your debt payments are so high that you cannot invest to at least meet the full contribution match, then you budget needs another look.
My suggestion is to do both. However, focus on paying off that high interest debt, especially those debt that are above 7%. The reason I suggest 7% is that the annual stock market return is 10%, however, this does not account for the average rate of inflation of 2-3%. This would equate to approximately 7% annually. Invest a small amount, what you can afford each month, your future self will thank you.
2. You can't buy a home because of all that iced coffee and avocado toast
This has been disproven but it still is said. Essentially Millennials have been the laughing stock of the generational joke. We are the ones that cannot get it together, despite us trying to succeed.
The reasons that millennials are not readily buying home is mainly due to economic reasons but not because of coffee and avocado toast. US Millennials are in heavy debt already, making mortgages unaffordable. Most of this debt is actually personal debt, not including mortgages and student loans. Although Millennials get the most flack and are believed to be the indebted generation, that is not the case, it is Generation X.
So why can’t people afford to buy a home? It has gotten worse for younger generations but one of the reasons is paying a large portion of income to rent, which is a necessary evil in some areas. For instance, in Stockholm county, depending on which neighborhood you are in and whether you are eligible for subsidies, you can be paying over half of your income to rent. Millennials, as a generation, are the most educated group, and many fields are located in areas with expensive living expenses.
3. Credit cards are evil
They are not inherently evil but if used incorrectly it can appear to be evil. However, it is one of the easiest forms of debt to accrue. There are several pitfall but the ultimate financial advice is to use them wisely, especially when earning cash back or miles for travel.
For instance, use it like a debit card. If you do not have the money for the item in your bank account, you do not have the money to pay for the item. So do not swipe your credit card. The next step is to pay it off immediately as the charges post, you will likely avoid any fees. These are not only interest but it can include a late fee, if you forget to pay it on time. Depending on the card, the card issuer might be paying you in miles, points or cash back, which means that the overall cost of the purchase is lowered.
Another benefit of credit cards is that it is a form of fraud protection. Coming from a former banker, when you use your debit card, you put your money at risk. Even if you report a fraud charge, you are out of cash for an extended period of time, it can be 10 days or longer, without that money. If the fraud is on a credit card, your money is not at risk. You can use your cash as normal but if your money is stolen with fraud then you do not have a backup, unless you have a savings account.
What else would you add to the list?
There are more I could have added but these are the ones that really make me want to roll my eye as far back in my head as I can go. Many of these ideas are outdated and absolutely false.
When it comes to your budget and building wealth, always remember everything in moderation.