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The 5 Worst Pieces of Money Advice From Personal Finance Bloggers

Kyson helps people make better personal finance decisions by challenging cliché advice and common misinformation.

Learn how to sort through the financial advice of self-styled experts.

Learn how to sort through the financial advice of self-styled experts.

The Rise of the Personal Finance Bloggers

Over the past 15 to 20 years, personal finance has exploded as a popular genre of books, blogs, podcasts, and Youtube channels. In the '90s, famous books like The Millionaire Next Door and Rich Dad Poor Dad helped spark a movement of popular literature and personalities giving people advice on their money. Famous financial gurus like Dave Ramsey and Suze Orman have been some of the most popular sources of financial advice in the digital age, and countless bloggers, YouTubers, and podcasts have appeared in the same genre.

These blogs and books have helped a lot of people make progress with their financial goals, get out of debt, follow a budget, and plan for retirement. However, there are some pieces of common financial advice that you might hear a lot from these sorts of popular personalities, but which are not necessarily the best advice for everyone. Lots of people make decisions based on the opinions of these personalities but some of their advice may not be the best when you actually dig into data.

Here are the five worst pieces of advice given by popular financial advice-givers in their blogs, books, and podcasts:

Bad Tip #1: Buy a Clunker Car

Bad Tip #1: Buy a Clunker Car

Bad Tip #1: Buy a Clunker Car

The famous book, The Millionaire Next Door, studies the habits and behaviors of America's millionaires (many of whom actually live fairly nondescript and modest lives, it turns out) as a way of helping people understand what actions and behaviors can help them build wealth. The book is full of lots of interesting data and tips. One major problem with the book, however, is that it often makes the data fallacy of confusing causation and correlation.

One of the most foundational maxims for interpreting data is to not confuse causation and correlation. Just because two things happen at the same time, does not mean that one causes the other. People in the Middle Ages believed that having lice was good for you because people who had lice were rarely sick. That's an example of correlation: Sick people rarely have lice. But that does not necessarily mean that lice cause good health. We learned later that lice need to live on people with normal body temperature. If people get a fever, the lice will leave. Lice didn't cause people to be sick.

The Millionaire Next Door makes this mistake when it implies that people become rich because they buy cheap cars and, therefore, you should also buy as cheap of a car as you can in order to build wealth. There are lots of reasons why this interpretation of the data is problematic. For one, a poorer person buying a cheap car can be a bad idea, especially today when car repair costs have gone up and cars are not as reliable as they used to be.

Older cars, even well-built and reliable ones, are more likely to need random and unforeseen repairs. Studies show that many Americans have less than $400 saved for an emergency, that's barely enough to cover a couple of tires, much less a larger repair to the engine, transmission, or other major systems that can have issues after a car is 10 years old, even a good car. If you don't have any cash savings a $1,000-$3,000 car repair could mean going further into debt and slowing down your financial progress. For some, it might be impossible to pay for a car repair if you have no savings and maxed out your credit cards--you might lose your job because you can't get to work, and have to declare bankruptcy. It could set off a chain reaction of financial problems that are worse than if you spend a little bit more on a more reliable car.

Rather than one-size-fits-all advice, everyone should weigh what makes the most sense to them. If you have a good amount of cash saved up to cover repairs, an older cheaper car might be better. If you are living paycheck to paycheck and need a reliable car to get to work, a modest car loan is not a bad idea.

Personal finance gurus like Dave Ramsey are anti-debt and think people should never take car loans. Yes, a car loan is not an ideal financial scenario: Cars lose value, and the interest you pay on a car loan can be significant, so you end up losing a lot more money than just the cost of the car. However, that might be a worthwhile trade if you need a reliable car to get to work and cannot afford large unforeseen repairs. Limiting the risk of a major financial emergency might be worth losing a little bit of money over time on interest.

Tara Mellow, writing at, warns that long (six years or more) car loans are a bad idea. It's certainly best to find a used car that you can afford to pay in a shorter amount of time and with a modest monthly payment.

Bad Tip #2: $1,000 in Emergency Savings

Bad Tip #2: $1,000 in Emergency Savings

Bad Tip #2: $1,000 in Emergency Savings

One common piece of advice, which originally comes from Dave Ramsey, is the idea that you should only save up a small amount of money for emergencies before trying to get out of debt.

Dave Ramsey's "Seven Baby Steps" are published on his website and are described in more detail in his first and most popular book, The Total Money Makeover. This is the book that most people should start with if they are interested in learning about Dave Ramsey's ideas. Even though I believe his emergency fund idea is flawed, many of the other steps can be helpful in your journey of financial growth.

The Baby Steps are a seven-part plan to lead you to pay off your debts and build wealth. The second step is the one that Dave seems most passionate about—paying off debt! Dave Ramsey believes you should pay off all debt before saving more money or investing in the stock market. This is also debated by financial advisers and bloggers. The only exception is setting up a $1,000 emergency fund.

But there is a lot of evidence that $1,000 is not nearly enough.

An emergency fund is there, at the very least, to help you pay for something unusual beyond your day-to-day expenses: An unexpected car repair bill, or a medical expense. But is $1,000 enough to cover these sorts of emergencies? Not for most people.

A trip to the emergency room, depending on your insurance, can cost anywhere from $500 to $3,000.

A car repair, especially in the case of a major accident, can easily cost more than $1,000, even if you have good car insurance.

Not to mention, these costs can vary a lot depending on where you live. According to AAA, the average hourly cost for labor on car repairs can vary depending on where you live in the United States: Hourly labor costs can be anywhere between $40 and $200!

What if you have an emergency room bill and a car repair bill from an accident? You could need to pay several thousand dollars! A $1,000 emergency fund won't be enough.

So, if $1,000 is not enough, how much should you save instead?

The right number will depend on a number of factors: What are your monthly expenses? How secure is your job? How would your life change if you were injured for a few months, or totaled your car?

My suggestion is to aim for two to three months of emergency savings before you start trying to get out of debt. Imagine you spent a couple of years paying off debt and did not put more than $1,000 in savings. You won't be able to pay your mortgage with a paid-off credit card if you lose your job!

Bad Tip #3: Buy a House

Bad Tip #3: Buy a House

Bad Tip #3: Buy a House

This is a controversial one. Buying a house is, of course, central to what many people see as the American Dream. It represents autonomy, personal success, and family. And in lots of people's minds, buying a house is a smart financial investment.

But is it?


On the surface, a house seems like a potentially good investment. Houses often increase in value with time, and you need a place to live anyway--so you might as well put your money toward something that grows in value. After all, on average, house values go up 5% to 6% a year. That's not too bad.

However, what people miss in this analysis is that an individual house is a lot riskier as an investment than the housing market as a whole: All sorts of variables including location, disasters, and changing styles can impact what your house will be worth to other buyers in the future, which can make it a pretty risky investment. You will need to continually repair and update your home in order to see any growth as an investment, which reduces your overall returns and takes lots of persistent work. Not to mention that selling your house can be a long, grueling, and expensive process that will also cut into any profits you might make. Not to mention the other financial risks--you could lose your home if you hit financial hard times and can't pay your mortgage. When you put all these factors together, a house is a fairly mediocre investment: There's a significant amount of risk and it's difficult any gains you have.

If you are not sure how long you are going to live in a particular location, renting is often a better option. The money you save by renting can be invested in better ways, and you will likely come out ahead in the long run compared to if you had bought a house.

There are, of course, some other reasons you might want to buy a house: It provides some level of security (your mortgage will stay the same, and no one's going to kick you out, as long as you pay your mortgage), you can customize it as much as you want, and it is an asset you can pass down to your children. And, yes, it very well might make you some money—especially if you can monetize part of it by renting it out, for example.

But, at the very least, make sure you do the math and are honest with yourself about the risks. It may not make much money for you as an investment. Remember, when you calculate its potential value as an investment, you are not just paying the price of the house but also for mortgage insurance, real estate fees (both when you buy and sell), taxes, repairs, and improvements.

Bad Tip #4: "Stop Buying Lattes"

Bad Tip #4: "Stop Buying Lattes"

Bad Tip #4: "Stop Buying Lattes"

Personal finance bloggers love to criticize people's spending habits. Of course, we could all use some encouragement to think about our spending habits and find ways to save money on a day-to-day basis. However, many bloggers obsess over criticizing people's spending habits, and saying things like "If you stop buying Starbucks every day, you will be a millionaire in 10 years."

While it is true that saving a little bit more here and there can definitely add up, especially if you invest what you save, obsessing over day-to-day spending habits is not really the best path toward financial security.

First of all, I believe people should try to spend based on their values: Maybe a regular latte at Starbucks is something you really enjoy and helps you save a few minutes of sleep in the morning instead of making your own coffee, or helps you have more time to help your kids get ready for school. What is more important is that you are honest with yourself about your values, and make spending choices based on them. If you really want to be a multi-millionaire in 10 years, by all means, cut out everything extra. But if you'd rather live a balanced life with moderate stress, and have plenty of time for friends and family, let yourself loosen up a bit. If you really want to travel, maybe think twice about getting a new iPhone every year and put that money toward a travel fund. It's all about defining and setting your values and being consistent.

Besides, while I hate to be a Debbie Downer, small everyday purchases are hardly the thing keeping you back from wealth. The costs of necessities (health care, education, child care, food) have increased significantly over the past several years, while wages have grown much more slowly. That's cutting into your net worth much more than your latte.

Is there anything you can do about it? The best philosophy I know of is called "pay yourself first." Set some savings goals for yourself and do some investment math. Maybe in 10 years, you want x number of dollars in savings (for a house or as an emergency fund), and in 10 years you want x number of dollars investments for retirement. Do some math with an investment calculator to determine how much you need to save every month to get there. Maybe $300 into savings (maybe with a 1% interest rate) and $500 (maybe with a 7% interest rate) into investments a month will get you to your goal in 10 years. [In 10 years, you'll have $37,000 in savings and $85,000 in investments]. Then, set up automatic payments from your paycheck for those amounts, and give yourself the freedom to spend the rest on both your necessities and your values, such as your lattes, without guilt!

Maybe you'll discover that you don't have enough money left over for your values. Well, then, readjust! Maybe you can live with a more modest 10-year goal if it gives you a little bit more flexibility now. Give yourself the freedom to renegotiate as you learn what works for you.

Bad Tip #5: Buy Term and Invest the Difference

Bad Tip #5: Buy Term and Invest the Difference

Bad Tip #5: Buy Term and Invest the Difference

This is another controversial one. I've written about the differences between term and whole life insurance elsewhere, so I won't bore you with the details here.

In short, term life insurance is cheap life insurance that lasts a fixed amount of time: 10 or 20, or 30 years, typically. The catch is that, in most cases, you will never get any money back. It's there as a cheap safety net in case something happens to you and you want to make sure your family has some money.

Whole life insurance is more expensive (often 10 times more a month in premiums compared to term insurance), but it lasts your whole life. As long as you keep paying it, you are guaranteed a death benefit payout even if you live into your 100s. This type of life insurance can also be used as an investment: There is a cash portion that grows over time, the company will pay you a dividend every year as a percentage of your cash value, and the death benefit will often grow over time as well. It can be a little bit complicated, but it's a useful financial tool that can help you out in a variety of financial scenarios over the years: Maybe you have an emergency and need some cash quickly, you can withdraw a portion of your life insurance policy tax-free.

Lots of financial bloggers hate whole life insurance (often, in fact, because they are sponsored by term life insurance companies). It is definitely expensive, and as an investment, it does not grow as significantly as investing in the stock market. For this reason, they tell people to "buy term insurance" and use the extra money saved to invest in the stock market. In terms of raw numbers, this might make sense, but there are other factors to consider: Stock investments are riskier. Whole life insurance never loses value after it increases in value. Furthermore, whole life insurance is tax-free, while you will have to pay taxes on earnings from stock investments. Life insurance should not replace other investments but can be an important addition to your savings and retirement plan.

Check out these numbers from some life insurance expert bloggers, showing how whole life insurance compares to investing in the stock market.

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.


Kyson Parks (author) from San Diego, CA on May 24, 2020:

Thanks, Rich! Hope you enjoyed your latte! I've been wrestling with the savings question too, as the interest rates at savings accounts are so terrible right now. You can still find okay rates (over 1%) at online banks. I use Ally and like it a lot, and even now still have 1.4%. But most of my savings is in a savings account with very little interest, but I like having it there because it's connected to my other accounts and is very accessible in an emergency, which is the main reason it's there! If you're okay with a little bit of risk, you can start a brokerage account with a financial planner and you can keep some of your investment in cash with them in a money market account, which technically is exposed to the market but is pretty secure and gets closer to 2%.

Rich E Cunningham from Ontario, Canada on May 23, 2020:

Great article! Ironically I am drinking a Latte while reading this but I made it at home so maybe that wont get any celebrities angry at me.

Its always good to consider the other side of "Advice.". I think during this whole COVID-19 crisis most people wished they had more savings.

One thing I have been considering is where one can put their emergency savings, which doesn't have market risk.