Financial Feminist - 111. Debunking the Worst Money Advice We've Ever Heard

Episode Date: August 31, 2023

There is a plethora of bad money advice out there –– from finance Chad’s telling you to dump your life savings into crypto to some of the biggest names in personal finance who continue to give outdated, shaming, and downright harmful information to their followers. In today’s episode, we collected some of common money myths and half-truths from our listeners and debunked the worst of them, including whether or not you actually need a credit score, why deprivation is not the way to go, and why so many people think investing is just gambling. Read transcripts, learn more about our guests and sponsors, and get more resources at  https://herfirst100k.com/start-here-financial-feminist-podcast  Not sure where to start on your financial journey? Take our FREE money personality quiz! https://herfirst100k.com/quiz Learn more about your ad choices. Visit podcastchoices.com/adchoices

Hello, financial feminists. Welcome to the show. I am so excited to see you. If you're an oldie but a goodie, welcome back. If you're new here, welcome. I am Tori. I'm a money expert. I am a New York Times bestselling author. And I also host this show where we talk about how money affects women differently, as well as how to fucking fight the patriarchy by getting fucking rich. And if you could have seen us in the studio, and by in the studio, I mean the second bedroom in my house, you would have seen for the last half hour podcast producer Kristen and I having an aneurysm over technology today. Our show is pretty seamless. We've been doing this for two years. Things go off mostly without a hitch until you plug in things and they just decide not to work one day. So I am literally surrounded in a graveyard of black cords and I'm currently

using my backup microphone. So if for whatever reason this sounds like shit, no, it doesn't. That's that's your own ears. It's not ours. It's yours. That is all you. That's not it's not me. It's you. No, but it should sound great anyway, because Kristen's good at her job. However, just just thank a podcast producer today. Thank a podcast host today. There is a lot that goes into just talking into your ear holes where you're like,

she's just spouting off shit into my AirPods. Also, and audio engineers, of course. Thank you, Kristen Cuddin. Of course, of course, of course. Yeah, this is not just me talking into your ears. This is a very robust media project. And so we appreciate your support of it and the other podcasts that you like. Perfect segue. If you love the show and want more of it, well, subscribe. Click subscribe

wherever you're listening right now and leave us a five star review. It helps us be able to support the show and continue creating more great episodes for you. I'm going to get a little gossipy and it's going to be fun because we're talking about some of the worst financial advice I have personally heard that I hear other financial experts spout off or from questions from our community of what people have heard and if it's true or not. We're going to delve into today the good, the bad, the ugly around all of the financial advice that has made you at one point go, is that it? I don't know if that's it. I'm just going to start off. Kristen has not written this as part of our plan today. I want to start off with a personal story of some really bad financial advice I got. When I was at my first corporate job,

I was trying to save as much money as possible while also traveling and doing fun stuff and living in the big city. And by big city, I mean Seattle, not New York. And I was very transparent about my money journey and about my attempts at being able to save money and progress towards my goals. And one of my coworkers, who was a male coworker, he worked in finance. He was their senior manager of finance at the time. And I remember probably a year into working there, I don't even know how I got started on it, but I think I had just mentioned briefly, oh yeah, you know, I'm saving money or saving this portion of my money. And he looked at me and he said, you don't need to save all that money. You're young. You can catch up. What are

you doing? Like, you don't need to save that much money. First of all, completely unsolicited advice. Second of all, he had no idea what my actual goals were, which were to leave and never talk to him again, but truly like to go and work for myself and not work in a corporate environment. If the advice truly was, Tori, you are not having fun and all you do is save money and you're kind of a killjoy. Yeah, that would have been good advice. But I was still traveling. I'm still doing a lot of things to be social and to spend my money. And it was just one of those moments where I was like, oh, you don't know my life. You don't know my life. You don't know what I want. And also, you're telling this bright eyed and bushy tailed 23 year old who's really excited to start saving money to set herself up. Well, like, yeah, but you should take yourself less seriously. saving money to set herself up well, like, yeah, but you should take yourself less seriously.

That was the tone. It's take yourself less seriously, blow all your money. This was coming from somebody in finance. That was just a moment for me in my life where I had a realization that not everybody in your life who has various levels of caring for you is going to give you good advice. One of the other pieces of advice that I got that ended up being bad financial advice was actually from my own parents. I've talked about this before, but when I was at my last corporate job and things got a little squirrely and it was time for me to analyze whether I was going to double down and stay or quit and try to take her first 100K full time, I literally called my parents whether I was going to double down and stay or quit and try to take her first 100k full time, I literally called my parents and I was 25 at the time. And my parents were like, you need to do anything you can to keep your job. You need to do everything and everything you can to make sure

that you have your job and you have your health insurance and that you have stability. And one of the greatest gifts that my parents gave me was stable choices. They were really focused on picking the smart, stable choice so that I could have a really great life. And I'm thankful for that. But they also inherently taught me that risks were bad. Any kind of risks, even calculated, fairly reasonable risks. And for them, going out on your own, not having that stable paycheck, not getting your

health insurance, not getting the structure of a nine to five job that felt really risky for them. And I joke now with them. I'm like, remember, remember what you told me? Remember how dumb that was? I remember how terrible that advice was. But again, this is a reminder that even the people who have your best interests at heart are sometimes going to give you advice that doesn't align with your values, doesn't align with the kind of person you're looking to be, doesn't align with your own career. And I get why my parents were doing it, right? Their job is my own safety, right? And for them, a nine to five paycheck meant safety, meant stability. safety meant stability. And so I just want to start this episode by saying, again, even the people who are well-intentioned, even the people who have what they think are your best interests

at heart, even that advice sometimes is not going to be great for you in your own life. I will also say again, another one from my parents, I've discussed this in my book, we've discussed this on previous episodes, we have a whole episode about this, is my parents when I was 22 were like, you need to buy property like you need to buy property right now, because if you don't, renting is throwing money down the toilet. And I almost bought a condo an hour outside of where all my friends lived. But 20 minutes from where my parents lived, very convenient. And it was something I wasn't ready to do. I wasn't ready to be a homeowner. I wasn't ready to live and commute an hour and a half into the city one way. And my life

would be very, very different if I had made that decision. And ultimately, I was not ready for it. On paper, it was a great decision, right? It was like, yeah, own property, start building that. But the only place I could afford property when I was in my early 20s was an hour outside of Seattle, very close to where my parents were and where none of my friends were. So again, all of this to say that sometimes even very well-intentioned advice from people who love you and people who care about you is not the advice that you want or should be listening to. Okay, let's talk about some of the advice that we hear all of the time with Dave Ramsey first. You knew this was coming. You knew we had to dunk on some Dave Ramsey stuff. Okay, first, one of his things is

that a good starter emergency fund is $1,000. Once you hit $1,000, then you should proceed to paying off your debt. Now, I want to be clear. $1,000 saved is a huge accomplishment. That is not me dissing you. That is not me being like, oh, well, that's stupid. $1,000 is better than nothing. And it's a major accomplishment. But it's just not enough of an emergency fund. It's not. It's not enough of a starter emergency fund. Yes, even if you have debt. If you're an oldie but a goodie to the show, you've heard me say this a million times. I think about a thousand dollars for my own emergency fund. And I'm like, that doesn't even pay a month of my rent, yet alone my groceries and my insurance and everything else that is a part of my life. And if I was in a nine to five job or if like HFK didn't have a good month and I didn't have

income coming in or I had this huge emergency happen, I can't afford my life. Not just for like a couple months, but like a couple weeks. So this is why we focus not on a specific number. It's not $1,000 or $3,000. It's living expenses. Your living expenses are different than mine, different than Kristen's, different than somebody else, right? And that's why when we built an emergency fund, we're not focused on a solid number. We focus on a specific amount to you. Three months of living expenses in that high yield savings account. So that's the first piece of advice

that I just want to debunk. Again, $1,000, really great, really important. Is it enough? No, it's not. It's not enough to sustain you for an actual emergency fund before you proceed to paying off debt. Dave Ramsey, the tweet, quote, the only time you should see the inside of a restaurant

when you're in debt is if you're working there. That is a real life tweet. He actually tweeted that. I have the screenshot. It's quoted in my book. If you have debt, the only time you should see the inside of a restaurant is if you're working there. Woof. Woof. This is just bad. This is just shaming and judgmental. And frankly, it's just it's just in such bad taste. If you're in debt, I don't want you depriving yourself of a life that's fun. One, that's just not great. That's just not fun to experience. And two, it's also not literally psychologically prudent. Like as his advice was strict, but good, which is what a lot of people say about him is they'll be like, yeah, you know, it's like tough love. No, it's not tough love. It doesn't work. Diets don't work, right? Restriction doesn't work. And that's not because of willpower. That's because of actual psychology.

And one is also a dunk on restaurant workers. It's just like this serious dunk on like six different people. It's bullshit. It's shaming. It's judgmental. If you have debt, you're allowed to go out to a restaurant. You're allowed to have nice things. You're allowed to balance your spending while also paying off debt. It's bad advice. It's bad advice. It's shaming. It's judgmental. It doesn't acknowledge systemic factors. It's just a dunk on people to make them feel like shit. Not a fan. His other big thing that we've all heard is that credit cards are evil. Credit cards are bad. Literally, you don't need credit cards or a credit score. If you don't know this, Dave Ramsey literally tells people that credit scores are a quote, I love debt score,

and that you don't need them. I'm sorry. Credit scores are the, I told you this was going to be a spicy episode. Credit scores are the only reason that the average person can actually like get ahead building credit. Is the credit system fucked? Yeah, it is. But credit scores are literally how you get an apartment, how you buy a house, how you take out a loan for anything. But it's bad advice. Like there's no part of it that's good advice. There's no part of it that's good advice. And it also, not shockingly, disenfranchises black and brown people. The amount of people who have come to me, who are especially people of color and have told me like, I listened to Dave Ramsey. I thought I didn't need a credit score. And now I'm like 35, 40 years old and I

have not built a day of credit and I don't know what to do. It's bad advice. You need a credit score. You need to build credit. Credit cards are not the devil. Credit cards, as long as you use them responsibly, are actually really, really great tools for getting free shit, but also building your credit and also protecting yourself from fraud. The whole credit cards are evil. Credit scores are evil. I just want to debunk that so hard. It's bad advice. It's bad advice that disenfranchises people who are already disenfranchised further. It's just not financially sound advice coming from literally the world's leading expert in money. I promise this whole episode isn't going to be me dunking on Dave

Ramsey, but shouldn't it be? All right. And finally, last piece of Dave Ramsey's advice that I absolutely hate is just this feeling that you are worthless if you have debt or you are just that you should be so ashamed of your previous choices. If you listen to one episode of his call-in show, it's just not a great time. It's just not fun. It's just a lot of him telling you, like, how could you and slapping you on the wrist. And rather than being empathetic and understanding while also giving you good advice, he gives mediocre advice while telling you that you're a piece of shit. This is not specific to Dave Ramsey. This is just in general. The tough love thing, you can find advice about anything that is just as good and is also empathetic and understanding and acknowledges systemic oppression. And I would argue that that is better advice every day of the week. We know from a psychology standpoint, we know from a physiological standpoint

that when somebody speaks to us with empathy and understanding, we're more likely to want to engage in that topic. We're more likely to have hope. That's probably my biggest beef with Dave Ramsey's advice is even though stuff that is fine or good is just like shrouded or covered in this feeling of deep, deep shame. And we don't like shame here at her first 100K and neither should you. All right, let's talk about other really bad

advice that I've heard. One question we recently got from listeners, we did a brief overview of student loans and the student loan repayment plan. They asked if their credit score would go down if they paid off their student loan balances. So let's talk about this like myth that I hear. This is the myth of like, if you pay off your debts, your credit score will go down. Or a variation of this, which is keep a balance on your credit card so that your credit score goes up. Yes, this is an actual thing. The amount of TikTok comments I get that are people going, I shouldn't pay off my credit card in full because I need to keep my

credit score up, right? That's what I was told. No, no, no, no. You need to pay off your credit card on time and in full. Meaning if you put a thousand dollars on your credit card, pay the full thousand dollars. Now, if you do pay off your debt, if you take, you know, let's say $5,000 of student loan debt and you pay it all off, especially bigger balances, you will see a hit to your credit score temporarily. That's going to happen. What's made up your credit score is part of you paying off debt and showing that you can pay off debt, right? You've taken out debt. And if you're paying it on time and you're submitting your monthly payments and you've been doing that for a while, your

credit score has gotten used to the fact that you're like a reliable person who takes on debt. So then when you wipe your debt, even if that's a financially good thing, your credit score freaks out for a second because it's like, oh, wait, where did all this debt go? They're no longer contributing to it. So they're confused about if you're actually financially responsible or not. So you might see this dip in your credit score that will rebound very, very shortly, typically in like a couple months, maybe less than that. The dip in your credit score is worth it so that you don't have debt anymore. I'm going to say that again. A brief dip in your credit score is worth you being debt free. It's the lesser of two evils, right? You're taking this not fun thing,

which is a slight dip in your credit score to like fucking do this great thing, which is get out of debt. This is why, again, the credit score system is kind of bullshit. But will you see a slight dip? Maybe, possibly. Is it worth it? Hell fucking yeah, because it means you're paying off a portion of your debt. This can happen with getting out of credit card debt, getting out of student loan debt, paying off your mortgage, paying off your car loan. But again, the net positive is you have paid off your debt. All right, so we've covered some of the myths that I've heard or some of the bad advice that I got. We've covered some of Dave Ramsey's worst advice. Let's talk about some career myths or career advice that is just not helpful.

The first, and again, I discuss this in my book as well, is this idea of loyalty in your career. We are fed this lie, especially as women, that to progress in our careers, we need to be loyal. We need to be loyal to a company, to a position, to an industry, because loyalty will pay off. And at the end of the day, statistically speaking, that's incorrect. You have more negotiating power when you first start a job than you will ever have again. And for most companies, loyalty doesn't actually mean anything. As a business owner, I can speak to the fact that sometimes, even though this person may be a great employee, sometimes you have to do layoffs, right? Sometimes you have to let people go.

And other times, more vindictively, people will just fire you. Companies will just let you go. Companies will cut your hours. So I need you to be in a situation that values you, that sees your worth, as opposed to believing, okay, I'll just keep my head down and I'll do good work and they'll notice me, right? That's the myth really. It's like, keep my head down, stay loyal to this company, and eventually they'll notice. And the truth is for the vast majority of companies, that's just not how things work. And especially if you're a member of a marginalized group, what ends up happening is you end up just being a wallflower at the company.

One of my other things that I hate, hate that I hear is, oh, I can't negotiate even though I know I'm being underpaid because the company's not doing well right now. This also is just like, it's a bad time to negotiate. Here's the thing. It's always a bad time to negotiate. You can always make a reason for why you shouldn't do something, right? You can always make up a reason for why it's a really bad time to negotiate. Oh my God, my boss had a shit day. I don't feel well. And the company is going through a rough time, right? Unless you're literally the CEO where you have a typically legal duty to make sure that the company's doing well, whether the company's doing well or not is not your prerogative.

That's not your job. You deserve to be compensated fairly regardless of whether the company is making a bunch of money or is currently struggling. I saw this a lot in the pandemic. People were like, yeah, but it's a pandemic. And I'm like, you still deserve to be compensated. Now, are you probably less likely to get the raise? Yeah, maybe. Right. Because if they don't honestly have the money to increase your salary, but this is where other things can come into play. You don't have to just negotiate your salary. You can negotiate your benefits, your PTO, your other forms of compensation. You can negotiate your title. We have more episodes about how to do this, but I just hate the myth that, oh, the company is doing terrible. So I'm not going to negotiate at all. It's like,

there's always a reason to not negotiate. In the feeling of like, there's never a good time to negotiate. That means actually every time is a good time to negotiate. Let's talk about some investing myths. I have an entire workshop, free workshop, where I talk about all of the secrets of the stock market and debunk these myths in more detail. You can go to herfirst100k.com slash secrets to sign up for that workshop. And one of the biggest myths is that investing is gambling. It's not. It's not. If you are day trading, if you are using investing as a short-term way to make money, that is gambling. But the true definition of the word invest is to put energy, money into something for a long period of time, right?

When you invest in yourself, you're not expecting to change overnight, right? It's not a get-rich-quick scheme. night, right? It's not a get-rich-quick scheme. So some people use investing to gamble by making bad decisions and by viewing investing as this short-term thing, this thing that you do over days or weeks or months and not over years, if not decades. Another one is that you can't manage your investing yourself because it's too complicated and too hard. That is a lie that has been sold to you by this billion dollar industry, which is financial bros named Chad and Wall Street finance bros. You don't need a Wall Street Chad to save you.

You don't need somebody to come and do this for you. That is a lie that's been told to you to keep you from investing and to also prop up, again, a billion-dollar industry using your hard-earned money. You just need somebody to teach you, whether that's me or somebody else. You need somebody to sit down with you and guide you. You can invest yourself. You can 100% do it yourself. And this myth that you need a financial advisor, you need somebody to come save you is just not true. You don't need to be good at math. You don't need to be a professional stock picker. One of the stats I mentioned in my book is that actually professional stock pickers

are terrible at their job. They're awful at their job. They're terrible at their job, but we're paying them like they're good at it. You can manage your money yourself. You can invest for yourself. You can build your own wealth without relying on a Wall Street Chad to save you. One of the other myths about investing is that you need to find the hot stock and that's how to build wealth. You need to figure out what the next Apple is in order to be good at investing. Also not true. in order to be good at investing. Also not true. That's where investing gets riskier, is trying to bet on the next biggest thing. And you notice I said the word bet because it is kind of a gamble. That is not a sustainable way to invest for the long term. So I don't have time to make that my hobby and research a bunch of companies to figure out what's going to be the

hot thing. Index funds. We've talked about this before. They're a bunch of stocks and a bunch of companies to figure out what's going to be the hot thing. Index funds. We talked about this before. They're a bunch of stocks and a bunch of companies together for one low fee. And that's what I choose to invest in. I'm not chasing the hot stock. I'm not chasing the hot industry. And finally, oh gosh, indexed universal life insurance. Life insurance is great if it's used like life insurance. If you are using life insurance as an investment, it is a scam. If somebody is telling you to invest in something like life

insurance or IUL, which stands for indexed universal life insurance, you don't have a financial advisor. You have a life insurance salesman. They get a massive cut of that. Now, you got to make money. I get that. But they are not recommending a good thing for you. It's a scam. IUL is a scam. Life insurance is great for actual life insurance, for the purpose of life insurance, which is to protect your loved ones in case you die. Morbid, but true. If you're using life insurance as an investment, nah, use your investing accounts for investments. And then just no crypto. Crypto, NFTs, these are again,

another like, oh, to the moon, right? These are the things that are going to get you rich. I don't invest in crypto. I never have. If you want to invest in it, it should be no more than 5% of your total portfolio. It's just not something that I feel like I want to spend my money on. It's not been proven. It is a speculative investment. I like to take my hard-earned money and put it towards something that has been proven over almost 100 years. I'm just not a crypto girly. You all know that about me by now. Let's take a couple of the money myths from our community. One of the ones that, again, I just highlighted is this feeling of, oh, you can't invest on your own because it's too scary. I can't invest on my own because I'm worried about making a mistake or worried about losing all of my money and fucking up in some way. We've just debunked that. You can invest. You just need

somebody to guide you. That's why you listen to this podcast. Hello. One of the other myths that we talked about when we talked about Dave Ramsey and debt is like, I can't treat myself, right? If I have debt, I can't buy that little treat. I can't buy a latte. I can't go on vacation. I can't go out to eat. You can have both. You can have that balance. That's 100% okay. And frankly, is the thing that actually makes life worth living and will keep you going in your consistent journey to pay off debt. One of the other myths we heard from our community is that you should use your emergency fund to pay off your debt. And as we just discussed, emergency funds are there in case of emergency. You're not building your emergency fund. You're not building savings to then go pay off your debt. You're building savings to sustain you so that you don't have to take on more debt.

If you want to build your savings to pay off your debt, great, but that's not for your emergency fund, right? You can build your emergency fund and then start building money to pay off your debt. That's great. But no, we're not building an emergency fund to pay off debt. That's not the purpose of an emergency fund. And one of the last ones that I talked about, again, at the beginning of this episode is that buying is always better than renting. It's always a better investment. You're stupid if you rent. It's a bad choice if you rent. I've discussed this with Ramit Sethi, who's a fellow finance expert. He also rents. We are high earners. We are millionaires who rent. And that fits our place in life right now. That fits our lifestyle better. I also just can't bring myself to pay a million dollars for a three

bedroom, two bath house that needs a huge kitchen remodel in Seattle. The fact that that costs like $1.1 million is just crazy to me. Renting fits the season of my life, as Ramit said in our episode. That's okay. If you are renting, there's no shame in that, especially if you're actively choosing to rent. That's a lifestyle choice. That's not a bad thing. Like I said at the very, very, very beginning of this episode, ultimately a lot of these myths and a lot of this advice comes from seemingly well-intentioned people who have either been told this advice by somebody else and feel the need to share it with you, or because that's what works for them. My parents are homeowners. It makes a lot of sense, right? It made financial sense for them to purchase a house. So of course they're like, Tori should also own a house. Didn't make sense for me. I am not married. I want to live in a big city where the

price of a house is not as affordable. I travel a lot. And frankly, I'm not very handy. So I can't fix a lot of things. It doesn't fit the season of my life to own property. So I would always encourage you when you hear financial advice, when you hear just general advice that doesn't ring entirely true for you, explore why that is. Is this well-intentioned person giving you advice that doesn't fit your life? Is this person trying to scam you or sell you on something? Is an industry being upheld because your lack of education, which by the way, is not your fault, but is that what's happening? It's really important, I think, when we start learning about personal finance and continue on our journey to really always ask ourselves, are we using money to build the life that we want? Is this decision one step closer

to building the life that I want, even if it's different than somebody else's life? Is this decision one step closer to building the life that I want, even if it's different than somebody else's life? Is this one step closer to protecting myself and my family? Is this one step closer to doing something that feels right for me, even if people don't understand it? Because at the end of the day, the only person you have to answer to is you. The only person you have to live with and whose decisions you have to live with, it's you. And if you don't love your decisions, if you don't love the life you're currently living, make a change. It's okay. And also investigate your advice before you take it. I hope this episode has been helpful for you. If you liked this episode, feel free to share it.

I would love to hear as well if you're on Spotify, tell me some of the worst advice you've heard. It's always fun to dish about it because there's a lot of people out there giving you a lot of advice, some of which is fine, some of which is just shaming or ridiculous or scammy or just not true or relevant for you. So I would love to hear your stories. As always, you can leave us voicemails as well. If we get enough voicemails, maybe we'll do a little compilation episode. It's always fun to hear y'all's stories and especially the things people have told you that just seem absolutely bonkers crazy. You can subscribe to the show wherever you're listening right now. It's your easiest way to support it. We appreciate you being here as always. We appreciate you being

Financial Feminists and I'll talk to you soon. Have a good one, guys. Thank you for listening to Financial Feminist, a Her First 100K podcast. Financial Feminist is hosted by me, Tori Dunlap, produced by Kristen Fields, associate producer Tamisha Grant, marketing and administration by Karina Patel, Sophia Cohen, Khalil Dumas, Elizabeth McCumber, Beth Bowen, Amanda LeFue, Masha Bakhnikeva, Kaylin Sprinkle, Sumaya Molok-Rio, and Harvey Carlson. Research by Arielle Johnson, audio engineering by Alyssa Midcalf, promotional graphics by Mary Stratton, photography by Sarah Wolf, and theme music by Jonah Cohen Sound. A huge thanks to the entire Her First 100K team and community for supporting the show. For more information about Financial

Feminist, Her First 100K, our guests, and episode show notes, visit financialfeministpodcast.com.