Last week, The Financial Blogger ran a guest post from Studenomics laying out a list of "30 Financial Moves Before 30," advice for young people to get a grip on their finances. List articles are great for making fun of, since the author usually had to stretch to make their magic number, and they're full of conventional wisdom, which is usually either blandly uncontroversial, or more often flat out bad advice.
This particular article also threw in some advice which would likely qualify as good advice for life, but in a purely financial context, probably isn't going to help you get ahead.
1. Build a Strong Emergency Fund
BAD!
I've talked about emergency funds before. They're a pet peeve of mine in the world of personal finance blogging. The advice seems to come down to: "You're in debt. Instead of reducing your interest payments by paying down your debts, make sure you keep lots of cash in the bank to handle any emergency that might come up."
This is what lines of credit are for. You need to have access to money in an emergency, but cash in the bank is costing you. Some people recommend 6-12 months of expenses in an emergency fund. Let's say 12 months of expenses is $30k for you, and you are foregoing paying down $30k on your student loans at 5% in order to "be prepared." That's costing you a whopping $1500 per year. If you keep a line of credit open, you can save the interest and still have access to the funds when you need it.
2. Pay off Bad Debt
Bland.
You may want to look into paying down your good debt, too.
3. Contribute to a Roth and Traditional IRA/RRSP
GOOD! (sometimes)
The US enforces a "use it or lose it" system for contribution limits. Americans should make contributions to some kind of IRA, since the tax benefits will continue for life. Under 30s are likely in a low tax bracket, so should focus on the Roth. The Roth/Traditional debate is essentially the same as the Canadian TFSA/RRSP decision, which I have covered.
The use of the term RRSP implies this advice is good in other tax regimes, but this isn't always the case.
Canada, for instance, carries forward unused contribution room. If you live in Canada, and still have debt, the investment gains on your savings are - barring extraordinary performance, which can't be counted on - at best treading water against your cost of borrowing. Since you can contribute later, you gain nothing by making your contribution now, and may be losing out. A lot depends on your tax bracket, but most under 30s are in the bottom tax bracket. In this situation, TFSAs are a wash, and RRSPs should be deferred until you are earning more.
4. Make a Major Investment Mistake
BAD!
I get what he's trying to say here. Mistakes are a part of learning, and you may do better in the long run by experimenting. Still, this isn't something to be aiming for. Try to avoid mistakes, but more importantly, diversify so that no one mistake is going to be major.
6. Pay off all debt
Bland.
Only number 6 and we're effectively on reruns.
7. Create long-term career goals
GOOD!
Always a good idea. Knowing where you're going can help you get there. I might also add: dress the part. If there's one thing my 20s have taught me that I was in denial of before, it's that clothes have a huge impact on how people see you, and how competent they think you are.
8. Get a promotion
Bland.
Promotions feel good, and they help move your career forward. But a promotion down the wrong track, or with an employer you don't want to stay with long term, may actually be a bad thing. Getting promoted at one company my keep you from looking elsewhere for better opportunities. Do well at your job, but don't be afraid to jump ship.
9. Quit your job
BAD!
I'm not opposed to quitting your job, per se, but as financial advice this is a dangerous one. Quit your job because you hate it, sure. But don't expect to be richer for doing so. Quitting your job for a better opportunity, though? That's good advice.
10. Start a side business
GOOD!
It's not for everyone, but a side business can certainly help you meet your financial goals.
11. Invest in your side business
Bland.
It's almost like 30 was too hard to get to without breaking one piece of good advice into its individual steps.
12. Chase bank rates
BAD!
Even the author notes this is a bad idea. Unless you're pushing around millions of dollars, changing banks for a 1/4 point is far more hassle than it's worth. And you shouldn't have millions kicking around a bank account...find a real investment.
13. Switch to Online Banking
Bland.
Online banking isn't for everyone, though I expect the under 30 crowd is probably mostly comfortable with it. But online or offline, finding a bank you're happy with definitely something you should do, and fees should be only one consideration. In my experience, quality of service is more important. After a couple of attempts with commercial banks, I'm now quite happy with my credit union.
In the long run, I'd favour having a brick and mortar bank over an all-online model. As your financial life becomes more complex, having a relationship with a real person instead of a call centre can be valuable. Of course, this requires picking a bank that has a personal touch.
14. Pay back your parents
BAD!
This might be good moral advice. But it's not good financial advice. Besides, family relationships shouldn't be all about money. You're probably going to be taking care of your parents in their declining years, so don't sweat it about paying them back now.
15. Donate to charity
BAD!
Again with the moral advice. If you feel giving to charity is a good use of your money, that's great. Please give. But again, this is not going to make you richer. Giving your time, on the other hand, can be a win-win situation. If you pick the right volunteer opportunities, you get experience and connections that in turn improve your income. And you still get to make a significant contribution to your community.
16. Help out a friend in need
GOOD!
What goes around comes around, so helping out your friends can be a great idea. But don't get sucked into a one way relationship, where a friend sucks the life and money out of you. Friendship involves give and take.
17. Take a career risk
Bland.
Risk-taking is good, even if it doesn't always turn out well. But this is about as generic as advice can get, and gives the reader no idea of what qualifies. Should I be telling off my boss? Quitting my job? (there we go with reruns again) Maybe sleeping my way up the ladder? These are all risks, but some might have more benefits that others.
18. Try negotiating
Bland.
Maybe this is the risk from #17. It's true...if you didn't negotiate, you settled for too little.
19. Start using sub-savings accounts
BAD!
Needlessly complicating your financial life is unlikely to pay dividends. This is also a continuation of the underlying assumption that you should have money in savings accounts, which are unlikely to even keep up with inflation.
20. Take advantage of your health benefits plan
BAD!
I'll admit I've been known to go for a massage or two in my time. But remember that the more people take advantage of their benefits, the more expensive they get. You are paying for that massage, just indirectly. And don't forget about the co-pay if you don't have 100% coverage.
21. Set a retirement target date
BAD!
It's not a bad idea to look at different scenarios and come up with a plan that balances a desire to retire young with a desire to live well today. But life happens, and setting a hard target date is bound to lead to disappointment (or maybe working too much, if your one of those assholes). When exactly you retire is a combination of how well you save and how the market does during your working life. You only control one of these things.
22. Start a 529 College Savings Plan/RESP
Highly dependent on your situation.
I'm not familiar with the rules for 529s, but you actually have to have kids to set up an RESP. Maybe you do, maybe you don't. 30 is no longer particularly old to still be childless.
23. Track your credit
BAD!
Tracking your money is a good idea. Paying your bills is a good idea. Tracking your credit score is a waste of time. If you are smart with money, a good credit score follows. If you are not smart with money, you shouldn't be taking on more debt anyway. Stop worrying about the number.
24. Travel the world
BAD! (at least financially)
I love traveling, so it's a bit hypocritical of me to say that this is bad advice. But the fact is that I'd be substantially richer if I never went anywhere. Not only are there direct costs to travelling (My wife and I have probably spent $40k or more on traveling in the past 10 years), but there's also indirect costs. Lost income (we took 6 months off, so add at least $35k), and we sold a condo shortly before a big run up in prices that has still not reversed itself (add $100k).
In retrospect, I might have timed my big trip better, but I certainly wouldn't have traded it for anything. That doesn't make it good financial advice, though.
25. Save up for your wedding
BAD!
If you save more, you'll probably spend more. Instead, spend your money wisely and aim to turn a profit on your wedding.
26. Spend your money frivolously once
BAD!
Maybe it's me and my penchant for semantics, but "splurge" and "frivolous" aren't the same things in my books. A splurge is spending a lot of money on something that is worth its price to you, even if it is a luxury. My bikes and vacations are undoubtedly good examples. Frivolous spending is spending money without considering the value of what you get in return.
27. Create a will
Bland.
This is neither good nor bad advice. If the lawyer costs more than your total assets, it's probably a bad idea to create a will. But more generally, there are many situation where the existence of a will will have little or no impact on what happens in the event of your untimely demise.
28. Try a random part-time job
Bland.
Again, here's something that's hard to really disagree with, but doesn't seem like something that you're really missing out on either. If you can make some money working part time at something you enjoy, then that's great. But if you value your leisure time, maybe you should take the time to savour it.
29. Sell your crap
GOOD!
And here I was thinking we'd run out of good advice almost a half list ago. Selling your crap can de-clutter your home, your life, and fatten your wallet. What's not to like. Better yet, though. Don't buy crap in the first place.
30. Live like a scrooge for a bit
BAD!
This is definitely going a little overboard. Scrooge let money drive his life at the expense of eeking any enjoyment out of it. Despite being a wealthy man, he would not spend on heating or light in his bedroom. He had no friends...the closest thing was a dead business partner.
Far better is to live like a student well after you can afford not to. Maybe not the parties, but the roommates and the cans of tuna can go a long way to setting your financial life up on the right foot. And students, much better than older people, seem to understand that spending time with people is more rewarding than spending money with people, so have your friends over for a potluck dinner instead of going out to a fancy restaurant just because you can.
I know this list wasn't meant to be taken literally, as 30 things everyone should do. But enough of it is frankly bad advice that you should be cautious about taking any lessons from it.





