3 Common Pieces of Financial Advice I Won’t Follow

There’s a lot of financial advice out there in the world — some of which is good, and some of which isn’t so good.

It’s also important to realize that some tips for managing your personal finances may work for most people, but may not necessarily work for you — which is definitely the case for me with some of the more common recommendations experts put out there.

In fact, here are three pieces of advice that you hear all the time and that I simply won’t follow — along with some tips on why they may not work for everyone.

1. Live on a budget

If you have ever read anything about finance in your life, chances are good that you’ve been told that you need to have a budget. And, in some cases, this suggestion makes good sense. After all, you must live below your means if you want to build wealth, and you often can’t do that if you’re just spending without a plan.

Unfortunately, budgeting doesn’t work for me. And I’m not the only one. In fact, research has shown that 84% of people with a budget end up spending over it. In close to half of these situations where people exceed their budget, the extra spending goes on a credit card.

The reality is, whenever I make a budget, I don’t end up sticking to it. I’ll decide I need or want to spend more in some areas than others, and I’ll end up just giving up on the entire thing. This means budgeting is a waste of time that does nothing to help me improve my situation.

Instead, I’ve automated my financial life. I keep my fixed costs below 50% of my income and have them paid automatically. I also transfer 20% of my money to savings. Then, anything left over is fair game to spend on whatever I want.

This works really well for me because I don’t have to account for every dollar. So I don’t end up getting discouraged that I’m failing. Plus, since I’ve kept my fixed costs reasonable, there’s enough money left to spend on what I want — and my long-term and short-term goals get taken care of effortlessly. The money just transfers to savings and my brokerage account without any effort on my part.

If you have a hard time living on a budget, automating your finances may work for you as well. It’s pretty easy to set up automatic payments and withdrawals to savings — the key is to get your fixed costs down, which may mean doing things like renting a cheaper place or driving a less expensive vehicle. Fortunately, these big moves only have to be made once and then you can enjoy easier money management.

2. Save 10% of your income for retirement

There’s another rule that you hear often — that you should save 10% of your income for retirement. This rule doesn’t work for me, though, because I want to be able to retire early and I want a really fun retirement where I travel and enjoy life, which means I need more money.

Instead of just following this rule, I’ve figured out how much income I want in retirement and multiplied that number by 25 since I plan to follow the 4% rule and withdraw 4% of my account balance in retirement each year. This helped me to see how big my final nest egg needed to be, and I used the calculators at Investor.gov to break my big goal down into smaller monthly goals to achieve.

Your retirement savings is too important to just follow a basic rule of thumb like saving 10% of your income. Instead, think about what you want your retirement to look like, how much money you’ll need to achieve that, and how much you need to save right now to make that happen. You can use the same process I described above that I used to set my own goals — which has resulted in my saving well over 10% for my future and which may do the same for you.

3. Avoid using credit cards

Finally, many financial experts advise steering clear of credit cards, but that’s a rule I’ll never follow. I like the credit card perks available to me, like airline lounge access and purchase protections. And I don’t want to pass up the chance to earn rewards, as getting 2% back on my spending makes my purchases cheaper.

You don’t have to avoid credit cards either, as long as you’re confident you can pay back your balance and avoid carrying it forward (and paying interest). If you keep your spending in check, you should be able to do that.

Ultimately, you don’t have to follow generic money rules set out for the masses. You can decide what works for you and implement rules of your own, as long as you have a plan that helps you achieve financial freedom in the end.

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