Financial wisdom is sometimes rather a contrarian. For instance, Walmart founder Sam Walton is quoted as having said, “Swim upstream. Go the other way. Ignore the conventional wisdom.”
However, is this really the right way to go? In a moment of free financial advice Perth, let’s take a look at how financial wisdom works. After all, things go the way they do for a reason. It isn’t always wrong to go with the flow of the crowd.
First, let’s prod free advice against fact-free advice.
A lot of people hear free advice, and then proceed to take it for granted. Mostly because it’s all conventional wisdom, which – in a fit of irony – is what conventional wisdom tells you to ignore. There’s also the stigma that free advice is also bad advice. It’s not.
Sometimes, free advice is harmless. Conventional wisdom becomes that because it works. When someone tells you to diversify, it’s because it’s a practical and sound investment strategy. It’s common wisdom and given out for free, but it’s also right.
However, the other side of this is that bad advice is more costly when it comes to finances.
One thing that most people get wrong is about the expenses you have when you retire. The assumption is that things get cheaper. This is absolutely not the case.
Groceries, utilities, and insurance still remain. Healthcare actually gets more expensive, with the number of pills that start piling up. This is before you factor in the cost of a nursing home if you don’t have anyone willing to take care of you in your twilight years.
In other words, you’ll want to have higher income during your retirement than at any other time in your life. You will want to build up cash reserves for that. The size of these reserves gets bigger if you want to do things like travel or invest.
Most people say that if you want to make money, you need to be willing to lose some of it first.
This is not true. Yes, stocks can be a volatile option, but they’re not the only one. Bonds are stable, even if the yield is low. Real estate can provide a steady income despite the huge initial investment. You don’t need to automatically assume loss just to make gains.
Finally, supposedly it is better to reduce debt first, prepare for retirement later. The fact is, this is false. Dwelling on your debt is leaving you vulnerable unless you already have liquid savings ready.
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