To some people, all personal finance advice is unrealistic. There are some – actually, a lot – of people who roll their eyes whenever they’re told to save or invest or pay off debt. They think that there’s nothing that they can do about their financial situations and that only people with tons of money can have good financial habits – like saving, investing, and paying off debt.
A big part of me thinks that one of the reasons that so many people are so overwhelmed by the world of personal finance is because a lot of experts give totally unrealistic advice. Like, actually unrealistic. Advice that no middle class family could possibly follow while still meeting all of their other financial obligations. For example:
1. Save 20% for a home downpayment. This is advice that is leftover from an era of high wages (relative to cost of living) for middle class Americans. If most of us – especially those of us who live on the coasts – are going to become home-owners, there’s no way that we can meet the 20% downpayment criteria while still saving for retirement and paying all of our other bills. Unless, of course, we’re planning on waiting until we’re 40 to buy our first homes.
2. Never finance a car. So, let me get this straight: I’m supposed to be saving for emergencies, saving for retirement, paying all my bills, paying down my debt AND saving for a new car? Not. Gonna. Happen. It’s much more realistic to advise people to finance a reliable, reasonably-priced car, pay extra on it when possible, and drive it until the wheels fall off.
3. Build an 8-month emergency fund. Even for very financially savvy people, this seems like an unachievable goal. And even if it is achievable, most would say it’s probably not desirable. Putting money into a savings account doesn’t build wealth, it provides security. If you’re trying to build wealth, 3-6 months of emergency funds is secure enough – keeping thousands of extra dollars in a vehicle that’s essentially returning nothing is just plain silly when it could be invested elsewhere for higher returns.
Of course, if you earn a high enough income to accomplish all of the stuff on my “unrealistic” list, then by all means go for it. But financial experts, stop telling average, middle class Americans to practice these financial habits as a matter of course, because we’ll just tune you out and keep spending our whole paychecks on junk that we don’t need – if we can’t meet these ridiculous expectations, why bother trying at all?
Do you agree with my list? What financial advice do you find totally unrealistic for the average person?