Viral but terrible financial advice you need stop listening to

Myths and bad advice about money are not in short supply. And they are costly. They could be financial beliefs that lead you towards bad money decisions, or financial approaches that ultimately cause you to lose more money. Here are some of the myths and bad money advice you need to stop falling for.

1. All debt is bad

There is bad and good debt. You must know which kind of debt you are getting yourself into. For example, taking loans to purchase items that do not bring in additional value or income streams is bad debt. In a previous interview, former Standard Chartered Bank chief executive officer Lamin Majang’ explained that it is possible to build business empires based on loans. “I have seen many small business owners take loans and proceed to build large enterprises. This means that a well utilised loan can turn out to be your quickest route to wealth,” he said.

1. Stocks always come back to even

At the securities market, one of the most common conventional pieces of investment given is to buy more shares when a stock goes down. The reasoning is that the share will be discounted. Also, if the stock goes up, you should buy more lest you miss out on an individual stock’s price increase. But this is not always the case. Even some of the best stocks in the market do not always come back to even. Stop investing with hope that your individual stock will come back to even just because you are buying more at a bargain. The better strategy is to sell stocks once they decline by more than 7 or 8 per cent. According to personal finance and investment advisor Rhina Namsia, you can easily lose your money by buying stocks when prices are going down. "There is much more that goes into play than just falling prices," says who is the founder and chief executive officer of The Acemt Consulting. Namsia singles out KCB as a case example. KCB is trading at around Sh41 per share. “This is a stock you would want to buy when its price is falling because it is undervalued with its book value at around Sh50.7 per share. It also has a return on equity of 22 per cent. A return on equity of 13 per cent and above is very attractive,” she says. In contrast, you should not jump on the Kenya Airways stock just because its price is falling. 

1. You can’t make it after 40

One of the popular myths is the assumption that your financial goose will be cooked if you hit your 40s or 50s without attaining financial freedom. But it’s never too late. Also, you must discard the myth that your future will be guaranteed by facilities such as pension alone. For example, a study by Zamara Group on 65,000 pensioners from 200 pension schemes in Kenya revealed that the monthly pension received on retirement is equivalent to a third of the pensioners’ last active salaries. This means that if you bank on this money alone, you might end up poorer.

1. Some money is too little to budget

Have you ever thought that your earnings are too small to have a budget for, or too small to save? This is the expressway to an unaccountable spendthrift. Regardless of how small or big your earnings are, you must have a budget. The budget must be an account of how you will spend every coin. This will not only seal your expenditure loopholes, but will also create an order of priorities on how you allocate and spend your earnings.

1. Money is evil 

Money is an enabler. The love of money is the root of all evils, not money. When someone tells you that money can’t buy you happiness, they either don’t have the money or don’t know where to shop,” says Daniel Mutuku, the managing director and career advisor at Career Point Solutions, a recruitment and job advertising business. Money will however only take you far if you have goals. Set a goal, create a plan on how to achieve it and then get to work to make it real. 

1. It pays to give

While it is okay to give money to relatives, friends, the needy, or your pastor, giving will not multiply what you have. There are limits on how much money you should give out and the circumstances under which you should give your money.  “There are limits to giving even to your family when you are financially well off. In my case, I was the first person in a few generations of my family to graduate from the university and get a good job. This meant that I had immense financial responsibilities, which I’d meet often out of guilt. I have since learned to say no, not to feel guilty of my accomplishments, and not to make financial decisions based on how guilty a relative made me feel,” says Purity Kagwiria, the Executive Director at Akili Dada, a leadership incubation organisation for women and girls in Africa. 

This is echoed by Rafael Obonyo, an advisor with the United Nations and the convener of The Youth Congress forum. He admits to having been easy with his cash. Obonyo says that he used to part with money every time he came into a situation that evoked sympathy and compassion. “Having grown up in an environment of lack and poverty, I sympathised a lot and found myself handing out money that I could have utilised in more productive ways,” he says.

1. Self-help financial books will open your wealth doors

There is an abundance of best-selling books on how to become an overnight millionaire. You need to stop swallowing lies that you can turn your few thousands into millions by simply buying a self-help book. “Books that show the fundamentals of investing, and the hard truths about making and losing money from investing in securities will hardly appear on the bestseller lists,” says personal finance coach Edward Okumu. “The more popular books are more likely to be superficial, impractical and non-compliant with local securities realities. They are also more likely to have flashier ‘millionaire’ titles.”

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