Thursday, September 15, 2011

Throw Out Old Financial Advice

You can keep whatever advice your mother told you. I'm sure that's engraved on your heart rather than taking up storage space in a paper or electronic file.

Otherwise, you're probably better off pitching every single piece you saved that tells you to invest in real estate (!), play brinksmanship with your credit cards and then do an easy bankruptcy, or get all the equity of out your house to finance new self-indulgence. I just spent an hour culling my financial article clippings and was discouraged by how time-sensitive all the well-meant advice was. The financial situation of this country has changed dramatically in the last ten years. The real estate bubble and its burst caused dramatic spending and equally dramatic regrets. Practically nothing about finance that was written before Lehman Brothers went down in 2008 is worth keeping, because at that moment, all the tried-and-true theories went out the window.

Nothing dates and becomes irrelevant quicker than specific financial advice. Laws have changed affecting credit and bankruptcy in particular, so consulting old advice that cites prior legal rights could be a crucial mistake. Holding on to dated expectations is just as foolish. Think of all those old retirement calculators that imagine you can average 10% interest on your investments. Try getting 5% today.

It's a sad world at the moment. Keeping around old personal finance advice that was keyed to a time of much fuller employment and wild credit card spending on consumables isn't going to increase happiness or give anyone pointers on how to live today and in the future. We return instead to the tried and true, the more general advice: Live below your means. Save as if trouble is around the bend. It might be.

Tossing all that now-useless advice in the recycle bin felt good.