Conventional Financial Wisdom May Not Be Best

Dennis Bridges’
“Real World” Personal Strategy Note

“A bank is a place where they lend you an umbrella in fair weather and ask for it back when it begins to rain.” -Robert Frost

You can find lots of advice on handling your finances, but not all of it is valid for everyone. That’s why it’s always helpful to have someone who can speak into your specific situation. Because we shouldn’t just assume that the following “rules” are always true…

1) Always invest for the highest return. 
High returns frequently involve higher risks, as well as bigger fees. You may be better off seeking safer, more conservative investments, even if they don’t produce as much in the short run.

2) Homes are always good investments. 
You may think that renting is just throwing dollars down the drain, but remember that homes can be an expensive proposition, with high transaction costs, and constant maintenance expenses. You may save more money by renting until you can better afford a house of your own.

3) Avoid debt at all costs. 
Generally speaking, Dave Ramsey is usually right when it comes to financial principles. And you should certainly avoid overextending yourself. However, some debt can be useful when buying a house (when that’s appropriate — see above), or in certain business situations. Just be sure you can comfortably manage it, and pay it off on time, and with as little cost as possible.

4) Sell when your stock is high. 
What goes up must come down, right? But you want high-performing stocks in your portfolio at all times, so resist the urge to cash out just because a stock has reached an all-time high. Otherwise, in time, you could end up with a bundle of low-performing investments.

5) You can do everything yourself. 
You can trade your own stocks if you want, but you’ll often do better working with a good financial planner. And you can prepare your own taxes, but, well, as I think you probably understand, it’s better to work with someone who knows the system like the back of their hand.