Money Lessons You Don't Need To Follow

Here's what I've been taught about money: It's not good to be in debt, and therefore it is good to pay off debts as quickly as possible, including a mortgage. Turns out, this conventional wisdom is a holdover from a different time.

Carmen Wong Ulrich, the president and co-founder of ALTA Wealth Management, told me: "People think that it's a good idea to pre-pay a mortgage and/or pay a mortgage off ASAP." What's wrong with that? "This advice comes from a previous couple of generations who had horrible interest rates on their mortgages—in the 1980s, the average mortgage interest rate was in the teens. Imagine—my dad, who had great credit, was paying 17% on his mortgage. That's expensive. Today, mortgage rates are at incredible lows—you should be in no rush."

Supporting local businesses is great, but you don't need to follow your parents' footsteps in keeping their life savings at First Local Urbantown Bank with No Branches Anywhere Else. There are banks that exist entirely online, and experts say they are not only safe but can save you a lot of money in fees. Kiplinger.com points out that because online-only banks don't have the same overhead costs as traditional banks, they can offer high interest rates on checking and savings accounts. Kiplinger rated the best deals in online banking here.

Personally, I would never tell anyone to not go to college if they have the option, from a self-betterment/learn about the world/read lots of books angle. But when it comes to cold hard financial facts, an expensive four-year college education might not actually make the most economic sense, particularly if it's going to mean embarking on grown-up life with an oppressive load of debt. As Robert Kiyosaki, the author of the best-selling Rich Dad, Poor Dad series, told me, in today's world college isn't always a financially sound investment. Kiyosaki said, "It's tough to know—on the front end, when a student is taking on school loan debt—what the ROI [return on investment] will be. Will the degree he or she earns at a cost of $100,000 in school load debt land them a $200,000 a year job? Or a $50,000 job? For many students, school loan debt is an albatross around their necks as they begin their adult lives." (Then again, if they go to a liberal arts school, they'll get the albatross reference.) So the idea is, from a financial standpoint, young people may want to think carefully about their future career prospects before taking out loan for a super-pricey education.

So if we don't want to send our children into student-loan debt land, we should be sure to save as much as we can in case they do want to go to college, right? The personal finance journalist and best-selling author of Get a Financial Life, Beth Kobliner, says this is another big "nope." "It's definitely smarter for parents to max out their own retirement plan," says Kobliner. "Particularly if their company will match their contribution—something they won't find in a college savings plan. And while kids can borrow for their college education, parents can't borrow for retirement, which means they may have to depend on their kids (who may already be struggling to make ends meet for their kids) to support them down the road." And that's not all, Kobliner says. "A new study released earlier this month shows that the more money parents contribute to their kid's college education, the lower their child's GPA. The gist is that kids are just not as motivated to achieve, so they do well enough to graduate but don't push themselves to be their best." To which everyone who had a college roommate with a major in Modes of Recreational Drug Use in Party Settings says, "Yep."

It sounds like the right advice: Use all your money to buy actual things that actually exist (and in a pinch could be sold on eBay). In the past 10 years, there's been a lot of discussion about the money-happiness dynamic, and it turns out that while a new couch may make your house better, it might not be the best way to make your life better. Elizabeth Dunn, PhD, University of Virginia, co-author of Happy Money: The Science of Smarter Spending, has done extensive research on how money can "buy happiness." Her advice? "Seek experiences: Vacations and time with friends provides more happiness than simply buying more clothes or widgets for the house. The money spent is more meaningful and memorable." Your parents may think it sounds impractical, but this isn't just about a bank account—it's about a life. And it's not theirs (anymore), it's yours.

With all the personal finance advice we have at our fingertips (and on our screens), some of us tend to get excited about hot new stocks and over-diversify, collecting lots of investments that duplicate one another. But that can be detrimental to your financial future, says Carl Richards, a certified financial planner, on his site BehaviorGap.com. The problem is, as he writes, "there's no cohesive investing strategy at work... This over-diversification can lead to inefficiencies, including unnecessary taxes, internal expenses, transaction costs and, maybe most importantly, the impact on your life in the form of the time you have to spend thinking about all those lines on your monthly statement." So while it feels very modern and high-tech to dive into a bunch of individual funds (and manage them from your phone), here might be one place where an old-fashioned approach—a few well-chosen funds, overseen by a financial planner—can serve you well.

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