Financial experts reveal their worst money advice
By Dana Dratch
They say free advice is worth exactly what you pay for it.
Not always true. Sometimes it can actually cost you.
And when it comes to personal finances, everyone from your Great Aunt Millie to that semi-anonymous blogger is willing to tell you just how to protect your job, save for the future and manage your debt.
While some of the advice is sound, a lot of it isn't. And some of it may be perfectly fine -- just not for you.
If you've ever gotten bad advice, you're far from alone. Even people known for their financial acumen have been on the receiving end of really rotten advice at some point in their lives. Here, six well-known professionals share their stories of the worst financial advice they've ever had:
Barbara Corcoran, real estate expert and founder of The Corcoran Group, a New York-based real estate firm: In her best-seller, "If You Don't Have Big Breasts, Put Ribbons on Your Pigtails: And Other Lessons I Learned from My Mom," real estate expert Barbara Corcoran credits her mom for teaching her what she needed to become a success in business and in life. But she also admits that one piece of advice -- though practical -- turned out not to be the right move for her.
"I had 22 jobs by the time I turned 23, and when I told my mom I was quitting my job as a receptionist to start my own company, this was her sage advice: "Why don't you stay with this job for a year or two? Holding the job for a while will make you more steady and will look much better on your resume.
"My mother was dead wrong. If I hadn't started my business then -- when I had nothing to lose and nowhere to go but up, and even too stupid to know what to be afraid of -- I never would have started. Jumping from job to job was the giveaway sign that I needed to have a place of my own. I sold that business 25 years later for $70 million."
Larry Winget, author of "You're Broke Because You Want to Be: How to Stop Getting By and Start Getting Ahead": "The worst financial advice I have been 'offered' and see offered every day is the offer of a store credit card in order to receive a 10 percent discount on today's purchases. People stupidly take this deal and save $10 on their $100 purchase, and then they have a credit card at some ridiculous rate and it impacts their credit score because now they have more open credit and it entices people to spend money they normally would not spend.
"It seems like such a good deal and it has emotional appeal at the time it is offered, but it is absolutely stupid! I get this offer at nearly every retail store I buy from. Even online."
Robert Kiyosaki, real estate entrepreneur and co-author of "Rich Dad, Poor Dad": The advice: "Get rid of debt," Kiyosaki recalls. Who offered it: "Most people -- including my mom and dad."
What makes it bad advice: "If you're financially educated, like my rich dad, you know there's good debt and bad debt. Bad debt makes you poor," he says. "Good debt makes you rich. Today, I'm hundreds of millions of dollars in good debt."
Who finally set him straight: "That was my rich dad." The man advised Kiyosaki to learn about business, so he took a job at Xerox. His mentor also wanted him to take a course in real estate, so that he could learn how to manage debt to grow wealth, Kiyosaki says. "Good debt puts money in your pocket, and that's the difference," he says.
BUYING A HOME
chairman and CEO, Edelman Financial Services, and author of "Rescue Your Money: Your Personal Investment Recovery Program": Edelman's worst advice came long before he ever became a financial adviser or wrote his best-seller, "The Truth About Money." "When my wife and I were trying to buy our first home, a mortgage broker told me to have my parents give us cash for the down payment and say, since such gifts are prohibited when applying for a loan, that I sold a coin collection -- untraceable. I rejected that advice, of course, since it was highly unethical, and we decided we weren't ready to buy a house at that time."
Ben Stein, author of "How to Ruin Your Life": "The absolutely worst financial advice I ever received was to buy an array of Internet stocks in early 2000. I had resisted joining the craze but they kept going up and up. I could not see any reason for it, but like a fool, I thought I would take a flier on them just because everyone else was.
"They promptly crashed, breaking my heart, although not impoverishing me."
BORROWING FROM THE 401(k)
Dave Jones, president of the Association of Independent Consumer Credit Counseling Agencies: "In my case, most of the bad advice I've gotten over the years has been from stock brokers," he says. As a young man, Jones wanted to sell some of his stock to finance a home addition. The broker "thought it would be better if I took a loan from my 401(k)," Jones says. "I was a young man, and I took $20,000 from my 401(k). I didn't really realize what the impact could be. Long story short, about three months later I lost my job and I had to pay back that money immediately. I ended up having to refinance my house to repay the 401(k).
"It was not a good situation, but it was a life lesson I never forgot," Jones says. In addition to brushing up on the ins and outs of 401(k)s and resolving to manage his own stock portfolio, Jones learned that "people who give advice often have a parochial interest," he says. Sometimes, he says, "they don't have your best interests at heart. You have to be careful."
See related: Compare retail store credit card, 8 things to know about credit card debt, In times of financial uncertainty, follow timeless advice, Don't retire debt with loan from a 401(k)
Published: August 16, 2010
Three most recent Credit account management stories:
- 4 times to go old-school with your finances – When organizing your budget or keeping track of credit card bills, technology can get in the way. Here are four situations where old-school pays ...
- 5 financial tips for the newly engaged – Planning your future finances should be equally as important as planning your nuptials, experts agree. Here are five money tips to remember when you and your partner start a life together ...
- How to fight phantom-debt collectors – Callers with details about you and your debts can be convincing, so it pays to know how to tell a legitimate collector from a phantom-debt scam ...