Bad Advice for Newly Weds
Now freshly engaged my fiance and I have already started to receive “Newly Wed” type advertisements.
The latest to hit our mailbox was a copy of a magazine called [The Nest]. It’s a magazine filled with advice on decorating, entertaining, cooking, and all things material.
It was almost 50% advertisements and perhaps a bit more when you read the content closely. I can just about pick out all of the placed products disguised inside the articles. It was fun to read through. It is a bit of comedy for someone who lives a frugal life.
So far so good. Now interestingly, they managed to include three pages near the back about debt. Finally a bit of sanity in a world of consumer driven chaos! Lets examine their advice.
1. cut your credit card habit
Three cheers for immediately getting to the source of the issue. Debt is about behavior first and foremost. You can’t improve your situation until you address the underlying cause of your overspending.
2. pay as much as you can
They provide the typical scary math to point out the absurdity of minimum payments.
3. prepare to make some sacrifices
I love it. Its tough love for those drowning in debt. All the usual suspects are here; ditch the premium cable, downgrade to dial-up, stop eating out, etc.
4. lower your interest rates
More common sense advice so far. They are batting four for four thus far.
5. transfer your balances to a better card
This could have been rolled up into number four but I won’t hold it against them.
6. never forget to make a payment
If you have gotten this far, I’m not sure this needs to be said but it can’t hurt.
7. don’t go overboard
Ok sure, you should never sacrifice your dinner just to shave a few dollars off your VISA bill. Just when they are about to wrap up the article they go a bit overboard themselves. They mention the benefits of 401(k)s and company matching dollars.
So, provided you’re making all the minimum payments on your cards, allocate any extra money to your 401(k) before all else.
I’m sorry but this just doesn’t wash with me. I know a 401(k) match is free money and you should take advantage of it if you can. However, I do not agree with their delivery of the concept. If you are drowning in debt you need to be doing far more than minimum payments to have a prayer of getting yourself out. More often then not their advice is good but for others it may be a financial poison pill.
They continue onto the subject of home ownership.
A house appreciates in value, often at a faster rate than what you’re paying on the loan. So, if you’re looking to put down roots, don’t let your debt struggles discourage you from buying a home.
And off the cliff they go. Debt struggles are a perfect reason NOT to buy a home. Doing so is a one way ticket to foreclosure.
Saying that a house will appreciate faster than debt is a dangerous statement. That may have been the case in the boom years, but not in todays market.
Assuming you have loads of debt then I also assume you do not have money for a proper down payment. Can you say creative financing? There are very few situations where a couple should buy a house over paying off high interest debt. Very few indeed. You need to be in a position in life to grow your wealth. Getting bogged down with a mortgage AND debt is harmful advice in this day and age.