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I like to go into January each year with clear goals and an actionable strategy, so one of the things I want to do before the end of the year is to map out a future plan for my money.
Although there was a lot of financial advice, I wondered if there was anything I should remember to avoid at the start of 2022. So, I asked four financial advisors to share the bad advice they often ask their clients to ignore.
1. Think of your home as an investment
As you approach the new year, you may begin to develop strategies for how you will invest your money and take inventory of your current investments. Financial planner Justin Napti said some advisors are still asking clients to approach their homes as an investment, which he believes is bad advice.
“While there are some fortunate homeowners who have used equity in their homes to help support their retirement, this is not the case for everyone,” Nabeti said.
“The biggest problem I find with advisors telling clients that their home is an investment is that it causes them to become confused about what the real investment is,” he explained. “Assets make you money, so your home is not an asset unless you buy it with the intention of selling it for a profit in the next several years.”
Instead, Nabeti suggested that people only think about how their homes fit into the broader investment strategy.
2. Setting unrealistic financial goals
As ideas begin to roll around in the new year, financial advisor Scott Satoff said it’s best to avoid broad financial goals that aren’t realistically achievable.
“It is also important to be specific in your goals so that you have actual numbers against which to measure your work,” Satov said.
He gave the example of “save more” as a common and broad goal and suggested setting these types of goals with actionable steps.
“Open a high-interest savings account and set up automatic withdrawals from your regular account every month,” Satov said. “Once you set it up, it’ll do the work and you’ll start seeing the savings account grow.”
3. Investing only in stocks of major companies
If you’re considering making new investments next year, financial advisor Scott Hastings said he thinks investing in large companies only is a bad idea, and that investors should aim for portfolio diversification instead.
“Although investing in stocks is good advice, it’s never a good idea to pick just one or two large companies and invest all your savings there,” Hastings says.
“All stocks are affected by the global stock market, so it doesn’t really matter if the company is big or small. If it crashes, it will be hurt,” Hastings explained.
4. Keep credit card balances to build your credit score
Whether you enter 2022 with credit card debt or not, financial advisor Andrew Lokenoth said holding credit card balances is a bad idea with the idea that you’ll build a better credit score.
“Failure to pay a credit balance in full each month will result in additional interest accruing on that balance each month, and this fee continues to grow larger and larger due to
“Two of the biggest factors that affect credit score are payment history and credit utilization rate, and paying off your card balance in full each month affects those two factors in a positive way,” he added.