According to the most recent research report from the CFP Board, 57% of Americans admitted to making regrettable financial decisions based on misleading information online. While social media can be filled with insightful and helpful financial advice, there are many millionaires giving awful suggestions on money management. What makes this advice awful is that it’s usually very risky, lacks a proven financial payoff, and can even be misleading.
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Here’s the worst financial advice that you should ignore from millionaires and celebrity financial influencers.
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Suggesting That You Drop Out of College
R.J. Weiss, certified financial planner (CFP) and CEO of The Ways to Wealth, pointed out that you may hear millionaires say you should drop out of college and start your own business because that’s where the real education begins. “There are far, far more millionaires off social media than on it. So, it’s important to take everything you hear with a grain of salt,” he said. You’ve likely seen a motivational video from a millionaire or financial influencer suggesting that you drop out of college. While Austin Russell told CNBC dropping out of college is a wise move, not everyone is cut out to be an entrepreneur. He also received a $100,000 grant, which likely alleviated any financial burden associated with dropping out to pursue a business.
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What Can You Do Instead?
Weiss shared that, as a general rule of thumb, he tries to learn from what these millionaires did instead of what they say in social media posts. He also noted that many millionaires went to college. It’s worth noting that dropping out of college can also lead to significant stress, since you have to deal with your student loans and there’s a chance that your business idea won’t take off.
Declaring That Their Strategy Works For Everyone
Weiss pointed out that people who became millionaires from one good investment decision in a short amount of time tend to believe that their investment strategy works for everyone. He said this is common in cryptocurrency and entrepreneurship. “The decision involved a lot of risk, and it was good for them, but that’s not a path the average person should follow to become a millionaire. Most people who got rich in crypto got in very early,” Weiss said.
Rich Jacoby, MBA, founder and CEO of GoldenCrest Metals, agreed that the worst advice a millionaire can give is to assume their investment strategy works for everyone. “When a tech billionaire says ‘real estate is the best way to build wealth’ or that someone should go all-in on crypto, they’re ignoring that they have a massive safety net and can afford to lose millions while weathering a financial downturn,” he explained.
A millionaire can take bigger risks since they’re already established. Their risk tolerance and time horizons are also entirely different from those of ordinary investors who are trying to build up their savings.
What Can You Do Instead?
When you hear someone like Robert Kiyosaki promote the benefits of investing in real estate, you have to remember that he has a different risk tolerance and time horizon. Weiss said you should be cautious when listening to the advice of someone who became a millionaire through concentrated investments because this usually involves some luck and timing. It’s also important to remember that other factors contribute to their success, like family connections and any possible inheritance.
Chase Your Passions To Get Rich
Bridger Pennington, co-founder of Fund Launch, shared that telling people to pursue their passions is bad advice often given by millionaires and celebrities. This piece of advice is prevalent in the entrepreneurship space from popular figures like Gary Vee, but it falsely assumes that there are riches in every niche. There aren’t any guarantees that what you’re passionate about will lead to any kind of revenue.
What Can You Do Instead?
“Everything eventually becomes work, so I’d recommend picking something that you’re good at, and eventually you’ll become passionate about it,” Pennington said. You may be better off focusing on something lucrative so you can spend more time on your passions instead of trying to turn your hobbies into a business.
Get Seven Streams of Income
Pointing out that most millionaires have seven streams of income is financial advice that Pennington said isn’t helpful since these people didn’t have this many sources to start off with. This is a common piece of advice that you see in social media posts, but the author rarely mentions how long it took to build up these streams.
What Can You Do Instead?
Pennington said most millionaires built wealth by having one stream of income that they got very good at. You should focus on increasing your income from your day job so that you can then save more money to open up new investment opportunities.
Suggesting That People Have Income Problems
“I also too often hear that people have ‘income problems’ rather than spending problems,” Jacoby explained. “Regardless of your income level, everyone needs spending discipline.” There are many cases of individuals with high incomes still living paycheck to paycheck due to a spending problem. It’s also misleading when a wealthy person suggests that someone with a lower income should simply try to make more, as if the person hasn’t tried this option.
What Can You Do Instead?
Grant Cardone is known for declaring that people have an income problem, which can be an accurate issue, but the reality is that you have to master the basics of money management at every level. Jacoby said you should focus on fundamentals instead. “Build an emergency fund, maximize your 401(k) employer match, and pay off your high-interest debts first. Once you’ve built a nest egg, start diversifying into low-cost index funds. Keep it simple and boring,” he said. You don’t have to get caught up in trying to join some millionaire’s fad or gimmick income-earning strategy to get ahead.
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This article originally appeared on GOBankingRates.com: Top 5 Worst Financial Advice From Millionaires
