AmOne’s Take on Breaking Financial Rules

pile of pennies

[Photo Credit: Flickr/F. Delventhal]

Be sure to start saving for college early. Always max out your 401K. Cut expenses and keep a 6-month cash emergency fund. Buy a car, don’t lease. Don’t give the government an interest free loan by having too much taken out in payroll taxes. Advice like this is everywhere. In fact, most of us can recite these in our sleep. We all want to be financially secure and we follow the advice the experts present us. Sometimes though, we don’t get the results we expect – no matter how hard we try.

Maybe it’s time to flip some of this advice on its head. Maybe we should break some of these old rules.As Robert Pagliarini of AOL’s DailyFinance website points out, it is smart to have a 6 month emergency fund in our current economic environment. However, it doesn’t have to be in cash. Break the rule: Put it in a short-term bond fund. With this type of fund you can easily sell it should you unexpectedly need the funds. How about this one? Fully fund your 529 savings plan and start saving for college early. This is great advice IF you have enough money saved for retirement. Break the rule: You should never sacrifice your retirement savings to pay for college. Your child has choices: go to a less expensive college, take out loans, get a job while in school. If you don’t have enough saved for retirement you only have two choices: cut your expenses or work longer. These aren’t always viable options at retirement age so retirement should be your #1 priority.

Another piece of advice you’ve probably heard a hundred times is to make sure you don’t give the government an interest free loan. Do you struggle with saving? If so, break the rule. Getting an IRS tax refund is a forced savings plan. It’s much easier to squander $100/month than a $1,200 check. Sometimes it just takes looking at things from a different angle to find a better outcome. It’s great to follow rules, but sometimes breaking a few rules can lead to greater rewards.

Learn more by reading Robert’s article, “10 Financial ‘Rules’ You Should Start Breaking Now” over at the DailyFinance website.