If you’ve read just one book or article on self-help or financial planning you undoubtedly came away with a lot of shoulds – “I should lose weight this year”, “I should make and stick to a budget”, “I should become a stay-at-home mom” and so on. The problem is that these “shoulds” can pull you down because you’re seeing your life through other people’s lenses.
When it comes to your financial bottom line “should” can be just as harmful.
Here are four “shoulds” that may seem right but can actually be wrong and should be replaced with common sense.
I should refinance my mortgage to a 15-your loan
Here’s one that just seems self-evident. Interest rates today are practically at an all-time low at around 3% for a 15-year mortgage. If you have your radio on for more than half an hour or read several articles on financial planning you’ve undoubtedly heard that it’s imperative to refinance so that you can get that loan paid off early and own your home free and clear when it comes time to retire.
But there is no such thing as a free lunch and a 15-year mortgage will have a higher payment than the 30-your loan you currently have. What happens if you were to run into a big unexpected expense or lose your job? You might find it tough to make the payments on that oh-so-attractive 15-year mortgage. You could actually end up losing your house instead of getting it paid off early because you were not able to handle those higher payments.
A better idea for your financial planning is to just double up on the payments on your existing 30-year mortgage. That way you’d get your mortgage paid off much faster but if you were to run into some financial emergencies along the way you could scale back and make just the minimum payments on that 30-your loan until your situation gets better again.
I should drop what I’m doing and care for my aging parents
We understand your parents are great people who did a lot of sacrificing to raise you and get you through school and you really do want to help them. But if you interrupt your career to bathe, attend medical appointments, clean, argue with insurance companies and basically act as their caregiver there can be some real pitfalls with long-term repercussions.
For example, your financial planning will take a hit, you’ll have a smaller retirement nest egg, you may have lower Social Security benefits and your health could suffer. In addition, you may find it difficult to rejoin the workforce because your professional networks and skills have become rusty. The relationship you have with your parents could become strained as could your marriage and your relationship with your children.
Thanks to the aging of the baby boomer population we now have a group of professional care givers that, for a fee, will help you with finding in-home care, nursing, medical payments, driving to appointments, bill paying, home shopping and even more. One of these professionals could quickly handle all those caregiving activities that would take you many hours. This would leave you, the beloved son or daughter, still employed, feeling mentally fulfilled and having a nice, pleasant relationship with your folks.
I should never take a risk
Whether we like to think of it this way or not life is just one calculated risk after another. Whenever you make a decision you’re taking a risk because there’s no way for you to know what its outcome will be. Just walking across the street is a risk because you could be hit by a car. Signing up for a home equity debt consolidation loan is a risk because you could run into an unexpected financial emergency and lose your house.
However, there are some risks you should take because the rewards could be great.
For example, you could risk getting turned down by a man or woman and it may have nothing to do with you as a person. Whether you’re asking her or him to write down their email address or their phone number on a napkin you’re risking rejection. But if you run the risk and are not turned down you could end up dating the person you spend the rest of your life with.
Another example in financial planning is the risk of failing. You could invest $10,000 in a startup venture with the risk of losing it all. But failing could be both the worst and best thing that could happen to you. Failing teaches you an important lesson that can help you figure out something that would lead to success. The harsh reality is that if you never risk failing you’ll never succeed. Stephen Spielberg, who has won 13 Academy Awards, was rejected by the University of California’s School of Cinematic Arts twice. The billionaire Oprah, who now has her own TV channel, was fired from her first job as a TV anchor in Baltimore. And J. K. Rowling was a single mother broke and on welfare and studying while simultaneously writing the first Harry Potter book.
If you have a problem with risk taking, here’s a motivational video with billionaire and super risk taker Elon Musk that should help.
I should pay whatever’s necessary to get my child a great education
Are you aware of the fact that college students graduated last year owing an average of more than $37,000 in debt – just for an undergraduate degree? Given the fact that many of these people graduated with no debt, this leaves a lot of folks graduating owing $80,000 or more. And that’s without an advanced or medical degree. Where were these peoples’ parents when their children were making financial decisions that ended up with them owning so much money? The sad fact is that they were probably co-signing student loans and harming their own retirements.
Have you learned to say no to your children when they want the latest iPhone or $200 jeans with rips at the knees? If you haven’t, now is the time to learn. When your child says that he or she wants to go to a private school in some faraway state to get a degree in English, here’s where you need to just say no. Tell her or him that they can get the same degree for half the price at a school that’s like an hour from home. Or you can use the “yes but”. Yes, you can go to that private school but you’ll have to pay for it. I won’t pay off your student loans because if I do I’ll end up living with you as I won’t be able to afford my own retirement.