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Financial Expert Mark Lamkin says he has made every single one the top five worst pieces of financial advice.
As a young broker, I took several stock tips from a good friend or clients of mine. For years, I thought hitting a home run was the way to wealth. I never made money on a single one of those. If there's anyone who should have known better, it was me. No matter how attractive an offer sounds, keep the following in mind: If somebody knows how to make a quick buck, they'll be making it, not telling you about it.
Robbing 401k: The suggestion to use 401(k), 403(b) or retirement savings to get out of debt is usually shared by well-meaning relatives of indebted consumers who don't want to be tapped for help. It often doesn't solve the problems to begin with. Too often, consumers are not prepared for the future tax liability based on the fund withdrawal. In addition, without an overhaul to a borrower's spending behavior, the underlying financial problems are unlikely to be resolved. Add to this the unlikely ability to rebuild those funds. They'll never recapture that starting base with 15 to 30 years of growth, which will leave you worse off when you do want to retire.
Borrowing to invest:
Just because you can do something, doesn't mean you should. Investors can borrow money from brokerage firms. When you borrow money from your broker, it's called a margin loan. You can use the money you've borrowed to make just about any investment you choose. Lending money to investors is an easy way for brokerage firms to make money. The brokers can borrow money for next to nothing, since money market rates are essentially zero. The brokers can then turn around and lend the money to investors at a higher rate, and keep the difference.
Even more important:
Speculating with borrowed money is highly dangerous and not a good idea for most people. If the price of an investment you bought on margin falls, you'll need to come up with additional cash or collateral to cover the losses or the brokerage will sell the investment and stick you with the bill. Margin loans are dangerous for many reasons. For one, you're giving up one of the biggest advantages of individual investors, which is patience. If a stock falls in value, you might be forced to sell when you don't want to. Also, by amplifying your risk, you may be more likely to make a bad decision, as emotion inevitably takes control.
Paying what you can:
A lot of people think that paying any amount owed on a debt acts as a good-faith effort and that creditors are obligated to work with you if you pay a nominal sum of, say, $5. This isn't true. There's no such thing as getting an A for effort when it comes to delinquent debt. The rationalization behind this theory is that some payment is better than no payment. If you've worked out an agreement with a creditor to pay $5 a month you're in the clear, but there's no automatic agreement that kicks in if you just send in whatever you want. Collection will still occur.
Lending to friends:
Don't get me wrong, there's nothing wrong with giving money to friends and family if you have the money to give as a gift (no strings attached). I have given money to relatives and friends because I want to. But if you expect for the friend to pay you back, you're putting your relationship in a dangerous place. If they don't pay you back the relationship may be ruined. Perhaps its a good strategy for getting people you don't like out of your life.
Lamkin Wealth Management 5151 Jefferson Blvd., Suite 102 or 901 Lily Creek Drive Ste. 102 office: 502-961-6550 Office toll free: 866-961-6550 www.lamkinwealth.com
"Securities Offered Through LPL Financial, Member FINRA/SIPC and an Investment Advisor"