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Make sure you’re listening to the right financial advice this year.

Main points:

  • Many people reevaluate their financial situation at the beginning of the new year.
  • If you’ve been following Dave Ramsey’s advice, there’s some advice you should stop listening to.
  • This includes paying off your mortgage early and avoiding credit cards.

Dave Ramsey is a well-known financial expert, and he has some great advice, including his recommendations on which retirement account to invest in and why you should avoid taking out a new car loan.

But Ramsey has also given a lot bad council And if you’re wondering how to manage your finances in the coming year, here are four suggestions from Ramsey that you should absolutely stop listening to ASAP.

1. Don’t worry about your credit score

Ramsey has said many times that you shouldn’t worry about your credit score. Basically, he believes that only people with a lot of debt have good credit and that it’s best to stay away from borrowing.

This board has several problems. First, you will probably have to borrow for a while, for example to buy a house. And while Ramsey said lenders will do “traditional underwriting” and look beyond your credit, that’s not always the case.

Your credit score is also important for other things like renting an apartment or affordable insurance. You need to take care of it, and if you listen to Ramsey and don’t care if your credit score is good or not, you should stop following this advice right now and start working on earning a score that opens doors for you.

2. Avoid credit cards

Ramsey also says you should never use credit cards, opting instead for a debit card or cash. This is also a bad move.

Credit cards help you build credit. They can also give you the opportunity to be rewarded for spending that you have to do, no matter what. If you pay off your balance in full, you can earn hundreds or even thousands of dollars a year in additional credit card rewards.

It’s also easier to rent a car or hotel with a credit card than a debit card because you don’t have to wire up real money when you make a deposit. Unless you’ve proven yourself to be completely irresponsible with credit and you don’t trust yourself to not have a huge balance that you can’t pay off, you should have a credit card.

3. Pay off your mortgage early

Ramsey recommended paying cash for your home if you can, or taking out a 15-year mortgage if you can’t. He also suggested that it makes sense to pay off your home loan early.

This is bad advice. A mortgage is one of the most affordable loans, and the interest on it can be tax-deductible if you do the math. You should get a 30 year mortgage and not pay even $1 extra on it. Instead, you should invest the extra money you would otherwise use to pay off a loan that has a lower interest rate that you could probably earn by investing in a safe S&P 500 index fund.

4. Invest in mutual funds

Ultimately, Ramsey said, you should choose mutual funds over ETFs. And he recommends actively managed funds.

This makes no sense. You’ll pay higher fees and have more restrictions and, in most cases, fewer options. ETFs that track market indexes are usually the best bet for most investors.

You should stop following all these tips in 2023 as it can help you in a better financial position in the long run.

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