If you are seeking financial advice, you will not have a hard time finding it – on the internet, television, and print, there are plenty of "experts" with a variety of qualifications telling what you should do with your money and credit. (Not to mention those friends and family members that like to give their two cents.) But unfortunately, it is not all good advice. In fact, following some of it could harm your finances. Here is advice that you probably want to tune out:

You should not have any credit cards
The pitfalls of credit use have gotten a lot of attention in the media, causing many to say that it is not a good idea to have credit cards at all. True, if you have had problems using credit cards responsibly in the past and don't think you can have them without getting into debt, it may be a good idea to avoid credit cards completely, but otherwise, it is helpful to have them. In order to have a good credit score, you need to have credit and use it responsibly. Without a strong score, you will probably find it hard to get a mortgage or a car loan at a low interest rate (or even just get a loan at all). Renting an apartment may be tricky as well. You don't need to carry a high balance on your credit cards to have a good score. (In fact, that will hurt it). All you need to do is make a small purchase each month and pay off your balance in full when you receive the bill.

You should not call your mortgage lender if you cannot pay your mortgage
Some people suggest not calling your mortgage lender if you cannot pay your mortgage, believing it will accelerate the foreclosure process or that the lender will not notice that you are behind if you do not tell them. Well, the lender will notice if you stop paying, and the timeline for foreclosures is dictated by state law. Lenders usually do not want to foreclose and are willing to consider alternative options, such as a loan modification or short sale. However, they cannot help you if you do not talk to them.

Don’t invest in stocks
With the beating the stock market has taken in recent years, you may have heard that stocks are no longer a good thing to invest in. It is true that returns of 10% or more may not be common in the future, but long-term, they will likely, on average, provide a higher return than bonds or cash equivalents (whose rate of return may not even keep up with inflation). Because of short-term volatility, the stock market is not a good place to park savings that you will need in a year or two, but for goals with a longer timeframe, such as saving for retirement, volatility is not a major concern because stocks, in general, rise in price over time. And making sure that you diversify what you invest in reduces your risk.

Avoid credit counseling agencies
They work for the creditors. They charge high fees and don’t help you. Doing credit counseling harms your credit report. These are common reasons that people give for avoiding credit counseling agencies. Yes, there are many crooked agencies out there looking to take advantage of you, but none of these statements apply to reputable credit counseling agencies. A reputable credit counseling agency will help you explore your options, give you advice based on what is best for you, and, if appropriate, may be able to put you on a debt management plan in which many creditors give you lower rates in exchange for closing your accounts. Just talking to a credit counselor does not affect your credit report and does not cost any money. (A small fee may be charged for other services.) So how can you tell the good agencies from the bad ones? Look for an agency that is part of the National Foundation for Credit Counseling or Association of Independent Consumer Credit Counseling Agencies, and see if there any negative complaints filed against them with the Better Business Bureau. If the counselor is unwilling to answer your questions, encourages you to not open your statements or communicate with your creditors, or puts excessive pressure on you, look for another agency.

1. Seek a second opinion. If you know very little about a subject, it can be hard to tell which financial advice is good, but if you get information from a variety of sources, you will better know what you should listen to and what you should discard.

2. Avoid absolutes. If a piece of advice says that one way is always the right course of action, regardless of individual circumstances, then it probably is not good advice.

3. Before you buy a book or magazine, see if you can find information on the topic online first. Why spend money when you do not have to?

4. When you are speaking to a financial expert, don’t keep things in for fear of sounding silly. He or she is there to help you.

5. When a creditor or other company that you do business with sends you information about your account, read it. It may be boring to read five pages of disclosures, but there could be important information in there.

6. Before you give advice to others, double-check it. You probably do not want to pass on misinformation.

7. Be cautious of financial advisors that get paid on commission. There are many reputable advisors that would not sell you something just to line their pockets, but not all are this way. If you feel that your advisor is just looking for a commission check, get another one.

8. Don’t be afraid to change course. Most decisions are not irreversible. If something is not working, consider what other approaches you can take.

9. If you are going to see a financial advisor, ask what information you should bring. You don’t want to spend the whole session staring at each other.

10. If you are using a financial service, such as a brokerage firm, make sure that you check your statements to ensure that they are doing what they are supposed to do.

These websites are good sources of quality financial advice – and they won’t cost you a dime.

Kiplinger’s website contains informative articles on virtually every financial topic as well as a variety of financial calculators.

Like Kiplinger’s site, columnist Liz Weston’s site contains articles on a variety of financial topics. She also answers readers’ questions.

The Wall Street Journal’s personal finance section is a good source of information for current financial news (especially related to investing). There is a fee to view some articles, but most are free.

This blog focuses on personal stories, but it still contains plenty of facts and helpful financial advice.

Copyright © 2011 CCCS
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