Fahim Imam-Sadeque weighs in on the financial advice you don't need any more

Simon Wells
Authored by Simon Wells
Posted Thursday, June 16, 2022 - 3:50pm

There are tried-and-true pieces of financial advice that have been passed down for generations. Business development professional Fahim Imam-Sadeque says that some of this advice is still very applicable in today's financial world.

However, some advice is no longer relevant. The key is understanding what pieces of advice are still relevant and which ones are not. Avoiding poor advice will help you make sound financial decisions instead of ones that can do more damage than good.

Here are five pieces of financial advice that should not be blindly followed.

You don't need a budget

A standard piece of advice is that budgets aren't for everyone. The thinking behind it is that it's OK if you don't work well within a particular structure.

This is not a good idea. Everybody needs a budget to help them understand their current financial position and what they need to change to improve their long-term outlook.

The great part about budgets is that they are very customizable and personal. What works for one person may not work for another. So, instead of avoiding a budget, create one that works for you.

Don't use credit cards

The old line of thinking is that it's never a good idea to build up debt on a credit card. They charge high interest, meaning a purchase will cost you significantly more than the sticker price if you put it on a credit card.

Today, this thinking doesn't apply perfectly anymore. You certainly don't want to rack up excessive credit card debt, but there are times when it does make sense.

First, having a credit card helps new spenders build a credit history and a solid credit score. It's often one of the easiest and most accessible ways to do so.

Second, plenty of credit cards are beneficial even if you aren't a new spender. Cards with promotional periods with 0% interest and with significant rewards could make it worth your while.

Your credit score is all that matters

Your credit score will play a massive part in your access to capital. For example, lending companies will look at your credit score when you apply for a vehicle or home loan to determine your eligibility.

But your credit score isn't all that matters. True, it will be one of the primary drivers of what interest rate you will get on these loans, but it's not the only determining factor.

You could have an excellent credit score, but if you don't have a solid debt-to-income ratio (DTI) or enough money saved, you may not be given the access to capital that you need.

What's more, a solid credit score only qualifies you for credit. It doesn't ensure you're financially stable. So, focus more on building your income and saving.

Stop investing when the market is bad

This may seem like great advice. However, why would you pump money into investing if the market is performing poorly? When stocks drop, for instance, most people will lose money on their investments.

However, this is a short-sighted way of thinking. Down markets actually provide great opportunities to invest. When the value of stocks is down, they can be purchased at discounted prices. If you hold onto these stocks long-term, you could realize significant gains.

Pay down all your debt

Getting rid of your debt is always a great idea, but it shouldn't always take priority. Fahim Imam-Sadeque says it's equally important to put money aside in case of an emergency.

Everyone should aim to have three to six months' worth of expenses set aside in an emergency account if they need quick access to money. Building this balance is as important as paying down your debt.

About Fahim Imam-Sadeque

Fahim Imam-Sadeque is a business development professional with proven experience in the asset management industry. He has a Bachelor of Science in Actuarial Science from the City University of London and is a Fellow of the Institute of Actuaries. Fahim's top skills include asset management, hedge funds, investment management, sales, and consultant & client relationship management.


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