April Fool?


April Fool = April 1st.

Were you the fool or did you do the fooling today?

Today has got us thinking about some of the worst financial advice we’ve heard.
Advice that clients have heard prior to meeting with us.
Advice that we ourselves may have heard over the years.
Even though it’s good to talk about money, sometimes we take onboard poor advice.

I speak from personal experience.
It’s 2007 and I’m just about to start my first graduate job.
My supervisor sits me down and talks about pension options:
“You don’t have to enrol in the company’s pension plan. You won’t be retiring for a long time.”
And rather than question their logic (which was probably them wanting to save time by avoiding paperwork)
Rather than ask a few questions about why I shouldn’t join.
I just went along with their suggestion and kept the difference in my monthly pay.
Which probably wasn’t much back then.
But take into consideration that I worked there for a few years, and hindsight is a wonderful thing.
I could have had a decent starting pension pot, but all it’s did was delay me paying into one!
And then comes the ironic twist – I ended up working in pensions later on.
Where the importance of having later life savings was drilled into me!


Here’s a rundown of some of the worst advice we’ve heard…

April Fool #1: “Don’t bother investing – it’s just too risky”

All investing carries with it a degree of risk – it’s up to you to decide on how much risk you can take on.
And if you’re not sure then it’s best to speak to a financial adviser.
Leaving all your money in one place doing nothing means that you could end up with less due to inflation eating away at it. A low-risk option is a cash ISA, because the interest rate will encourage it to grow. A stocks & shares ISA is slightly more risky as you are at the whim of the markets, but by diversifying, you should be protected. Yes, you may lose money investing but a diversified portfolio will mean the loss is spread out. And investing for the long-term is a far healthier strategy than trying to get rich quickly.

April Fool #2: “Don’t buy a new car” / “Don’t buy a used car”

Nothing brings out the ‘amateur expert’ quite like buying a car does.
If it’s not relatives telling you that the motorway you came via isn’t the best way, it’s how their car engine does so many miles to the gallon compared to yours.
Firstly, there’s your own budget and how much you have to spend – if you’ve got enough to buy brand new, and it’s something you want (to show off in) then by all means, there is no reason why you can’t go and treat yourself. But just note that as soon as you drive it away from the showroom, the value of that new car can drop by up to 40%.

Similarly, be wary of buying second-hand. That ‘absolute bargain’ could end up costing more in repair bills, especially if it is vintage or requires obsolete parts.

April Fool #3: “Don’t get a credit card / Just get any credit card”

Both my grandparents were adamant that credit cards were not worth the hassle. Many a time I’d hear them say: “If you can’t afford it, you can’t have it”.
Instead, they would have paid for big purchases with some form of hire purchase, paying it off for ‘luxury’ items such as new appliances.

If used correctly, credit cards are a good way of building up your credit score provided you do the research and meet your payments on time.
A few of my university friends got one and spent the rest of the term trying to clear the debts as they didn’t. If you’re using a credit card to fund a lifestyle, it can only lead to problems later on!


April Fool #4: “Why bother renting? Your money is lining the pockets of some landlord, somewhere”

Renting a property, rather than owning a property and having a mortgage, is one of those talking points that separates generations. What was once seen as aspirational by prior generations can now seem outdated and old-fashioned. It also goes hand in hand with the fact that whilst property prices and living costs have skyrocketed, wages have not.

Yes, renting is not everyone’s cup of tea. But paying for rent and bills will show banks that you are responsible and will help you build up a credit score.
If you buy a property with a friend or a partner, and the relationship goes south, it can be difficult to get out.
Nothing worse than having to pay for a mortgage on a property you don’t want to live in. With a person you don’t want to be near!


april fool

Would you take advice from them?


April Fool #5: “We’re here for a good time. Not a long time”

Hats off to a former work colleague of mine who said this a lot. They decided that they would rather opt out of the company pension and use that additional money to fund their rented flat in London. Even if you don’t believe in a pension or the prospect of retiring seems a long way off, just be aware that we are now living for longer.
The current State Pension may not be enough to sustain you when you get to your sixties (that’s if the retirement age stays where it is!)

Remember when you are auto-enrolled, the minimum you pay in each month is 5% and your employer pays in 3%. Some will allow you to pay in more each month, and some will match your contributions. Putting away a small amount each month may not seem much, but at some point in the future, you’ll be thankful you did. There’s no reason why a long time can’t also be a good time!

April Fool #6: “Insurance? Isn’t that a form of gambling?”

Illness can come at any time to anyone. If you don’t have some form of ASU cover (Accident, Sickness, Unemployment) then it could prove to be very costly. We saw this with COVID furlough, which is estimated to have cost the UK economy billions.

So if you are prone to catching every bug that comes along.
Or your family has a history of medical issues.
It makes sense to take out some form of income protection policy.

April Fool #7: “My pension will take care of me later on”

A noble sentiment, and yes, your pension is there for later on in life. But a belief that you’ll be okay just with a State Pension? Yikes.

“Neither a borrower nor a lender be”

And lastly, we’ve added this little snippet from Hamlet. Of course, it makes perfect sense to not give or take money from friends because it could potentially backfire. And you could end up losing a valuable friendship.
But how will you build up a credit score otherwise?
Proof then that Shakespeare would have been ‘Bard’ from being a financial adviser…