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Why Smart Finance People Say the Dumbest Things
Having trouble keeping up with all the financial mumbo jumbo going around these days?
Most financial matters beyond whether to use cash or credit can become fairly complex, and even a checking account, with its various rates and fees, can turn into a nightmare when it goes in the negative.
This is why so many people rely on financial experts for, well, their expertise. While finance gurus may be very familiar with the ins and outs of the NASDAQ and short sells, they can also fall into the trap of oversimplifying things and sometimes make incredibly boneheaded statements.
In a recent article for The Motley Fool, author Morgan Housel pokes fun at financial experts and their oxymoronic jargon. Appropriately titled ‘Stupid Things Finance People Say‘, here are a few of our favorite examples:
“They don’t have any debt except for a mortgage and student loans.”
Aside from the fact that a mortgage and student loans are quite clearly debt, these tend to be the largest sources of debt most people have. Home loans can run into hundreds of thousands of dollars, and many student loans are larger than the cost of a new luxury vehicle. In fact, it’s estimated that the average four-year grad is $24,000 in debt.
Compared to these types of loans, a few thousand dollars owed to credit card companies seems like small change.
Irreverent statements like this are made because many financial experts assume that people are going to attend a college or buy a home, so to them, having these types of loans is like drinking water: nearly everyone does it so they don’t count the behavior.
However, the reality for most people is that all types of financial obligations should be factored in whenever considering taking on more debt.
“Earnings missed estimates.”
This statement doesn’t even make sense. How does one ‘earn’ something that was missed?
Whether the issue is how well an investment does, the success of a startup company or the stock market in general, estimates and predictions are based on a combination of information, historical trends and intuition on the part of financial experts.
Instead of talking about earning missed statements, a more accurate version of the statement would be, “We were wrong.”
“He was tired of throwing his money away renting, so he bought a house.”
At first glance this appears to make sense, but the reality is that you are basically renting money from the bank when you have a mortgage. Additionally, with the realities of the housing bubble, owning a home can end up being a gamble in a way that dropping off a rent check every month is not.
Just because someone is an expert at finance doesn’t mean they’re an expert with your finances. The best way to keep on top of your investments is to practice good money habits.