For all of the “conventional wisdom” and “rules of thumb” surrounding personal finances, there always seems to be an alternative viewpoint. In fact, some of the richest people around built their fortunes, in part, by going against the common wisdom.
Even if you’re not a true contrarian by nature, consider these alternative views on financial success:
Don’t set goals. Just about every self-help book on the shelves points to the need for setting regular career and business goals. What’s wrong with goals and plans? Too often, rigid planning inhibits success when those who set them cling to their plans when circumstances inevitably change. Jim Oelschlager, founder of the investment company Oak Associates, Ltd., says that the only business plan he ever had was “answer the phone if it rang.” He’s now the richest man in Akron, Ohio.
Pay off your smallest debt first. Most financial advisers recommend paying your largest debts and those with the highest interest rate first. But that can take time, which can be frustrating. Paying off your smallest debt completely can help you feel that you really are making progress and may motivate you to continue paying off your debts.
Don’t be afraid of stocks. More than two-thirds of 401(k) money is in low-yielding bonds. Especially if you’re still young, invest in stocks. Over the long-run, they perform the best.
Sell your winners. Speaking of stocks, contrarians regularly rebalance their portfolios by selling their “winners” and buying more of the “losers.” Most people can’t bring themselves to do this, even though it improves returns over the long run.
When you pay off a personal credit card, don’t close the account. Doing so will reduce your available credit and only drive down your credit score. Likewise, borrowing more than 30 percent of your available credit will also impact your score.
Buy low, sell high. Actually, this is classic investment advice that investment gurus have always espoused. However, few investors realize that buying at the bottom of the market and selling at the top actually involves doing the exact opposite of what everyone else is doing. Buying at the bottom involves buying when no one else dares. Selling at the top means selling when everyone else thinks the investment is brilliant. Famed investor Warren Buffet notes, “Buy when there is fear in the market and sell when there is greed.” In the end, most situations return to normal and, when they do, the contrarian is left with the profits of being brave in the bad times.
Money isn’t everything. This is perhaps the ultimate contrarian opinion in a culture that idolizes its millionaires. Truth is, health, family and happiness are probably more important in the long run. After all, money can’t buy you love!
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