Money advice is everywhere. You hear it from family, friends, and even strangers online. Some of these tips sound smart, but not all of them hold up in real life. In fact, a lot of so-called financial “rules of thumb” can actually hurt your wallet if you follow them blindly. That’s why it’s important to question the advice you hear, even if it’s popular. Your financial situation is unique, and what works for one person might not work for you. Here are five common financial rules of thumb that are actually total BS—and what you should do instead.
1. Save 10% of Your Income for Retirement
You’ve probably heard that saving 10% of your income is enough to retire comfortably. This rule of thumb is everywhere, but it’s outdated and doesn’t fit most people’s lives. The truth is, 10% might not be enough, especially if you start saving later in life or want to retire early. People are living longer, and the cost of living continues to rise. If you only save 10%, you could run out of money in retirement.
Instead, figure out how much you’ll actually need. Use a retirement calculator to estimate your expenses and savings goals. Many experts now suggest saving at least 15% to 20% of your income if you start in your 30s or later. If you can’t hit that number right away, start with what you can and increase it each year. The key is to make saving a habit and adjust as your income grows.
2. You Must Have Three to Six Months of Expenses in an Emergency Fund
The three-to-six-month rule is everywhere, but it’s not one-size-fits-all. For some, this amount is too much to save quickly, especially if you’re living paycheck to paycheck. For others, it might not be enough, such as those with a family, a home, or a job in a field with an unstable income. The right emergency fund depends on your situation.
Instead of sticking to a set number, look at your actual needs. If your job is stable and you have few expenses, a smaller fund might work. If your income is unpredictable or you have dependents, you might need more. Start by saving one month of expenses, then build up from there. The goal is to have enough to cover real emergencies, not to stress over hitting a magic number.
3. Renting Is Throwing Money Away
Many people say renting is a waste because you’re “paying someone else’s mortgage.” This advice ignores the real costs of homeownership. When you buy a home, you pay for repairs, property taxes, insurance, and sometimes unexpected expenses. Owning a home can be a good investment, but it’s not always the best choice for everyone.
Renting gives you flexibility. You can move for a job, avoid hefty repair bills, and sometimes save money compared to owning. If you’re not ready to settle down or don’t have enough saved for a down payment, renting can be a more brilliant move. The key is to compare the total costs of renting versus owning in your area. Don’t let anyone shame you for renting if it fits your life and financial goals.
4. Always Pay Off Your Mortgage Early
Paying off your mortgage early sounds smart, but it’s not always the best use of your money. Mortgage rates are often lower than the returns you could get by investing. If you put extra money toward your mortgage, you might miss out on higher growth in your retirement accounts or other investments. Plus, mortgage interest can be tax-deductible, which lowers your real cost.
Instead, look at your full financial picture. If you have high-interest debt, pay that off first. Make sure you’re saving enough for retirement and emergencies. If you’re on track with those goals, then consider making extra mortgage payments. But don’t feel pressured to pay off your house early if it means missing out on other opportunities.
5. You Need to Make Six Figures to Be Financially Secure
A lot of people believe you need a six-figure salary to be financially secure. This idea is misleading and can make you feel like you’ll never get ahead. Financial security isn’t just about how much you make—it’s about how you manage what you have. Many people with high incomes still struggle because they spend too much or fail to save.
Focus on living within your means, saving regularly, and avoiding debt. Track your spending and set realistic goals. Even if you don’t make six figures, you can build wealth over time by making smart choices. Don’t let flashy numbers distract you from what really matters: your habits and your plan.
Rethink the Rules and Make Your Own Path
Financial “rules of thumb” can be helpful starting points, but they’re not laws. Your life, goals, and challenges are unique. The best financial advice is the kind that fits your situation, not someone else’s. Question the rules, do your research, and make choices that work for you. That’s how you build absolute financial security.
What’s the worst financial rule of thumb you’ve ever heard? Share your story in the comments.
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