I stumbled on an article on USA Today titled “8 Money Missteps That Can Really Hurt You Financially” by Kathryn Canavan. The writer made many good points in the article and I do agree to almost all of them. The first three points, however, got me thinking whether the advice suggested was really the best, although it does, I admit, seemed to make sense. Below is what I was thinking:

Kathryn wrote that raiding your 401(k) is money missteps #1

I do understand that for many elderly people the 401(k) is their only hope of having money for their retirement days. Too often however, the retirement savings run out long before the life time of the person actually does. Not to mention that in the past year many have noticed that they have lost 40-60% of their retirement money in the 401(k).

Financial advisors keep telling them to continue investing into their retirement plan, reasoning that the current recession is only a temporary setback and that the market will go back up again. These poor people follow their advice, not knowing any better as they are usually completely blind about the trends in the economy and the financial world. How would they understand that there are many economic analysts who have warned that the market will crash again some time this year if their experienced financial advisor does not tell them about it – or worse – have no clue at all themselves!

People with a 401(k) retirement plan usually have the option to invest their retirement savings in stocks, bonds or money market investments or a mix of all of the above. They are told it is a smart move in the long run. However, what many people do not understand is that the stock market isn’t exactly the best and ideal place for long-term investment. To understand more about the 401(k) and how saving or investing your retirement here is actually risky, click here.

If you are planning your retirement, invest in something that can give you continuous cashflow for a long time. Instead of keeping your money in your retirement plan, it would be a better idea to use it to invest it in your own cash cow.

Kathryn wrote that walking out on your mortgage is money missteps #2

Although personally I would agree because I believe to always repay my debt, but it does not make sense to pay a mortgage that is worth more than your home. The problem with the mortgage industry today is what we are experiencing is a burst of the real estate bubble that had grown over many years in the past.

According to Answers.com a ‘bubble’ is defined as “a speculative scheme that comes to nothing” and “a fantastic or impracticable idea or belief; an illusion”. The real estate bubble created a wealth illusion in the United States. When they first bought their homes in the past, they thought they would buy a home worth a fortune – which apparently was only an illusion caused by the bubble. So when they signed up for a home with a price tag of US$150,000 it most likely did not worth that much at all – it was only a bubble, only an illusion.

Knowing this, it is hard for me to actually agree to not walk out on your mortgage, if you have already paid as much as the home is really worth.  It is not a good thing to do -to walk out-, however, the bubble and the usury that you are paying in your mortgage are not any better either.

Kathryn wrote that ignoring the card balance is money missteps #3

With the credit card it is a little bit similar with the mortgage case above… although no bubble is involved in this one. The American society has been brainwashed completely by pumping values and dreams into their heads, making them want it all regardless of whether they can actually afford the lifestyle they are being enticed to. The level of America’s consumptive behavior seems to be so out of control.

I am always amazed of how huge the personal debt of an American could actually be. I once read an article written by a woman who got rid of her US$100,000 credit card debt. I was astonished and wondered how she got into that kind of credit card debt in the first place? What did she buy that she got so deep in debt? Might as well go to Indonesia or China where it was manufactured and buy the whole factory there. Would probably be much cheaper and even profitable.

Having deliberately set up the financial mindset of the average American –to recklessly shop and shop using their credit cards– credit card providers are preying on their low financial intelligence and charge an enormous credit card usury. In the end Americans pay way more than what they originally owe. After paying as much as you originally owe, it does make sense to just walk out… although I would not recommend it.

However, even if you do walk out on your credit card, something in your financial intelligence (or probably even deeper than that) needs fixing first because otherwise, the vicious cycle of reckless spending, piling debt and walking out will repeat itself.

The whole money system in the US is robbing you blind using your retirement plan and your debt. Although it is generally recommended to always pay off your debt (once you got into that trap), I would reconsider and ask myself if the system really should have their way into my pocket.

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