In today’s digital age, social media platforms like TikTok have become sources of personal financial advice, both good and bad. TikTok is flooded with personal finance information with promises of millions, early retirement, thousands in passive income, and more. However, it is crucial to be aware that not all of it is accurate.
Myth 1: “Crypto Investments Guarantee Wealth”
Cryptocurrency investing is one of the hottest topics on TikTok, with videos promising quick wealth and stories of early investors in cryptocurrencies like Bitcoin making substantial gains. However, it is essential to understand that investing in cryptocurrencies is far from a guaranteed path to riches.
Cryptocurrencies are known for their high volatility, with prices that can fluctuate dramatically in a short period. To navigate this investment landscape responsibly, you need to conduct in-depth research, develop risk awareness, and consider diversifying your investments. Never invest money you cannot afford to lose, and it is wise to consult with a financial advisor for a more informed approach to cryptocurrency investments.
Myth 2: “Credit Cards Are the Problem”
Some TikTok users claim that credit cards are inherently evil and should be avoided at all costs. While some credit card offers can be deemed “predatory” with high interest rates and fees, it is usually not the credit cards themselves that are problematic; it is how your credit is managed that makes all the difference.
Credit cards offer numerous benefits, such as convenience, rewards, and the opportunity to build a strong credit history. Responsible credit card usage involves not overspending so you can pay your balance in full each month, steering clear of high-interest rates and high fees, and not accumulating excessive debt you cannot pay off each month. When managed properly, credit cards can improve your credit score and offer various advantages.
Myth 3: “The 50/30/20 Budget Rule Is Universal”
The 50/30/20 budget rule, widely promoted on TikTok, suggests dividing your income into 50% for needs, 30% for wants, and 20% for savings. While this rule can serve as a helpful guideline, it is important to recognize that it may not fit everyone’s financial situation.
Each person’s financial circumstances are unique, and what works for one may not work for another. It is essential to tailor your budget to your specific income, expenses, and financial goals. The 50/30/20 rule can be a starting point, but it is crucial to adapt it to your individual needs. Your own personal financial “sweet spot” may be more like 60/20/20 at this season of your life, and that’s okay – if you have a realistic budget that allows you to pay your bills, save, and provide a comfortable life for you and your family.
Myth 4: “Get Rich Quick Schemes Work”
TikTok is teeming with “get rich quick” schemes, including pyramid schemes, day trading strategies, “pay me to learn how…” and real estate schemes. These videos often depict a picture of rapid wealth accumulation with minimal effort, without adequately addressing the inherent risks involved.
The reality is that genuine financial success typically requires hard work, dedication, discipline, and a well-thought-out financial plan. Get-rich-quick schemes frequently prey on vulnerable individuals and can lead to financial ruin. Always be cautious of any scheme promising guaranteed riches, or requiring a payment to even see what is involved in the plan, and consult with financial professionals before making substantial investment decisions.
Myth 5: “Delay Retirement Savings”
Some TikTok users suggest that there is no need to save for retirement until you are older, but this belief can be detrimental to your long-term financial security.
The opposite is actually true, the earlier you begin saving for retirement, the better. Thanks to the power of compound interest, even small contributions can grow significantly over time. Waiting until you are older means you will need to save more significant amounts of money to reach the same retirement goals. Financial experts strongly recommend starting to save for retirement as soon as you begin earning income.
Financial Advice on TikTok
TikTok can be a valuable source of information, but it is vital to approach personal finance advice with a discerning eye. The five myths we have debunked in this article highlight the importance of critically evaluating the financial advice you encounter on social media platforms. To make informed financial decisions, conduct thorough research, and consider consulting with financial professionals.
If you have more questions or need personalized financial guidance, please contact our office. Our team of highly-rated financial advisors is here to help you navigate the complexities of personal finance, provide tailored advice, and assist you in reaching your financial goals. Contact us today for expert assistance in securing your financial future. Your financial well-being is our top priority, and we are here to support you every step of the way.
About the Authors
Alexander Langan, J.D., CFBS, is the Chief Investment Officer at Langan Financial Group. In this role, he manages investment portfolios, acts as a fiduciary for group retirement plans and consults with clients regarding their financial goals, risk tolerance and asset allocation.
With a focus on ERISA Law, Alex graduated cum laude from Widener Commonwealth Law School. He then clerked for the Supreme Court of Pennsylvania and worked in the Legal Office of the Pennsylvania Office of the Budget, where he assisted in directing and advising policy determinations on state and federal tax, administrative law, and contractual issues.
Alex is also passionate about giving back to the community and has helped establish The Foundation of Enhancing Communities’ Emerging Philanthropist Program, volunteers at his church, and serves as a board member of Samara: The Center of Individual & Family Growth. Outside of work and volunteering, Alex enjoys his time with his wife Sarah and their three children, Rory, Patrick, and Ava.
Reid Ruark currently serves as an Associate Investment Advisor at Langan Financial Group where he assists Alex in managing investment portfolios, prepares client reviews, and helps operate social media platforms. In his free time, Reid enjoys spending time with his wife, playing pickleball and connecting with members of the community.
About Langan Financial Group
Langan Financial Group is an independent financial planning firm located outside of Harrisburg and York, Pennsylvania. Established in 1985, Langan Financial Group offers a broad range of financial planning services. With an open architecture platform, our advisors have access to a diverse range of products, free from any sales quotas. Our team of financial experts, each with unique specialties, enhances our ability to deliver value to clients.
Disclosures
The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information.
