Terrible financial advice from startup founders
September 26, 2016
Maybe not all of them are unhinged but these soundbites from startup founders in a survey where they answered questions about their finances sure make them sound like it. I noted that only 6 of the respondents were women so it’s likely there’s some sort of self selection bias going on there.
“Don’t save for retirement. That’s like betting you’ll fail.”
The complete logic fail here is astounding. It assumes that the only success will leave you so wealthy as to have your retirement secured. It ignores the fact that you might succeed but only modestly so, or that you might have more expenses in retirement than a buyout could cover, or that you might succeed but not ever be bought out. Running a business doesn’t always end in being acquired for billions. It also links the act of saving to actively betting against yourself which doesn’t make any sense at all. I have supreme confidence in myself and my success but you betcha I save for retirement because I want one, and I don’t control everything around me.
“You can’t save your way to being wealthy.”
Yes, you can. You could also, if you were really savvy, probably spend (invest) your way to being wealthy. Refusing to do one or the other if you have the opportunity to simply because it’s not the quick and easy way is pretty shortsighted.
“Bet on yourself rather than on external investments (housing, stock market, etc.).”
We all know that’s not an either/or proposition, don’t we? Of course one of our biggest assets is our ability to earn. But that shouldn’t be your only asset if you have a choice about it.
Does this founder also put everything on red and let it ride? Because betting solely on yourself as a single asset and refusing to diversify is pointblank stupid. What happens if you’re killed or crippled in an accident? What if you’re struck by a chronic disease that severely limits your ability to function? What if a dependent family member falls ill and needs full time or long term care?
I don’t pose these as unlikely hypothetical scenarios just to be contrary. All of them have happened to us or a family member.
Other bad advice
That got me thinking about times in my life when I was given pretty bad advice and was chided for being too stubborn to heed it.
I did listen to good advice, I wasn’t immune to all advice, but some of these were just too much.
“Maybe he’s just being nice.”
When a manipulative abusive boss tried to give me cash for a vacation.
No, he was never just being nice. He wanted to buy loyalty for petty change and the loyalty he wanted was unreasonable and unprofessional. You know what I’m talking about.
“You should have kids when you’re young and have energy”
A cousin 12 years my elder pressed me on this point when I was 21 and definitely unprepared for marriage, much less kids. To my family, who expects to see us married by 24 at the latest, it was looking like I’d spend all my time working and never getting married and having kids. The joke was on her, apparently. 8 years later she said, ok, yeah, you should enjoy your life while you can.
Thank you, I believe I will.
Yes, there are times I wished I had JuggerBaby earlier so Mom would have met and enjoyed zir too. But that’s one tiny fraction of the entirety of our lives that I enjoy so much: having amazing flexibility and autonomy in my job, being financially stable, having a solid marriage and partnership, these things would be missing from the equation. Only their fledging counterparts would have been there: paying down debt, managing my health, and growing my career would have been so much harder and would have meant I’d miss so much more of JuggerBaby’s life. We were late to having a kid but because of it, I’ve been lucky enough to enjoy so much of zir growing up. (May we always have this stability and flexibility.)
To be fair to her, it wasn’t objectively a terrible bit of advice. It was just a bad idea to suggest that I should model my life on everyone else’s. I prefer to aim for a little more extraordinary, and that doesn’t fit the safe cookiecutter lives they encourage.
Really gung ho start-up folks take “stay hungry, stay foolish” to an ideological extreme.
Best piece of advice I have ever gotten was to learn when to say no.
I think the best addendum to that is a tutorial in learning how to say no.
You are spot on with the bad advice above. Too often you read about the entrepreneurs who made it but never read about the entrepreneurs that took the same advice and are financially ruined. The best advice I received was “Save early and save often.” This has worked out well for me so far. 🙂
Mustard Seed Money recently posted…Who Wants to be a Millionaire?
Now that’s advice worth taking!
Your point about a lot of this advice being presented in either/or fashion is so important. Wealth building, success, or whatever else we’re striving for is complicated with so many variables working together (or against each other). I get a lot of advice on children. Like I’m getting old, but also a lot of input as to how much maternity leave to take if we do have kids. The latter probably merits a blog post. We don’t get paid leave – but we can use our sick days OR we can take an unpaid leave. Lots to think about. Of course, right now, I’m a DINK, so I try to mostly ignore the unsolicited advice.
The question of if you want and will have kids is so personal, I don’t get why on earth they’d think that their advice on how long to take off for maternity leave would begin to apply to anyone else’s case.
I’ve heard so much dumb financial advice from people who out-earn me.
“You’re young! You don’t need to save for retirement”
Meh. My response to that:
To each their own.
I like the “save early and save often” that Mustard Seed mentioned.
TJ recently posted…I’m Going To Camp Mustache SE!
It’s a toss up if the worst advice I’ve heard comes from high or low earners, I’ve worked with both equal amounts of time, and it seems to be equal opportunity bad money management.
My mother used to pass on this nugget of wisdom from a male dean or someone at her university: “Learn to use the Cleopatra in you.”
I am so disappointed that it took me until this year to formulate the notion that I do not have to follow advice from a total stranger from the 1950s.
Also:
“Maybe he likes you and doesn’t know how to show it” and “Do good work, and it will speak for itself.”
Tragic Sandwich recently posted…Summer Recap
Ooooh I hated those. I heard them growing up too, they’ve survived decades.
Startup culture is so weird. It seems like people get obsessed about “building a company” and “making a difference”, but so many companies are not that useful (much less successful) and the ultimate goal still just seems to make a lot of money. Which I have nothing against, but the culture surrounding how startups do it perplexes me.
Bad advice I’ve gotten? I must have filtered it out, because nothing comes to mind. My mother in law sometimes has advice that makes me roll my eyes, but most of it isn’t downright bad, just unnecessary/inapplicable.
SP recently posted…Money Lately
So true – startup culture seems to thrive on the myth of startup culture but most really aren’t necessary businesses.
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