Guys! Did you know that if you have an S corporation you don’t have to pay taxes??? You can give yourself and your children jobs without owing the government one thin dime!
Bonus awesomeness: You can call everything you buy “a company expense,” and even take a “corporate vacation” every year.
Pretty sweet, huh? Except it’s also completely wrong.
You can start an S corporation, no problem. But your business still has to pay FICA taxes on the salary you pay yourself (and your kids, if you wind up employing them), and those paychecks will be subject to income tax.
This and other sketchy financial advice is available free for the taking from TikTok. And it’s worth every penny you paid.
“Surely no one would take such ridiculous info at face value,” you’re thinking. “And just who gets all their advice from the Internet, anyway?”
Quite a few get at least some of it that way. According to a poll from CreditCards.com, 28% of Gen Zers look for advice from “social media platforms and influencers.” Of the other demographics, 24% of millennials, 10% of Gen Xers and 4% of Baby Boomers get advice there.
When we go online to search for money help, there’s a chance we’ll find good stuff right away, such as the Consumer Financial Protection Bureau, the Federal Trade Commission or Consumer Reports.
But there’s just as good a chance that we’ll run across:
- Things that cost us money, rather than make it for us. For example, Consumer Reports notes that life insurance aimed at newborns is “unnecessary” for several reasons. But an excited expectant couple (or sleep-deprived new parents) may not think logically.
- Tactics that might work for some, but not for you. One TikTok guru suggested making a 3% down payment on a home, and then investing the rest. Sure, you might make money. But you’ll also have to pay private mortgage insurance, and will likely have fewer mortgage options and a higher interest rate.
- Completely unhinged advice that could land you in trouble. See “S corporations,” above.
So why do we listen? The bells and whistles, maybe. That social media influencer wouldn’t have so many followers unless he knew what he was talking about, right? Or maybe it’s a favorite mainstream personality that’s got us entranced. (Pro tip: Just because someone has your attention doesn’t mean they deserve it. Ladies and gentlemen, I give you…the Kardashian Kard!)
It’s all a gamble
Not that it’s just cult-of-personality folks who quite literally cash in. Bernie Madoff, who created the biggest Ponzi scheme ever, died in prison in mid-April 2021. The dude made-off with billions of dollars from numerous investors, none of whom were actually stupid. Instead, they were:
Simply human. How many people desperately want to believe that “too good to be true” really was true? (Hint: It’s a big number.)
Simply uneducated. They didn’t know what they didn’t know. (More on that in a minute.)
According to that poll, 53% of Gen Zers listen to friends and family when it comes to money matters. So do 44% of millennials, 37% of Gen Xers and 25% of Boomers. All right, then: Suppose your friend or your uncle claims to have a hot tip about a Sure Thing. If you’ve got five grand, they can double it for you in the next week or so.
Would you be tempted to believe them? Maybe, because you trust the person and/or you you might not know much about money. But when it comes to investing, no one can promise you anything. Low-risk, high-return investments aren’t real, whether they’re meme stock manias or tulip bulb futures.
It’s all a gamble. And it should be an educated gamble, not a blind risk or, heaven forbid, speculation based on what a bunch of amateur Reddit day-traders propose.
Again: If no one ever told you that, how would you know? You wouldn’t know that Madoff’s consistent 12 to 13 percent return, year in and year out, isn’t possible. You wouldn’t know to run that Sure Thing past a couple of money experts, or at least research it yourself.
Maybe it could work out. Maybe a decade from now you’ll be on your private island, recording a TED Talk about how you got in on the ground floor of cryptocurrency.
Maybe it will all work out fine. And maybe it won’t.
Don’t trust – verify
As J.D. Roth of Get Rich Slowly is fond of saying, “No one cares more about your money than you do.” That’s why it’s up you to learn all you can about personal finance. This helps guard you against scams, and positions you to make the most of your cash.
In a post called “Which Financial Advice Should You Trust?,” J.D. suggested four questions for vetting money info:
“Does this advice mesh with reality?”
“Is this person qualified to give advice?”
“How does this person profit from their advice?”
“What are the other options?”
(The article also features “the ultimate cheatsheet for critical thinking.” Check it out.)
In another post, “7 Essential Skills to Protect Yourself From Scammers,” J.D. also suggests tactics like refusing any deal/transaction that you didn’t initiate, surrounding yourself with money experts and refusing to invest in anything you don’t understand. All I can say is: Yep.
Don’t get all your advice from a single source – and remember too that money advice can change with the times. “Never carry credit-card debt” is great info in theory, but if I were unemployed during a pandemic you bet your life I’d be making minimum payments on my cards. After all, I’d need to conserve some cash for my rent/mortgage.
“Everyone takes out student loans, you just pay them off when you get a great job after graduation” is another unfortunately widespread theory. However, college has gotten hugely expensive, and the resulting loan balances can greatly hinder your chance at having any kind of life in your 20s and 30s (or beyond). Oh, and who says you’re guaranteed a great job after graduation?
“Renting is just throwing money away” – so much wrong with this that it makes my head hurt. Just a few cranky retorts, off the top of my cranky head: You can’t always know you want to stay in a specific place, you might wind up house-poor, and you’re not throwing money away because you get a place to live in return. Sometimes renting is the right option for you at this moment.
Take control of your cash
Understand: I’m not against the Internet as such. Heck, I make my living writing for it. If someone did a TikTok video about why you should save for retirement or why you need to build an emergency fund, I’d share that stuff right away.
But putting all your financial eggs in one basket based on the say-so of some guy with a webcam and an attitude? That could set you back for years.
Gen Zers, the folks who stand to lose the most, may or may not be reading this right now. If they are, please listen to me even though I’m an old poop who can never truly understand what it’s like to be you. I am begging you to educate yourself – and not just through 60-second TikTok yuks.
Read books, or at least get them on Audible and listen to them while you commute or work out. For nuts-and-bolts material, I suggest “Get a Financial Life: Personal Finance in Your 20s and 30s” by Beth Kobliner; “But First, Save 10: The One Simple Money Move That Will Change Your Life” by Sarah-Catherine Gutierrez, and anything by personal finance journalist Liz Weston (who’s also a CFP, by the way). [As an Amazon affiliate, I receive a fee for items bought through my links.]
(Pro tip: If these books aren’t available in your local library, ask for an inter-library loan. You can always buy your own copy later on if you find them indispensable.)
Visit reputable websites, such as the Consumer Financial Protection Bureau and the nonprofit National Foundation for Credit Counseling (which offers a lot of basic money smarts – not just “how to get out of debt”). Check out for-profit sites like NerdWallet.com, MoneyTalksNews.com and Self.inc as well, because companies like these have deep archives of topics for many ages and stages.
Talk with your friends about where they are financially – but again, don’t believe everything they say. They, too, may not know what they don’t know and could just be parroting outdated advice from relatives or, yes, their favorite pro athlete or TikTok influencer.
No matter where you get your money edumacation, remember that it’s never one-size-fits-all. It can’t be. A guy who’s just finished a two-year HVAC program is likely to have lots of job offers and maybe even a signing bonus. His options are completely different than those of a 23-year-old with massive student loans and a modest starter salary.
A culinary school grad who isn’t sure which city she wants to live in probably shouldn’t buy a house. A cancer survivor or someone fresh off a protracted divorce probably shouldn’t make any major money decisions just yet. And so on and so on.
Get as much info as you can, and filter what you find through those four questions noted above. Never stop learning. The financial life you save may be your own.
Readers: How do you get your financial info, and how do you decide which (if any) should be acted upon?
Those people who invested with Bernie Madoff directly, did so because they were greedy. Those people who kept getting wild interest returns on their money just grabbed it and smiled to themselves. Those people who knew Madoff personally were not ignorant, they sought him out and took the money and ran. I am not referring to individuals who were robbed of everything they had in pensions, etc. These people were educated humans who knew he was a crook.
Source, please? Why do you think they all knew he was shady? I doubt that Holocaust survivor and Nobel laureate Elie Wiesel would have put his nonprofit’s funds in Madoff’s hands if he thought the guy was a crook.
I have been mostly self taught about money. My husband does a lot of financial research so I guess he shares his knowledge with me. We ready reputable financial magazines. My former emplo used to provide financial seminars which were helpful.
I came from a poor background and had to learn that some risk can be a good thing for financial health.
When my eventual husband and I talked about life goals, he was the one who said he wanted to retire by 50. He wanted to be able to do volunteering, wood working and not have to get up at a certain time. I was the one who then sought out written materials and we made a plan. We were nearly derailed by his cancer but I have always carried an excess amount of health insurance and it paid off; I am not sure we could have avoided bankruptcy if we had not had excellent coverage because he was in the hospital so often that the bills were in the hundreds of thousands after 18 months. We lived extremely frugal lives before the FIRE movement made it trendy, and the exchange platform at the local dump sites and the university dumpsters the week the spring semester ended, were a regular stop on the weekends. And we did not bring home junk—we found appliances still in their boxes (our microwave, one of our televisions, a small fridge). I did stop short, however, in bringing home food like dedicated dumpster divers do. We also had a HUGE garden and put up a lot of the food that sustained us in the winter. And, like you, soup and fresh bread made up/still make up a lot of meals. I don’t think we lived a life of deprivation but of deliberation. When I go to garage sales I think, “How many hours did you work to buy this stuff that you are now selling for pennies?” (Not that we have not made some of those mistakes over the years, believe me!) When we would find ourselves veering off the path, I’d pull out a favorite book on financial planning or one that encouraged thrift and we’d use them to remind ourselves of what we were working toward.
Anyway, he turned 50 first and I followed 4 years later and have never looked back. Former employers have contacted each of us at various times to do some short term projects and we would usually take them to earn pin money for trips or the like.
I do realize that we were in a privileged position in that both of us had graduate degrees that were the keys to well paid employment, but I sure know colleagues who made the same amount but lived paycheck to paycheck. I would get teased about bringing a bagged lunch to work and my standard reply was, “Yup, these bags are paying off my mortgage by the time I am 50.” Of course that is simplistic, but you know what I mean. My parents were immigrants and we lived very impoverished in the early years of my life, so I already had a sense of saving and working hard. My father always worked a job and a side gig, and I did for many years as well. But it was making a plan and sticking to it, being willing to delay gratification, and ignoring people who sneered at things like bagged lunches and our elderly vehicles, that helped. One biggest extravagance was our dogs. I wanted a certain breed and we spent a lot to get one and then a second. They gave me more pleasure than almost anything else and were worth every penny.
It sounds to me like you did everything right. Deliberation, not deprivation — I like that!
I love the point you made about garage sales! My good friend owns a consignment shop, and marvels at how people waste money on clothing and household items that were never used (still with store tags on them) that she sells for 90% less. Holiday decorations that cost thousands are sent to her that nobody wants. She keeps her business with fresh with culling items, so every now and then a sweep is done. Lots of “stuff” end up in landfills.
Many of my friends including me go into retail stores and think “How much of this stuff is going to end up in landfills?” That cuts our spending down to essentials. I cringe when I see dollar sections filled with junk. People seem to gravitate to those places and spend. Where eventually are we going to put this junk? I lived by a landfill early in my life, and it was closed because it was full. I’ll never forget the smell or traffic or litter on that road.
We would be better off if we all lived like Mable. My best to you.
Reminds me quite a bit about the recent story in Bloomberg titled THE FALL OF THE BILLIONAIRE GUCCI MASTER. TikTok only gives you a fractional glance at someones life and you have no inclination of what their true motivation or story is. Verifying, as you advocate, is a must in today’s day and age.
Pro-tip upgrade: Better than Audible, get your audiobooks from your local library for free. I used to have Audible until I discovered my library in Colorado participates in Axis 360. Thus allowing me to listen to a plethora of books!
This is so true. Social media is a gift and a curse. Those of us that care about spreading accurate information have a bigger platform to do so, but others who only care about a buck or just saying anything have the same platform.
At least once a day, I am in the comments of posts going back and forth about misinformation. Is it worth it? For me, it is because it may save someone from making a horrible mistake. But, from my perspective, there is way more trash than good information.
Thank you for bringing awareness to this!
Thank you, Tiffany, for continuing to work for others.