Some money rules — the most obvious, most important standbys — will never change. Save for retirement. Stick to a budget. Spend less than you earn to build wealth.

But other pieces of long-held financial wisdom just don’t make as much as sense as they used to. In today’s post-recession economy and rapidly changing job market, some may not make much sense at all.

“Save six months’ worth of living expenses for an emergency,” for example, is reasonable advice that has become slightly outdated. Don’t get me wrong — you definitely need an emergency fund—but with today’s rates, many people question the six-month rule. It’s worth pointing out that most people have trouble saving even $1,000 for an emergency. But your emergency fund can also be too big: If you have tens of thousands of dollars in a traditional savings account, you’re missing out on the potentially higher earnings you’d get by investing that money instead. With most banks now offering less than one percent interest, you’d be better off putting some of that money somewhere that will get you a better return.

Money is just one resource when it comes to investing, and time is the other.

In other words, while the golden rules of personal finance may never change, not all rules are built to last. From buying a home to paying off student loans to finding a way to save for retirement, here are a few pieces of traditional money advice that could use an upgrade.


Old rule: Buying a home is better than throwing away money on rent.

Homeownership was once the core of the American dream. Even with extra costs like property tax, maintenance, and interest, at the end of the day you were putting your money into your own investment instead of your landlord’s pocket, and that meant you made a smart financial move. Or at least that was the prevailing logic.

And then the housing crisis happened, and banks encouraged borrowers to buy homes that were way more than they could afford, eventually leading to mass foreclosures, defaults, and plummeting home values. It served up a rude reminder that a home isn’t always a good investment, and at the end of the day, banks are the true homeowners, unless you’re wealthy enough to pay cash. It also shed a whole new light on the upsides of renting.

New rule: Renting can be a smarter money move, if you do the math.

Sometimes you’ll get more bang for your buck as a renter. This is possible thanks to something called opportunity cost, or the potential value you lose when you choose one path over another. It’s like skipping an epic party to stay home and binge watch Making a Murderer. Sure, you had a good time, but what did you miss? Choosing to rent can work the same way: If you take all the money you could have spent buying a home — down payment, maintenance, renovations, property tax, interest, and insurance — and invest it instead, that might yield a better long-term result.

Really, though, the better move will vary from person to person. It’s silly to say buying or renting is always smarter because there are so many individual factors at play: where you live, mortgage interest rates, housing prices, how long you plan on keeping the house — the list goes on. So here’s a better rule to follow: Don’t pursue homeownership blindly. Do your math to see which option makes more sense for you. (The New York Times Rent Vs. Buy calculator is the most comprehensive I’ve seen for figuring this out.) Remember how much time you spent thinking about which new laptop you should buy? A home costs 300 times as much as a MacBook Air. Take the time to crunch all the numbers.


Old rule: Before you even think about investing, pay off all your debt.

This is a good general rule. When you’re in debt, you’re paying interest, which is really paying someone money just to owe them more money.

On the other hand, student debt is overwhelming. The average 2017 graduate has nearly $40,000 worth of student loans, according to Student Loan Hero. Between higher tuition and stagnant wages, grads are taking longer to get out of debt, which means they’re leaving less time for investments to grow. After all, money is just one resource when it comes to investing, and time is the other — and investing is how you’ll be able to afford to retire someday. Should we really forgo years of potential growth in the market? Especially when so many people are struggling to retire by 65, it’s a valid question to consider.

New rule: Pay off high-interest-rate debts, then consider investing.

You should absolutely prioritize tackling those expensive, high-interest loans, which can cost you more money the longer you go without paying them off. But instead of postponing any investing until you’re entirely debt-free, consider doing it at the same time you’re reducing any debt that carries a lower interest rate.

Here’s why: The sooner you start investing in your retirement, the better, because your money needs time to grow. Time is a crucial element in compound interest, which can cause even modest savings to become impressive nest eggs. And as long as your debt interest rate is lower than the rate of return on your investment — the stock market, for example, has averaged about 6 to 7 percent in annual returns — your money will go further in investments than it will if you put it toward your debt.

The same logic applies to mortgage debt. “‘Pay off your mortgage early’ is an old personal-finance tenet,” says Holden Lewis, a writer and researcher at NerdWallet. “The idea was to pay off your mortgage as soon as possible; the shorter the mortgage, the better.” But in recent years, mortgage interest rates have remained low, which has many experts rethinking this rule. It may make sense to allocate your money toward retirement or other purposes. Paying off a mortgage early “is not a smart money move if you have higher-interest debt, you haven’t maxed out your 401(k), or you’re confident that you can get a higher return on investments than your mortgage interest rate,” Lewis says.


Old rule: Save 10 percent of your salary for retirement.

For a long time, money experts touted the wisdom of The 10 Percent Rule: Put 10 percent of your income into a retirement account. While it’s a good idea in theory, there are a few reasons this rule no longer holds up.

For starters, 10 percent was an easier chunk to put away for workers who didn’t have to contend with student loan debt and stagnant wages. But the more daunting truth is, for most people, saving 10 percent isn’t even enough. With longer lifespans, a decline in retirement pension plans and a reduction in Social Security benefits, most experts now agree that workers need to save much more.

New rule: Calculate how much you’ll need in retirement, then save accordingly.

People may have wildly different income needs in retirement, so instead of blindly relying on 10 percent, calculate how much you’ll need when you retire. Then figure out how much you need to save now, during your working years, to reach that savings goal, so you’re not rushing to catch up in your 50s. There are plenty of online calculators, like this one from Fidelity or this one from Bankrate, to help you figure out how much you should try to save now to retire by a certain age (another reason to rethink paying off all debt before you start investing).


Cutting back on your avocado toast habit will not afford you the down payment for a home any time soon.

Old rule: Student loan debt is always “good debt.”

Money gurus decree that there’s good debt and bad debt, and the difference is that good debt is an investment. And it’s true that a college degree will generally lead to higher earnings than a high-school diploma alone. But “one pervasive myth that has landed many well-intentioned people in major debt is that all student loan debt is ‘good’ debt, rather than judiciously weighing the costs and benefits of a degree program,” says Kristi DePaul, CEO of Founders Marketing, a firm that works with think tanks, universities, education non-profits and foundations, and edtech startups. In reality, the debt that comes with higher education isn’t always necessarily a good thing to take on.

New rule: Calculate the ROI of your degree.

With the cost of education on the rise, today’s student has to think longer and harder about the return on investment of their degree.

“There are many practical reasons to rethink what is now often a six-figure higher-ed investment,” DePaul says. “Today’s educational landscape is evolving away from the traditional. The elite brands that once stood for success in specific fields must now compete with a new outcrop of alternative credentials like digital badges and nanodegrees,” or online programs that can teach you specific skills. (Some employers accept them, but others may not be familiar with them, according to a report from U.S. News.)

While this type of education hasn’t replaced the four-year degree, it’s true that many major employers like Google and Apple are overlooking the bachelor’s degree as a standard requirement for a job. And the value of a college diploma has plateaued over the past several years; while the wage gap between the average high-school graduate and the average college graduate is still significant, it’s no longer growing the way it did in decades past.

This isn’t to say you shouldn’t pursue an expensive name-brand college education or go to grad school. But crunch the numbers, and be open to other paths. As Josh Kaufman, author of The Personal MBA, put it in the blog I Will Teach You to Be Rich, “Taking on loans to finance a credential can make becoming a successful person more difficult than it really needs to be.”

Kaufman suggests a sensible alternative: Consider whether the industry you’re planning to enter cares more about skills and experience than it does a college credential. Also, consider the cost of a brand-name school versus a (likely much cheaper) state or community college. Look at a school’s website to find its job placement rates: How many grads find jobs right after college, and what are their salaries? Beware of for-profit colleges, which have gotten in trouble for misreporting these statistics. And by all means, if you’re going to school with a plan to “find yourself” or take a break from the workforce, think twice about the price tag that comes with that. Unfortunately, today’s student has to think more about the money.


Finally, one piece of traditional personal-finance advice that might be outdated more than any other has to do with frugality: the idea that if you watch the pennies, the dollars will take care of themselves, helping you to get rich, afford a home, and maybe even retire early. It sounds good, but when you have to contend with structural issues like a massive income inequality gap, a student loan crisis, and barely moving wages, frugality just isn’t as lucrative as it once was. Cutting back on your avocado toast habit will not afford you the down payment for a home any time soon.

None of this is to say we should abandon frugality — or the rules of personal finance — altogether. But in order for those old rules to do the job, they have to evolve for today’s reality.