Whenever I hear “conventional wisdom,” I’ve learned to be skeptical.
It’s challenging to strike the right balance between timeless, principle-based wisdom and the accepted notions of the day. However, I think challenging the conventions, the “what-seems-to-be-wise” views of the day, with a different perspective can lead us back to true wisdom.
Jesus did just that. He turned religious conventional wisdom on its head. He said if you want to save your life, lose it. Be first by being last. Giving a small amount with great sacrifice is better than giving a great amount with small sacrifice.
Your financial decisions may improve if you challenge today’s conventional financial wisdom—what you hear from the media, other family members, or bankers. Here are four examples of financial conventional wisdom:
- Keep a mortgage to keep a tax deduction. Although interest is deductible if you itemize deductions on your tax return, you are still in a negative cash flow position. If you spend $1,000 on mortgage interest, then you receive only $200 of a tax benefit if your tax rate is 20%.
- Real estate will continue going up in value because they are not making any more land. Ask an owner of real estate in Detroit, Florida, or California if land can go down in value. Even farmland values have periods of boom and bust.
- If I can afford the monthly payments, then I can afford (fill in the blank). Don’t fall for this! Taking on debt involves assumptions about the future that may not work out.
- An investment in (fill in the blank) will always do well. No investment, in any particular asset, will always do well. Gold, stocks, bonds or baseball cards go up and down in value.
Because God’s ways are different than man’s ways, we should be reluctant to quickly accept man’s ways in all areas of life.
Jeremy L. White