How many financial myths have you bought into?
We’ve all heard the same financial advice our entire lives: spend less, save more, and save early. Although the majority of these words of wisdom are correct, there are a number of popular money management tips that are incorrect.
Below are seven money myths that could be causing you more financial stress than good.
Myth No. 1: Debit is often preferable to credit.
When you make a purchase, do you immediately search for your debit card? Although it’s true that paying for purchases with money you already have in your account is always the better option, credit cards have their time and place.
The truth: Credit cards have a bad rep because of the debt trap they represent, but they may be your go-to payment option on occasion. To begin with, several credit cards include rewards in the form of travel miles, cash-back programs, and other incentives. Second, establishing and maintaining a positive credit history is essential to your financial well-being. Only by using credit cards and paying your bills on time would you be able to do this. Finally, many credit cards provide purchase insurance, making them the better option for big-ticket purchases.
Myth #2: You must purchase a home at all costs.
It’s an important part of the American Dream: Go to college, get your dream job, marry, and buy a house with a white picket fence and two cars in the driveway.Unfortunately, so many people are fixated on that dream, oblivious to the fact that buying a home might not be in their best financial interests.
The truth: Renting a home or apartment could be a better option for many people, including those who aren’t ready to settle down or who expect a career change that requires them to move across state lines. It can also be a cost-effective alternative if you live in a high-priced city.
Myth #3: Only the wealthy can invest.
Investing is for those who drive high-end cars and own properties in three states.
Is that the case?
The truth: Someone with a small amount of money stashed away may get into the stock market. A sound investment strategy will help you develop your wealth and place you on the path to financial independence. If you’re a beginner investor, look into actively managed index funds as a simple way to get started.
Myth #4: Since my partner handles our finances, I don’t have to worry about money.
Are you in blissful financial oblivion, knowing that your partner is in control of your finances?
The truth: Regardless of their partner’s presence, every adult should be in charge of the family’s finances. If it is acceptable for one partner to consciously handle the family’s finances, both partners must be mindful of the family’s financial situation and capable of handling household expenses and investments if one partner passes away.
Myth #5: I’ll be able to get by with credit cards in any financial situation.
What makes you think I’d need an emergency fund? I’ve got credit cards!
The truth is that relying on credit cards to get you through a financial emergency is a surefire way to sink deeper into debt. You’ll be paying out a lot more than you spent due to interest. When you pay with plastic, you’re even more likely to overspend.
In the event of a true financial emergency, such as work loss, divorce, or sickness, credit cards should not be used. It’s best to set aside three to six months’ worth of living expenses as an emergency fund to ensure that you’re fully prepared for the unexpected.
Myth #6: I’m too young to be thinking about retirement.
Who would think of retirement when they’re only beginning a career and it’s still a long way off? Who can afford to plan for retirement when they have other pressing financial obligations, such as saving for a house and sending their children to college?
The truth is that there is no better time than now to begin preparing and saving for your retirement. The earlier you start saving for retirement, the less you’ll have to save each month and the more you’ll have saved by the time you’re ready to retire. Maximize your 401(k) contributions and/or open an IRA or other retirement account to ensure a safe, stress-free retirement. Start today and let compound interest do the rest!
Myth #7: I don’t need to budget because I have enough money in my account to cover my expenses.
Budgeting is among those who are only scraping by on a monthly basis. Why should I budget when I have enough money?
The truth is that budgeting is something that everybody can do. Those with a salary in the high six figures will quickly spend their way into debt if they don’t have a reasonable budget in place. A budget would require you to make responsible financial decisions and keep track of your finances at all times. Check out our Money Management tool in online banking and our app if you need any help getting started on your budget!