Myth #1: Debit is always better than credit.
The real deal: Credit cards may actually be the payment method of choice on occasion. First, many credit cards offer rewards in the form of travel miles, cash back, and other bonuses. Second, building and maintaining a strong credit history is crucial for your financial wellness; the best way to achieve this is by using your credit cards and paying your bills on time. Finally, lots of credit cards offer purchase protection, which makes them the smarter payment method for big-ticket items.
Myth #2: Buy a home at all costs.
The real deal: For many people, including those who are not yet ready to put down roots or who anticipate a career change that necessitates moving across state lines, renting a home or apartment might be the better choice. It can also be a financially expedient option if you live in a super-expensive area.
Myth #3: Investing is for rich people.
The real deal: Anyone with a small pile of funds can get a foothold in the stock market. A smart investment strategy puts you on the track to financial independence.
Myth #4: My partner manages our finances, so I don’t need to think about money.
The real deal: While it is fine for one partner to actively manage the family’s money, it is crucial for both partners to be aware of the state of the family finances. They both should also be capable of managing household expenses and investments if something were to happen to their partner.
Myth #5: Credit cards will get me through any financial crisis.
The real deal: Depending on credit cards to get you through a financial emergency is the perfect way to dig into a deep pit of debt. Thanks to interest, you’ll be paying back a lot more than you spend.
Credit cards should not be relied upon for a real financial emergency, such as a job loss, divorce or illness. It’s best to build an emergency fund with three to six months’ worth of living expenses so that you’re completely covered in case the unexpected happens.
Myth #6: I’m so young; I don’t need to think about retirement.
The real deal: The younger you are when you start building your retirement fund, the less you’ll be required to put away each month, and the more you’ll save by the time you’re ready to retire. Gift yourself with a comfortable retirement by maxing out your 401K contributions and/or opening an IRA or another retirement fund. Start today and let compound interest work its magic!
Myth #7: I have enough money in my account for my expenses, so I don’t need to budget.
The real deal: Budgeting is for everyone, regardless of their financial standing. A budget will force you to make responsible money choices, and ensure that you’re fully aware of the state of your finances at all times.
Your Turn: Which money myths have you bought into in the past? Tell us about it in the comments.