There are a lot of financial myths you might pick up once you start to get serious with money management. You might start to look for pieces of financial advice from all sort of places that you mix and match sound financial principles. You could end up more confused than the time you started and start to believe dangerous myths.
They start to become dangerous when they put you in financial trouble rather than give you stability and peace of ming. If it starts to produce undesired results, your financial beliefs might need to be revisited and fine-tuned to give you what you need. It is even more dangerous when you are unaware that you are doing more harm than good.
There are financial myths that could be masked as something that would give you financial freedom but all the while, it makes you miss out on opportunities. These are some of the worst kinds because you will be hard pressed to try and recoup your losses. There might even be times where it will be impossible for those instances where opportunities like investments come only once.
However, you should not despair because there are a few things you can do to help you manage these myths. First on the list is to identify some of the common misconceptions about your finances. The more you know about it, the better your chances are to address it before it does any real and lasting damage to your finances. Here are some of them worth looking into.
You need a certain earning level to save money
If you have convinced yourself that you need to be earning a specific amount of money to be able to save then you are sadly mistaken. There are a lot of people who feel the same way because a higher pay will create that buffer they need to save money. This is because, at present, their expenses are barely covering their needs. Business Insider shares that average pay for workers doing full-time jobs earns north of $44,000 every year.
As much as that is partly true, there is another way of analyzing this. Look at this situation from your expense side and you will find out that monitoring and bringing it down can give you some elbow room in your finances. Once you have that, you get to start saving some money aside for future use or even to pay down your debt obligations more aggressively. This is one of the financial myths you need to look into.
What you need to remember is that you can save money regardless of how much you make in a month. One of the ideas that could be preventing you from doing this is that you feel you have to save a big amount every month. In reality, you can actually start with a small amount. The idea here is to build that habit of saving to make it an automatic activity down the line. As your finances improve, your savings should increase as well and not your lifestyle.
Owning a home is always a good decision
There are a number of financial myths when it comes to home ownership but one of the facts when it comes to owning a home is that a lot of people want it. It is high up on their dream or the life they want to have. It is something a lot of Americans wish to have but that does not mean that it always has to be now.
Owning a home is great but there are times when you need to make sure that it is the perfect time to own a home. If you are currently juggling multiple debt payments and even sending some late ones to your lender, there is a big chance that your credit score is not ideal. If you take out a mortgage loan now, you will only be forced to pay a high-interest rate resulting in a big monthly payment.
It is also important to understand that if you started with a new job, taking on a mortgage loan might not a good idea at this early stage. This is because it ties you down to a specific location. If you ever find the need to relocate due to better opportunities in your career, you would have a tough time with the house under your name. You can either sell it but if you are in a rush, you could lose money in the sale. Putting it up for rent is a possibility but will you have time to check up on it every now and then?
Getting rich means getting a high paying job
One of the financial myths you need to correct early in life is that you will get rich if you get a big salary. To some extent, that may be true because 3 your take-home pay is significant. However, getting rich boils down to a few factors such as your financial discipline, lifestyle, and even your investment decisions you make early in life.
For one, the amount you make does not really matter when you spend more than what you earn. You could even be in debt at the end of the month. Having a big salary is just a start and you can use that as a primary tool to grow your finances. For one, you need to make sure that your lifestyle and spending does not overtake your income.
As you have your expenses and debt in control, it is also a good idea to use that money to invest and save for the future. Strengthen your reserve funds and make sure that you can weather financial emergencies that comes your way. Look into building up your retirement fund as well to help you retire on schedule. Use your funds also to make investments to take advantage of compound interest.
Questionable financial myths include debt being always a bad thing
When you start managing your own finances, one of the first things you will encounter is debt. From such an early age, you might have been told that debt is a bad option. You should try to avoid it as much as possible and to stay away from it whenever you can. However, this is not entirely true as debt can open up opportunities you could otherwise miss.
Take a look at how student loans can help you get a higher education which in turn puts you in a better position to earn more. Using a mortgage loan and putting a big on a house also helps you afford to buy a house. A business loan also gives you the chance to start up your very own business. Debt is a tool you can use to improve your financial situation as long as you manage it well.
Your savings account is your go-to place to keep your money
This is one of those financial myths you need to correct because unless you need to take out that money soon, there are better places to keep your funds. For one, you can invest that amount in stocks and other tools to make it grow better. The reason behind this is that letting your funds sit in a savings account only gives it a small growth. When you start looking at inflation, you could end up with a dwindling savings account.
There are a number of financial myths you need to seriously study and look into before adopting it into your own beliefs. There are some that can really be beneficial but there are some that can put you in a more compromising financial situation.