Since making and managing money successfully is difficult, people tend to lend their ears to advice from folks who may mean well but are not necessarily experts themselves in money matters. Consequently, certain things repeated continuously tend to be assumed as facts by many people, while actually being nothing but myths. Some of the more common money myths exploded:
7 Common Money Myths You Need to Know
#1 College Can Be Paid for Only by Loans
Since college tuitions are very expensive, most people assume that it is impossible to afford them without large student loans.
However, you can always pay with cash by having the right savings plan. One of the best ways is to save for a long time in an Education savings account or a 529 plan, however, if you have not been so farsighted, you can aim to lessen the burden by attending a college like a community college or a state school that is cheaper and then find enough work to pay for it.
This is a route that is especially effective with both the parents and the child pitching in to earn a little extra to fund the fees.
2# There’s No Use Making a Budget
There is a very common opinion that budgets simply don’t work, however, the real truth is that most often either the budget was not done right or the folks just didn’t stick with it for long enough to see it succeed.
A real budget isn’t merely writing down your expenses or balancing your bank account at periodic intervals but is actually a detailed plan of how you intend to spend your money in a specified period of time.
Since most people don’t make budgets that are accurate enough, to begin with, they end up slipping a little or even worse. This makes it very important to stick with the process so that you get it right with some practice and it becomes a habit.
3# Taking on Debt for Buying Cars Is Necessary
Since cars tend to be very expensive, most people buy it on finance schemes and when they buy cars that they really can’t afford in the first place, they end up mired in debt for a long time.
However, if you can take a hard and realistic look at your finances, you will be able to know how much you can afford and then buy a vehicle that you can afford on an outright purchase.
Since, cars are also fast depreciating assets, it can often make better sense to buy a pre-owned car for much less and enjoy the freedom from debt that comes with it.
4# You Can Build Wealth with Debt
The use of debt to build personal wealth and acquire assets has always been a hot topic of discussion. There are quite a few who firmly believe that by using debt responsibly and strategically, you can achieve financial security and success and do things that wouldn’t have been possible otherwise.
The real truth is that debt is an expensive crutch and everything that you use debt to acquire costs far more than if you were to use cash.
Acquiring debt is a drain on your resources, and unless you are smart, you end up in a debt trap that can ruin your life and financial independence.
5# You Should Always Have a Credit Card for Emergencies
On the face of it, keeping aside a credit card for using in a real emergency when you are stuck without cash seems to be a good idea; most often you will not have the self-discipline that will allow you to keep it tucked away from temptation.
You will find deals far too attractive to resist and swipe your card anyway and start mounting up debt in no time. If you must have a contingency for an emergency, make sure it is in the form of a cash reserve; some notes tucked away in an envelope is usually good enough to tide you over any sudden and unanticipated requirement.
6# Stock Market Investments Are Too Risky
Undoubtedly, the stock market is witnessing periodic crashes and unexplained buoyancy and can be a frightening place for the uninitiated. If you are completely risk-averse, you should probably avoid the stock market and put your money in government bonds.
However, one thing that no one can deny is that over long enough period stock markets have only risen so if you can take a long-term stance to investment, the stock market is a good place to be in.
Just make sure that you are not being too greedy and wanting to make big bucks in double-quick time because then you need to be a player and be able to take the rough with the smooth.
7# You Need to Have a Good Credit Score
It can be quite easy to believe that you need a good credit score to buy an asset as it serves as an indicator of financial stability.
It is important to understand that a credit score is only important for those people who lend you money to do various things and not something that you need to lead your normal life if you are not in the game of using debt to fund your lifestyle.
Good credit scores are actually an encouragement to take on more debt and sooner or later the accumulated debt will have you gasping for survival. If you can manage your money well, there is no need to have a credit score to worry about.
There is such an abundance of myths and misconceptions about money and personal finance that it can often be very difficult to sift the truth from the false and downright absurd.
You should endeavor to keep an open mind and not automatically believe something that other people say. It is essential that you continually learn about money, and how to use it in the most effective ways. While you will encounter many different opinions, you should have a view that is based on logic and your own assessment of your risk-taking propensity.
About Author: Marina Thomas