There are many pieces of financial wisdom we all should follow, such as saving for emergencies. Other money truths aren’t so much truth but myths some try to make you believe you must follow. In fact, following these myths may cause you more harm than good. Here are 12 money myths that can actually set you back financially.
Table of Contents
You Should Always Buy a House
We’ve all heard that you have to buy a house if you want to get anywhere in life. The simple fact is personal finance is personal for a reason.
Every situation is different. Perhaps you live in a high-cost-of-living area, or you value flexibility. In either case, it may not be the wisest choice to saddle yourself with a mortgage.
Investing Is Only For People With Lots Of Money
You need a lot of cash to invest in the stock market, right? Wrong. Don’t believe the lie that you can only invest with lots of money.
Investing isn’t only for the wealthy. Most brokerages let you start with next to nothing. Start with $100 and use time to your advantage.
Skipping Daily Coffee Will Change Your Finances
You’ve likely heard about the Latte Factor. Basically, it states the reason why many people aren’t financially stable is due to buying coffee at Starbucks.
The idea is overly simplistic and misses the larger point. You can budget however you want. If you value getting coffee, so be it. If you can do it and stay on track financially, then it’s not an issue.
Life is meant to be enjoyed, not lived in shame because you enjoy a simple pleasure.
Credit Cards Will Take Care Of Your Emergencies
Credit cards are a valuable tool to manage your finances. Rewards credit cards are even better as you get points for your normal spending.
However, they’re not a get-out-of-jail-free card to use for emergencies. That largely only results in debt.
Auto Dealers Give You the Best Rate on a Loan
It’s a common myth that dealerships give you the best rate on a loan. That may be true in some cases, but it forgets that lending is a profit center for many dealerships.
Instead of relying solely on the dealership, it’s best to compare rates from multiple lenders so you can find the best possible rate. You never know, it may be the dealer but it pays to comparison shop.
Debit Is Always Better Than Credit
Debit cards are great if you struggle with overspending and don’t want to incur debt. If that’s not you, debit may not always be better.
You risk losing out on rewards, not to mention the added security that comes with using credit cards. Used wisely, credit cards can be a great tool to use for your money.
You Don’t Need to Share Financial Responsibilities With Your Partner
Many people believe that if their partner manages the joined resources, they can ignore them. That’s simply not the case.
Regardless of who manages the money, both partners should know what’s going on. It helps to ensure both people are heard, not to mention protecting against financial infidelity.
More Income Means More Wealth
Earning more at your job is terrific. However, many people increase their spending to match their income.
In fact, nearly 25 percent of those earning six figures live paycheck to paycheck. If you begin to earn more, it’s okay to adjust spending some, but manage the majority of it wisely to ensure you reach your goals.
You Don’t Need an Emergency Fund
Many people believe credit cards are an emergency fund. Or, they believe they can’t save enough, so why start?
Both are myths. Start with a goal to save $250, then $500, then $1,000. Use that as a base to save even more. You can use an online bank like CIT Bank to increase your savings with a super competitive rate.
You Don’t Need to Know Where Your Money Goes
It’s easy to think that because you have enough money, you don’t need to budget. That’s another myth that can backfire.
There are countless budgeting apps that simplify budgeting for you, and many are free. Find one you like and start using it. Doing so will help identify cash drains and help you achieve your goals sooner.
It’s Impossible to Become Wealthy
Far too many people believe the myth that it’s impossible to become wealthy. That’s incorrect.
You can become wealthy, even on average income. It takes mindful spending, but it also takes finding ways to earn more and create streams of income. Together, this will help you grow and become wealthy.
You Don’t Need Life Insurance
No one likes to think about the end of life, but it comes for all of us. Purchasing life insurance is one of the most loving things you can do for your loved ones.
Better yet, the earlier you buy it, the cheaper it is.
How to Become Rich Quickly
Everyone wants to become rich quickly. While not always possible, there are legitimate ways to become wealthy. Follow these methods and you’ll be on the road to riches.
7 Ways to Make Mailbox Money
Mailbox money is a lot like passive income. You only need a little money to start to receive checks in your mailbox. Pursue these options to grow real wealth.
35 Proven Ways to Save Money Every Month
Many people believe it’s impossible to save money. Or, they think saving $20 or $50 a month won’t amount to much. Both are incorrect. There are many simple money-saving tips that can add up to big savings. You just have to start one, then another, to increase your savings.
101 Ways to Make Money On the Side
There are countless side hustle ideas you can pursue. Not everyone will be a good fit for you. Here’s an exhaustive list of options to make extra money on the side.
How to Start Investing With $500 Or Less
You don’t need a lot of money to start investing. It’s possible to start with several hundred dollars, or less. Take advantage of time and start growing your money as soon as possible.
I’m John Schmoll, a former stockbroker, MBA-grad, published finance writer, and founder of Frugal Rules.
As a veteran of the financial services industry, I’ve worked as a mutual fund administrator, banker, and stockbroker and was Series 7 and 63-licensed, but I left all that behind in 2012 to help people learn how to manage their money.
My goal is to help you gain the knowledge you need to become financially independent with personally-tested financial tools and money-saving solutions.