We all grow up hearing the same financial advice: Spend less, save more and invest early. While these words of wisdom certainly ring true, there are many widespread money management tips that are actually false… or, at the very least, they shouldn’t be automatically accepted as iron-clad truths.
Outlined here are 7 money myths that might be causing you more financial stress than benefit.
Myth #1: Debit is always better than credit
Do you automatically reach for your debit card when making a purchase? While it’s true that paying for expenses with money you already have in your account is often the best choice, there is a time and a place for credit cards as well.
The real deal: Credit cards get a bad rap for the debt trap they can represent, but they may occasionally be your payment method of choice. First, many credit cards offer rewards in the form of travel miles, cash-back systems and other bonuses. Second, building and maintaining a strong credit history is crucial for your financial wellness. A good way to achieve this is by using your credit cards and paying your bills on time. Finally, many credit cards offer purchase protection, which can make them the smarter payment method for big-ticket items.
Myth #2: Buy a home at all costs
The American Dream: Go to college, land the perfect job, get married, and buy a house, complete with white picket fence and two cars in the driveway.
Unfortunately, though, too many people are fixed on that dream without realizing that owning a home might not be in their best financial interests.
The real deal: Buying a home may be a great way to build equity and stabilize your expenses in regards to a place to live, but make sure to consider your options carefully before you jump in with both feet.
For many people, including those who are not yet ready to put down roots or who anticipate a career change that necessitates moving to a new city, renting a home or apartment in the short-term 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 only for rich people
Investing is for people who drive luxury vehicles and have homes in three different states.
Or is it?
The real deal: Anyone with a small pile of money squirreled away can get a foothold in the stock market. A smart investment strategy can be the best way to let your money grow and put you on the track to financial independence. If you’re a beginning investor, look into passively managed index funds for an easy way to start building your wealth. Keep in mind that investments in the stock market are not insured and you are putting your capital at risk.
Another investment option is higher-yielding insured accounts such as Money Markets and term certificates. At Radiant Credit Union, our Money Market Savings Account gives your savings a boost with superior yields! You’ll earn high money market yields on balances of $10,000 and above. Access your funds online and make up to six withdrawals each month. Or keep that money in your account and watch your APY make you money. Funds held at Radiant Credit Union are federally insured by the NCUA, so you don’t have to worry about your nest egg disappearing if the stock market takes a downturn. Learn more about Radiant federally insured savings at: https://www.radiantcu.org/accounts/savings.shtml
Myth #4: My partner manages our finances, so I don’t need to think about money at all
Are you living in blissful financial seclusion, confident your partner is managing the family assets correctly?
The real deal: Every adult should have a handle on the family’s finances, regardless of their partner’s involvement. While it’s fine for one person to be the active manager, both partners need to be capable of managing household expenses and investments. Emergencies and unforeseen circumstances are much easier dealt with when where the money is going to come from is not in question.
Myth #5: Credit cards will get me through any financial crisis
Why would I need an emergency fund? I have credit cards!
The real deal: Depending on credit cards to get you through a financial emergency is the perfect way to dig yourself into a deep pit of debt. Thanks to interest, you’ll be paying back much more than you spend. You’re also more likely to overspend when you pay with plastic…just because you can!
Unless it is unavoidable, credit cards should not be relied upon, well…ever. It’s best to build an emergency fund consisting of three to six months living expenses so you’re covered for the unexpected.
At Radiant Credit Union, we offer special share savings accounts you can designate for any purpose! Open your account, name it whatever you like – for example “Rainy Day Fund” – and make sure you’re covered in case of an emergency. Learn more about our savings accounts here: https://www.radiantcu.org/accounts/savings.shtml
Myth #6: I have enough in my account to cover my expenses so I don’t need to budget
I have enough money; so why bother?
The real deal: Budgeting is for everyone. Without a realistic budget in place, those pulling in a salary in the high six figures can easily spend their way into debt. A budget will force you to make responsible money choices and to be fully aware of the state of your finances at all times.
Myth #7: I’m so young; I don’t need to think about retirement
Starting out in the work world, who can think about retirement; it’s just so far, and so many years, down the road? Besides, who can afford to save for retirement when they’re bogged down with more pressing expenses, like saving for a house and putting kids through college?
The real deal: There’s no better time to start planning and saving for your retirement than right now. The younger you start building your retirement fund, the less you’ll have to put away each month, and the more you’ll save by the time you’re ready to retire. Gift yourself with a comfortable, stress-free retirement by maxing out your 401(k) contributions, and/or opening an IRA or another retirement fund. Start today and let compound interest work its magic!
At Radiant Credit Union, invest in your future with savings products to fit your budget.
- Share Certificates, IRA Certificates, and Jumbo Certificates
- Traditional IRA
- Offers many taxpayers one of the best “shelters for deferring taxes” on some income.
- Roth IRA
- Contributions to a Roth IRA are not tax-deductible. The Roth IRA, including earnings, can be withdrawn tax-free in retirement.
Learn more about our savings products here: https://www.radiantcu.org/accounts/savings.shtml
Your Turn: Which money myths have you bought into in the past? Tell us about it in the comments.