Financial Tips: 5 Popular Money Myths Broke People Believe to Be True
When you’re poor and financially challenged, gathering the knowledge and motivation to start saving and investing can be overwhelming. Things get worse when you trust all the financial tips you receive from those around, without even researching their validity first. Check out this article for a list of popular money myths you need to stop believe when you’re looking to build wealth.
I’ve never liked the word poor. It sounds like a mindset. I’m poor, so I’m not able to set money aside. I’m poor, so it’s no wonder I’m living paycheck to paycheck. I’m poor, so it’s OK for me to wallow in self-pity instead of finding a way to take charge of my finances. I prefer broke. Broke is temporary. Broke feels like something that can be fixed. Broke is when you don’t have any money now, but you’re expecting things to get better in the near future.
There’s a problem with being broke as well. It’s depressing, so it can prevent you from seeing the big picture and figuring out how to put an end to your financial misery. To add fuel to the flame, plenty of people pat you on the shoulder, sigh, and offer financial tips based on their own experience; tips you shouldn’t always follow. That’s how money myths get out in the world and cloud our judgment. To avoid falling into this trap, I’ve gathered five popular financial misconceptions and debunked them below.
1. You Need to Pay Down Debt Before You Start Saving
This is a widespread belief that can do more harm than good. While paying down debt is without a doubt important, building an emergency fund at the same time matters just as much. Otherwise, if something unexpected happens and you have no savings to resort to, you will only end up covering your emergency expense with credit, thus accumulating even more debt. Focus on paying down debt in a systematic way while also building up a little emergency savings. To learn more about how to save and pay off debt simultaneously, take a look here.
2. Home Ownership Is a Surefire Investment Strategy
Buying real estate can be a wise investment strategy, but only if you do your homework properly and understand how the market works. While housing prices are below the levels seen during the bubble years in many areas, you also need to consider the increasing costs of property tax and maintenance. Owning a home can be extremely beneficial, but it may not be the best way to invest your hard-earned cash. To learn more about real estate investment, Intercontinental has a great list of industry resources to get you started.
3. Debt Is Not so Bad. Everybody Has It
Some debt is believed to be “good”. However, this is usually debt you accumulate trying to advance your career or learn skills that might lead to a bigger paycheck later on. Think student and business loans. Credit card debt is and will likely always be bad. Credit enables us to purchase things we often can’t actually afford, and fuels the illusion that we have more money than we actually do. Misused, credit cards can lead you down a rabbit hole it will be tough to escape.
4. Carrying a Balance on Your Credit Card Improves Your Credit Rating
Well, no. What does improve your credit rating is using your credit card and then paying your balance in full and on time every month. Carrying a balance means paying interest. Plus, meeting only the minimum payments translates to years of paying interest you could have otherwise avoided.
5. Money Can Ruin Friendships
Talking about money with friends can be uncomfortable. Lending or borrowing money to/from them even more so. However, money doesn’t always ruin friendships. Sometimes it’s wise to ask for guidance from your more financially-savvy friends. Ask them questions about how they negotiated their salaries, started saving for retirement, or crafted their spending plans. They can provide insight that will finally help you get on the right path towards financial success.
False belief about money can negatively impact both your short and long-term financial goals. Becoming financially successful depends not only on how much you earn, but also on how good you are at managing money. Next time you receive advice, trust it only if it comes from reliable sources. Otherwise, it’s OK to doubt it and research the subject a bit before making any life-altering decisions.