Pondering over 10 personal finance myths
The most important factor that prevents Americans to be financially secure is the trust in the age old beliefs and deceptive thoughts about money. The advice and guidance financial experts give may work well for many people, but at the same time may not fit in your personal situation. Tips about money sometimes can be life saving and sometimes life destroying. Before deciding on any plan about money spending or saving, you must keep in mind few very common myths about money.
1. You can save money by budgeting
A budget can no doubt help you save money, but it should be given a space as an item in your budget. It’s important to set apart some money as savings.
While budgeting you are likely to set apart a fixed amount for an item. For eg., you might set apart $800 for a refrigerator, chances are you’re going to buy the product just by checking the money and not the item. You might get what you need at a much lesser price.
2. You are becoming wealthy as you are earning more
Generally, as you start earning more, you tend to shop a lot. You tend to buy things that you’ve always dreamt of. You actually ignore to think about savings imagining you’ve a lot of money. This is one of the reasons lottery winners declare bankruptcy soon. It’s important to ensure that higher earnings equals to higher savings too.
3. Money can’t buy happiness
The relationship between people, money and joy is not clearly captured in the phrase “Money doesn’t buy happiness”. The reality is money can buy happiness, specially for lower and middle class people. You can buy things that you actually need, this will of course give you contentment and happiness. If you want to spend quality time with your family, you need to go on vacation. A vacation is only possible if you have money to earn it. Quality time with family gives you happiness, which is the result of vacation that you buy from money.
4. The neediest is the first one to get the financial aid
There are many government aided programs that provide financial aid to people who are actually needy. However, most student based programs are merit based rather than need based. Even high income families can qualify for financial aid programs. This kind of programs makes rich people richer and needy people more needy.
5. Owning a home is better than renting
Keeping in mind today’s financial scenario, it’s better to keep your lifestyle flexible. Change in job or city isn’t a rare thing. In a condition like this, buying a home can give extra mental pressure. You need to sell the house before flipping jobs or city. In a rented house, you have no hassle of managing anything. Also, you never know the estate prices might just go down when you need to sell the house. You might suffer loss also.
6. Red cars are expensive to insure
The truth is the insurance companies are color blind. It doesn’t bother them if your car is blue, black, striped or red. The insurance rate for a particular model, make and age of the vehicle will be the same irrespective of the color.
7. Closing old unused credit cards is good for your credit
Your credit rating largely depends on your credit history wherein your borrowing history and balances on your credit card are shown. It’s a good idea to keep unused credit cards also open. Credit card companies keep a track of old accounts, especially those with good credit history.
8. Saving for an emergency is more important than paying off your credit card bills
The ideal decision should be saving money while paying off your debts. Instead, when you keep saving money without paying debt, you are actually stocking up more debt. The high interest rates are racking up in your account. Your credit ratings are also getting affected.
9. Expenses will cut down after you retire
Nothing like this is actually going to happen. Retirement, generally, means old age and aging people cost more than babies. People theses days don’t have their house completely paid off and prices of all products are getting higher not lower. Hence, retirement doesn’t by any chance means lower spendings.
10. You don’t have enough money to save
There is no guarantee that your income is going to increase or the time when it’s going to happen. It’s important to save some percentage of money with whatever you earn. You must start saving with small amounts.
A thought may be age old but it’s not necessary that it’ll work for you. So, whenever you hear something about finances, analyze your situation then take any action.