Let’s debunk some financial myths!
There are many ways to get advice on being smart with money— how you can make money, increase income and manage it thanks to personal finance websites, finance experts, money gurus on television, and feedback from your family, friends, and neighbours. But the information you get from such sources can sometimes make it difficult to separate facts from fiction.
We have gathered some well known financial myths that we will debunk today!
All of the below is for information only. Please always seek professional advice before acting.
We hope the following information will allow you to get a new perspective on your current financial situation.
Myth: Buying is better than renting
Reality: It is a famous myth that buying is better than renting. Renting can have a negative stigma attached to it, with the view that people who rent are wasting their money by paying mortgages of someone else instead of building equity in the property.
But you might not know that changes in the real estate market and taxes can make it hard to own a home. Also, owning a home has less flexibility and comes with many other additional costs, including household insurance, taxes, repairs, interest and more. Therefore, we are here to tell you that buying is not always better than renting.
Myth: Investing is only for rich people
Reality: it is one of the biggest misconceptions that exist. You can make more money when you invest more, and everyone can benefit by investing when they adopt a long term mindset and invest wisely. Just make sure to always focus on the interest rate, your risk appetite, and time to get maximum benefits when it comes to investing.
Myth: You should have 3 – 6 months of income in an emergency reserve.
Reality: The rule of three to six months’ savings has been around for years. However, the fact is that you need enough money to fulfil your financial needs in case of an emergency, such as when you are looking for a job.
Depending on the circumstances, it can take more than six months to find a job. Based on this reality, you may need larger emergency reserves.
Myth: Larger debts should be tackled first.
Reality: Financial advisers all over the country preach the importance of paying off large debts with higher interest rates first. While paying off larger loans is a good idea, there is a need to talk about paying off small debts. According to Harvard Business Review research, people get motivated by seeing modest balances vanish. In addition, paying off small loans can significantly influence one’s sense of accomplishment.
Myth: Money doesn’t buy happiness
Reality: we have often heard that money doesn’t buy happiness. It turns out it does, especially for individuals with low and middle incomes. According to a Princeton University study, individuals’ views on life improved as their financial status improved. In addition, an increase in income also improves the quality of life and overall emotional well being.
Myth: Credit cards are the gateway to debt.
Reality: Credit cards can cause problems for overspenders; therefore, the idea of avoiding them is reasonable. But credit cards are not always bad. On the contrary, you can use them to achieve your financial goals, such as paying off debt and improving your credit score. To prevent interest, you should always make payments on time and in full each month.
In addition, some credit card providers offer loyalty programmes and rewards through which you can earn points when you use them. As a result, credit cards can be a good funding source when you use them wisely and make repayments on time.
Myth: You can save for retirement later.
Reality: Most young adults, especially those in their twenties, do not prioritise savings because of the fact that there is a long time to retire. However, it is never too early to start planning for retirement. You can even start with 5% of your salary. One good rule of investment is that the longer you invest money, the more time it has to develop and earn you more.
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