Debunking 7 Prevalent Money Myths

Daniella Cressman
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Sharon McCutcheon

Money management can be quite challenging, particularly in today’s consumeristic society. However, it’s important to set the record straight on certain myths that have been circulating for a while now.

1. DEBIT IS ALWAYS BETTER THAN CREDIT

Debit cards are certainly safe bets: You can’t overspend, which is most peoples’ priority. A lot of folks believe that having a credit card can lead them down the rabbit hole of spending far more money than they actually have. However, this is not always the case.

It’s important to keep track of your expenses, but certain credit cards can actually save you money. Check out the Chase Sapphire Reserve, for instance: You can travel for free and get a lot of deals by getting signing up for one. Furthermore, it’s essential to have a great credit score in these days: It will come in handy when you’re buying a home, taking out a loan, or purchasing a vehicle.

Furthermore, it’s actually in your best interest not to pay off your mortgage early so that you can have good debt. This is because you can get a much higher rate of return by investing in an S&P 500: It’s had an annual average rate of about 10% for the past 88 years!

2. INVESTING IS FOR RICH PEOPLE

Many people get rich when they invest. However, the most important aspect of this activity is actually knowing what to invest in. You’ve probably heard the words stocks and bonds thrown around a lot, but simply putting $10 each month into your retirement account is also considered investing, and it’s a very effective strategy at that. Investing in an index fund is probably your best bet, because it often has a very strong rate of return.

3. I’M TOO YOUNG TO START PLANNING FOR RETIREMENT

Actually, it’s best to start saving for retirement when you’re young: You’ll be able to earn a lot more interest if you start saving at 21 than you will if you only put cash aside when you’re 30. Look into Betterment if you want to calculate exactly how much you’d need to invest each year in order to retire at your desired age while having enough to live on.

4. IT’S NOT WORTH SAVING IF I CAN ONLY CONTRIBUTE A SMALL AMOUNT OF MONEY

Every cent counts. If you can only set aside $10 every month for retirement, that adds up to $120 per year and your money often earns interest for a long time to come, so it’s well worth your investment. The experts recommend spending no more than 50% of your income on essentials, saving 15% of your salary for retirement, and keeping 5% of your earnings in your checking account.

5. I KEEP TRACK OF MY MONEY, SO I DON’T NEED TO BUDGET

Everyone can benefit from a budget. Usually, people spend more than they realize. If you think about it, a $5 cup of coffee each week is $20 per month and $240 per year! If you create a budget for yourself, you’ll know exactly where that money is going. You could save these funds for a rainy day or invest them in your business.

6. I NEED TO BUY A HOME AT ALL COSTS

There is a certain notion of what it means to live the American dream, and that often includes living in a big house and having a family. Both are extremely expensive choices, and both should be a personal decision based on your situation. In some cases, buying a home may be a good idea if you are going to live in a certain location for around thirty years, but, a lot of the time, renting is your best option: It gives you a lot more flexibility, and it’s often way more affordable.

You’ll want to do your research whether you’re renting or buying. It’s important to know how much the utilities cost and whether they’re included in your rent, how long you’re planning to live in the area, and how much income you’ll be earning each year. You’ll also want to take into account the income tax that you’ll be charged and how much money you’d like to put aside each month. It’s essential to understand the nuances of your expenses so that you can be prepared for present and future expenses.

7. MY PARTNER MANAGES OUR FINANCES, SO I DON’T NEED TO THINK ABOUT MONEY

It’s wonderful if you’ve found someone who can manage their own finances and yours, but it’s still important to educate yourself about money. In the case of an emergency, you may be forced to start learning more, and it’s always a good idea to be informed when it comes to your expenses and your savings. You never know when you might need this information. Educating yourself also gives you more options and more independence, if, for some reason, you and your partner ended up separating. No one wishes that on any couple, but you never know what might happen in the future, and it’s best to be as prepared a possible so that you’re well-equipped to handle whatever life throws at you.

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Canadian-American author writing about local politics, personal finance, & dining in Albuquerque.

Albuquerque, NM
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