There are a ton of common misconceptions out there about how to handle money and how much money you actually need. Financial myths are all around us and there is no great way to tackle them all at once.
I’ve taken 7 super common financial myths that I’ve heard over the years and I’m explaining why they aren’t true to hopefully get your thoughts about money on the right track.
7 Financial Myths You Probably Believe
#1 – I Need More Money To Start Saving
I’ve heard this from a ton of people in my life over the years. “I don’t have enough money to pay my bills, I can’t start saving.” Even if you’re able to just save $10 a week for an entire year, you can put $500 into an emergency fund in just one year! That’s an amazing start.
The people who say things like this are usually the same people who live above their means and buy a ton of things they don’t need. There are tons of places where you can cut expenses and if you put that money into your savings you’ll be headed straight to financial freedom!
If you really believe you must increase your income before you can start saving any amount of money, why don’t you? We’re living in the best time to start a side hustle! There are hundreds of ways you can make money from your home.
#2 – You Need To Be Rich To Start Investing
The reason why so many people think this is because almost all people who are active investors, are rich. How do you think they got there? People who invest are able to build more wealth over time instead of just letting their money sit and not work for them!
The first step to investing, is a time investment. You need to start out by learning everything you possibly can about investing. Why? Because once you put money into an investment you’re going to be nervous and anxious about it every single day. Knowing as much as you can about investing is going to help your nerves.
If you can find a way to invest just $100 every few months, you can definitely start to build wealth slowly but surely! It’ll be the best decision you’ve ever made.
#3 – You Must Combine All Finances When Married
I’ve heard a lot of people over the years saying that you must combine all your money when you get married, and you should know exactly where every single penny is spent. I find this to be extremely unhealthy and it also doesn’t teach anybody how to properly handle their own finances.
It is totally acceptable to have 3 bank accounts between one couple! One personal account for each of you, and a joint account. You can use the joint account and that’s where money is transferred to pay mortgages, bills, school bills, etc. This will teach both members of a couple to handle money intelligently and allow both members of the couple to have more freedom.
#4 – Homes Are Always a Great Investment
My entire life I’ve believed that houses are an amazing investment and there’s never a chance that you can lose money if you purchase a home. Ha! Financial crisis of 2008 anyone?
The reality is, there are a lot of situations where real estate isn’t actually a good investment and you can lose all of your money. There are still homes that haven’t gotten back all of their value since the 2008 real estate crash! There were people who were dependant on the value of their home for retirement and are now not doing well.
There is also a possibility for some kind of natural disaster to completely take away your home. I’ve read a bunch of horror stories about people who had minimal insurance and they lose everything in a hurricane. Devastating.
You also have no control over the area around your home. One year you may live in a nice suburban neighbourhood with a home work $500,000. Maybe the next year, the government will build a giant highway right beside your house and the value will drop!
You have no guarantee that your home will actually make you any money.
#5 – You Can’t Go To College Without Loans
Student loans just seem to be a way of life in order to get an education these days. So many of us (including me) leave college with thousands of dollars in loans and no income to pay them back.
There are so many things you can do in order to go to college without having to leave with crippling debt and nowhere to turn. You just need to focus on a goal and work your butt off to make it happen!
- Related Post: 6 Tips to Graduate Debt Free
#6 – You Won’t Have to Worry About Retirement Before 40
You’ve heard the saying “time flies when you’re having fun”, right? It’s true, time flies. Before you know it you’ll be 65 and be looking at your life in a rearview mirror. Starting to save for retirement now is going to help you build wealth in the long term.
You may not think that investing small amounts of retirement savings now is a big deal, but you need to remember the beauty of compounding interest. It’s a crazy thing when you can earn money from money that you’ve earned through compound interest.
You don’t have to worry about retirement today, but you should. The more money you have, the earlier you can retire and the more comfortable you’ll be.
#7 – The Lower The Credit Limit The Better
Having a $1000 credit limit, but using at least $900 of that limit is not a good thing. If you’re going to hover around $900 for a credit card, you’d be better with a limit around $3,000. Why?
Part of your credit score is calculated using your credit utilization. This takes into account the total amount of credit available to you and is focused on the percentage of your available credit and how much you use.
I really hope this post has shed some light on these 7 financial myths that you probably believe. If you know of any other myths that people believe, leave them in the comments and let me know!
Thanks for reading,