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 it’s important to understand why these myths are false and the reasons why they became so popular.

I write about personal finance every single day and I’ve heard just about every one of these told to me by one of my readers and it’s always hard to break some of these myths that have been living in people’s heads for years and years.

I really wanted to have a place where I could send all of my readers to learn 21 of the most common financial myths that are out there and why they aren’t true.

21 Financial Myths You Probably Believe

1. You Need Money to Start Saving

I’ve heard this from a ton of people over the years. They talk about how they don’t have enough money to save at the end of the month but what they don’t realize is that saving money will make it so that they have more money available.

If you could put away even $10 a week for an entire year, you’ll be able to save $500 towards an emergency fund that will make it so you don’t need to use credit cards to cover financial mishaps which will help you pay less toward your credit cards each month.

Most people who think they need more money before they can start saving happen to be living above their means at least a little bit and need to start cutting expenses and start budgeting, this way they would have more money available to save.

If you really believe you must increase your income before you can start saving, why don’t you? We’re currently living in the best possible time to start a side hustle because there are hundreds of things you can do online without a ton of investment. Here are just a few of my favourites:

2. You Need To Be Rich To Start Investing

The reason why so many people think this is because almost all of the people who are active investors, are rich! How do you think they got there? People who are investing are able to build more wealth over time instead of just letting their money sit and only earn 1% interest in a savings account.

Before you ever start investing you should learn as much as you possible can because it’s scarier when you start investing are have no idea what you’re doing. If you go with a financial advisor you won’t know how to answer their questions and you’ll probably end up answering wrong or getting walked all over.

If you’re too scared to start investing with big money, you could always start micro-investing using an app called Acorns. This app will connect to your bank account and round up your purchases to invest your spare change. This makes it so you don’t have to invest hundreds of dollars and takes a lot of the beginner stress away. Try out acorns for free!

3. You Only Have One Credit Score

Credit scores are one of those things that everybody has but not everybody seems to know much about. The second you turn 18 you have a credit score, but not only one credit score. There are 3 main credit score calculation companies out there and each company puts different weights on different aspects of your credit score.

You can read about the different things that go into a credit score in this article!

It’s important to understand that your credit score is not going to be the same across the board because if you see yourself with a 750 in one place, you may see yourself with a 690 in another and that can be quite scary, and may cause you to freak out.

4. Buying Is Always Better Than Renting

5. You Must Carry a Credit Card Balance to Increase Your Credit Score

6. You Must Combine All Finances When Married

I’ve heard a ton of people over the years say that you absolutely must combine every penny when you get married, and you should only have one bank account for the two of you. They say that you should know where every single penny is spent. Personally, I think this is a bit unhealthy and makes it so that there’s a chance one person may not know how to handle their own finances.

It is totally acceptable for you to have more than one bank account and have your own money. You can, of course, have a joint bank account for household stuff, but there’s no reason for you to have to have all of your money in one single account. I think this is extremely important because not all marriages are forever and you need to learn how to control money on your own.

7. If You Go Into a Higher Tax Bracket, You Make Less Money

8. You Get What You Pay For

9. If Investments Begin to Decrease You Should Pull Out

10. Cash is Always Best

11. Homes Are Always a Great Investment

My entire life I’ve believed that a home is always the absolute best investment and you can never lose money by purchasing a home because your home will only appreciate in value. Boy, have I learned some valuable lessons. The financial crisis of 2008 showed us that homes can lose thousands of dollars of value in just a few short months.

The reality is that there are a ton of situations where buying a home isn’t going to be the best investment and you could end up deeper in debt than you ever thought you could be. There are still homes from 2008 that haven’t gotten back all of their value, so that’s kinda scary over 10 years later.

Not only can your home lose it’s value from financial situations, but you could also experience a kind of natural disaster that could totally destroy your home and if you don’t have the correct insurance you could never get it back.

You also have zero control over the area around your home and what happens to your neighbourhood! One year you could live in a beautiful suburban neighbourhood and the next year they may build a new highway right next door and your house will drop in value immensely. For these reasons, you have no guarantee that your home will make you any money, and you should think about all these things before buying.

12. Two Incomes Are Better Than One

I’m a huge fan of both women and men working as long as it makes financial sense in their personal situations and sometimes the income you bring home just doesn’t cover your expenses that you incur because of the fact that you’re working! Sometimes, it actually makes more economical sense to have one member of a household work and the other to stay home and care for children and the home, and there’s nothing wrong with that.

If you’re spending money for child care, and gas, and everything else that goes along with working outside the home and it equals more than how much money you’ve earned, then you might want to think about staying home.

13. I Don’t Need Emergency Money, I Have Credit

Did you know that most Americans would not be able to cover even a $400 emergency if it were to come up? That’s just not okay! A lot of people think that it’s fine to just throw these emergencies on a credit card and deal with it later, but this is a myth. It’s going to dig you further into a hole of financial ruin that may take you a really long time to pull yourself out of.

Having an emergency fund is one of the simplest ways you can improve for your finances now instead of waiting until something goes horribly, horribly wrong!

14. You Can’t Go To College Without Loans

Taking out student loans just seems to be the way of life in order to get an education these days. So many people (including me) leave school with thousands of dollars in loans and no real income to start paying them back.

There are so many things you can do in order to go to college without having to leave school with crippling debt and nowhere to turn. You just need to focus on the goal and work your butt off to make it happen. You should definitely start budgeting when you’re getting ready to go to college and while you’re in school as well to make the process go a bit more smooth.

15. It’s Okay To Only Make Minimum Payments

Minimum payments on a credit card bill really grind my gears (wow, did I just turn 80?). What a lot of people don’t know about minimum payments is that the number they give you is just the amount they charged you in interest plus $10. This means that each month you’re only making a $10 improvement to your credit card debt.

If you only make minimum payments you’re going to find yourself paying off the same debt for years and years, so it’s important to not fall into the minimum payment trap.

16. Paying off High Interest Debt First is Always Best

When thinking about paying off debt there are two main camps that people seem to fall into. They either say you should pay off your smallest debt first, or you should pay off your highest interest debt first. Obviously, paying off the highest interest debt would make the most sense mathematically but it isn’t always the best option for all people.

Paying off debt can be really hard and sometimes we just need a bit of immediate success in order to keep us going, which is why the debt snowball method of paying off the smallest amount first works well for a ton of people. If you are more emotional and less based on numbers you’ll definitely find yourself paying off debt with a smallest amount first option will work best for you.

17. 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 really does fly. Before you know it you’ll be 65 years old and looking at your life in a rearview mirror. Starting to save for retirement now is going to help you really 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 compound interest. Basically, compound interest is the concept that you can earn interest on the interest that you’ve previously earned. This is why someone who invests $100 now will have way more money than someone who invests $500 in 20 years, even if no money is added.

It’s really important that you start thinking about investing for retirement now and start planning for your future. You can always add money to your 401(k) through your job, or you can start investing on your own through something like Wealth Simple.

18. Credit Cards Should Always Be Avoided

There are a ton of really popular financial gurus who are entirely against credit cards in any circumstances (*cough* Dave Ramsey). This is a really easy thing to say when talking to people who are bad with money and only use credit cards to build debt and not to their advantage.

This is a huge myth because credit cards can actually be extremely useful to you. Not only can using credit cards increase your credit score which will save you money, you can also use them to gain credit card points and essentially get things for free! You just need to do your research and not rack up a huge credit card balance in the process.

19. The Lower The Credit Limit The Better

I’ve noticed a ton of financial gurus out there saying that you should avoid credit cards entirely and never use them to your advantage, but you can make credit cards do amazing things for you if you understand how they work. For example, a higher credit limit isn’t a bad thing (unless you’re the type that will max out any card you have).

There are a couple things that go into calculating your credit score and one is your credit utilization which just means how much of your available credit are you using. This means that if you have a $1,000 credit limit and you usually carry a balance around $900 you’ll have a 90% utilization.

However, if you have that same $900 balance carried from month to month but a $5,000 limit you’ll have an 18% credit utilization which will be seen better in the eyes of credit firms and lenders. That’s why a lower credit limit isn’t always better!

20. I Earned This

This is a really common sentence I hear muttered by friends and family when they know they probably shouldn’t spend money on something but they’re trying to justify it anyway. Using spending money as a reward for a hard day at work or for finishing an exam in school is not a great way to build great financial habits.

The more you tell yourself that you’ve earned something the more you’re going to justify going into debt to purchase those same things in the future and you may see yourself struggling financially in ways you never thought possible, and you should be focusing on earning your future not earning some kind of new purchase.

21. My Partner Handles The Money, So I Don’t Have to Worry

This is a really common thing I hear from my readers and from some of my newly married friends and relatives. Having a partner who is capable of handling all of your money is an awesome thing, but you should never allow for them to have 100% control over all of your money decisions.

You never know if they may be making the wrong decisions or putting your money into things that you don’t support or want to be spending money on. You need to be an equal part of your financial planning.

This is especially important if anything were to happen to your partner, because you’ll already be dealing with so much grief, and if you have to now take control over all of your finances and have no idea where to start, that may be the hardest thing you ever do.

I really think that a Monthly Budget Meeting is the best way for you and your partner to communicate about what’s happening with your money without it being a stressful situation or causing a fight that you definitely don’t want to have.

Final Thoughts

This post is proof that you shouldn’t believe everything you read or everything you hear. There is so much financial misinformation out there that people just seem to believe without a second thought and these financial myths can actually hurt your finances. If you know any other financial myths be sure to let me know in the comments!