4 Personal Finance Myths & Why You Should Ignore Them
Getting online and searching for personal finance tips could greet you with an endless list of instructions, tricks, and how-tos. The excess of information can be overwhelming and some of it is probably even be outdated and no longer correct. There are several personal finance myths that are widely believed to be true; here’s a list of four, and why you should ignore them.
- Myth: Credit cards are a bad thing to have.
Credit cards offer somewhat of a Catch 22 when it comes to personal finance; having a credit card is one of the easiest ways you can build credit, but misusing your credit cards can lead to extreme financial difficulties. That being said, there is nothing inherently ‘bad’ about owning a credit card and using it responsibly. By using your credit card and subsequently paying it off in full each month, you’re building your credit history, and good practices make for great credit scores.
- Myth: Your emergency savings should hold 3 to 6 months worth of expenses.
While this might be a good rule of thumb to keep in mind, the amount of money that you actually need in your emergency savings is enough to cover your expenses until you can find a new job. Whether it will take you 3 months, 6 months, or a year, be prepared for how long it will realistically take.
- Myth: In order to invest your finances, you need to be wealthy.
Absolutely anyone can invest their money, and you don’t need to be wealthy to do it. Investment is one of the best ways to increase your wealth and, dependent on how you invest, it can be one of the safest ways to do so. There are countless ways to invest your money — including the stock market and real estate — so search around to find the best method for you.
- Myth: It’s better to buy a home than rent one.
This one is dependent on things like age, income, and career goals. If you’re young and just starting out at a job that you might leave in a year, it absolutely make better sense to rent a home than purchase one; you want to have flexibility to be able to move for a new job if needed, and you don’t want a house tying you down. If you’re looking to settle down, then it would make sense for you to choose to purchase a home. However, if you have the money and would like to make a real estate investment, you can always become a landlord and purchase properties to manage but not live in. The choice of whether or not to purchase a home is situational to the individual and their future plans.
Originally published at miguelaliaga.org on September 20, 2016.