Busted Myths About Personal Finance

by Pam on June 24, 2016

myths about personal financeThere’s no denying it; money is one of the most important things in our lives. It dictates everything we do in this world. Therefore, improving personal financial situations should be at the top of everyone’s agenda.

Regardless of any other life factor, we can all appreciate the importance of money. However, it’s a complex subject that most people struggle to gain a grasp of. In most cases, the main source of trouble is that we follow false information. Quite frankly, those financial myths could be doing far more harm than good.

Acquiring a deeper understanding will naturally put you in a far more powerful position. Here are 12 of the most common misconceptions. Learn the truth behind them, and you should be able to boost your finances in no time.

It’s Too Late To Do Anything

Giving up is the worst thing you can do, especially when facing financial problems. Once you’re in a hole, it can feel like it’s almost possible to climb out. But it isn’t. You just need to use this opportunity as a foundation for changing things for the better.

To build a better future, you need to appreciate where you stand and work on rectifying those past mistakes. For starters, using a credit history agency to understand your current score will give you a far better reflection. Before worrying about anything else, though, you should check that your details are factually correct. Errors here could be extremely damaging.

It’s never too late to make a change for the better. Regardless of whether your finances are in good health or bad, maximizing your opportunities is essential. Don’t be too ignorant to take note.

Borrowing Money Is Bad

Most people need a helping hand from time to time, particularly with regards to finances. However, borrowing money can feel like you’re digging an even bigger hole. Of course, it has the potential to make your situation worse. But borrowing money doesn’t have to be a negative feature.

The key is to be responsible with your lending. Under the right circumstances, small personal loans can be a great way to avoid incurring bank fees and other charges. Likewise, consolidation loans can be used to pay off debts on existing accounts. As long as you are well placed to make timely repayments, it can actively reduce the long-term costs.

As with any financial decision, weighing up the pros and cons before any completed transaction is vital. Do this, and you won’t go far wrong.

Credit Cards Encourage Debt

Anyone that’s ever faced financial problems will probably be aware of the dangers posed by credit cards and store cards. Interest rates can be ridiculously high too. If you’re not careful, it can leave you in a rut.

However, it doesn’t have to be that way. Without wanting to be too repetitive, it’s about being accountable for your actions. When used in the appropriate manner, credit cards can actually save money. Moreover, it can provide a safety net if you ever get caught short – for example, losing your train ticket.

Ultimately, credit cards don’t encourage debt. Irresponsible behavior does.

Only Big Savings Are Worth Your Time

We all need to spend cash in our lives. The important thing, however, is to seek value for money. Learning to take greater care with your expenses is one of the most important tasks of all. And it’s not just about the big items.

By now, you should be aware that running price comparisons on car insurance, energy rates, and other big purchases can be very rewarding. But even using coupons to lower your weekly grocery bill can have a telling influence on your overall finances.

Individually, the little improvements might not seem overly important. Together, though, those changes can make the biggest upgrade of all. Don’t underestimate it for a second.

Buying A Home Now Is Vital

Home is where the heart is. For most people, building a happy home environment is the most important challenge of all.

The majority of the population will share the dream of buying a house and enjoying a happy family life. If you are taking this route, then it’s obviously vital that you take the necessary steps to secure the best mortgage rate possible. However, there’s absolutely nothing wrong with renting either.

This is especially true when you’re young as renting offers far greater flexibility in life. Nobody wants to be tied down before they need to be. This is one of the biggest financial decisions you’ll ever make, ensure that the timing is right.

Car Leasing Is For Idiots

Behind properties, vehicles are commonly the second most expensive asset that anyone is likely to possess. Naturally, we all want to drive the perfect car. However, there are many different solutions for financing it.

On the face of it, you might think buying the car outright is best. Whether it’s a cash purchase or bought through monthly finance doesn’t matter. At least it’s yours. But you need to take depreciation rates into account. Over the course of three years, your brand new car is going to lose huge value.

If you’re planning to change your car every few years, like most people do, car leasing could be a better option. OK, you won’t own the car physically. But you’ll be spending far less money on it in the long run.

Spending Is More Important Than Earning

Controlling your finances in a responsible manner is vital to your financial situation. But don’t be fooled; increasing your income is the best way to boost your riches.

It doesn’t take a genius to work out that someone earning $100,000 will be in a better place than someone on $25,000. Of course, you need to be careful not to overspend. Nevertheless, working your way towards that promotion at work and investing in your personal development is key. Essentially, greater levels of income will give you a far greater degree of comfort.

Improving your financial situation has to be a two-way street. In truth, though, the income side is king. If you want to enhance your situation, focusing on this should be the priority at all times.

Paying Experts Is Another Expense

You could be an individual struggling to pay the bills. Or you could be an entrepreneur looking to monitor your finances. Either way, there are various times in life where you may want to consider the help of professional money advice. There’s only one problem: it costs money.

Try not to think like that. You need to consider the full situation. In many cases, hiring an accountant or financial expert will actively save money. If the savings they generate outweigh the cost of their service, it makes complete sense to use it.

Apart from anything else, it will save you time and reduce stress too.

Savings Are Best Left In The Bank

As a responsible person, it’s imperative that you think about the future as well as the present. Those sentiments ring truer than ever thanks to rising life expectancy. Nobody deserves to be uncomfortable in retirement, and growing a sizeable nest egg is key.

It would be easy to assume that bank accounts are the best place for your savings, but it’s not always true. There are plenty of opportunities on the Forex, real estate, and stock markets. If you can find a solution that will see your funds swell at a faster rate, you’d be foolish not to capitalize.

Just remember that investments do come with a risk.

Life Insurance Is A Necessity

There are many financial lessons that are drummed into our brains from a very early age. One of the most common is that all adults should cover their lives. While this is true for most people, it doesn’t suit everyone.

Life insurance is essentially there to protect your loved one, children or other dependents. If you don’t have any, then it’s a bit of a waste. Instead, you’d be better off just concentrating on drawing up a will in case of the worst case scenario.

That’s not to say you shouldn’t have life insurance too. Instead, it’s simply a warning to ensure that you’ve considered it properly. After all, there’s nothing worse than paying for an expense that isn’t needed.

It’s All About You

But if you do live with a spouse or financial co-dependent, you need to appreciate the importance of their influence on your finances. It might be personal finance, but this is a team effort.

Whether it’s applying for joint credit, a joint mortgage, or tracking your spending doesn’t matter. Letting your financial partner suffer will inevitably bring huge problems for you too. Regardless of who monitors the finances, you both need to be responsible at all times. Otherwise, you’ll go down like a sinking ship together.

Money isn’t the most important thing you share as a couple, but it needs to be one of the first items on your list of priorities. Teamwork makes the dream work. Be responsible both individually and as a group, and your finances will be in the best shape possible.

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