What Money Myths Do You Believe?
There’s plenty of money myths and knowledge is king. Learning about these myths put you in control. Managing your finances doesn’t have to be complicated.
Here are a few common money myths.
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- ALL debt is bad
Well it may be true carrying a balance on your credit card or having a high-interest loan can cost lots in interest but not all debt is bad. In fact, certain types of debt, like home mortgages and loans for investment properties can help you get ahead and accomplish some personal financial goals.
Typically the interest rates on mortgages are much lower than personal loans or credit cards, and usually the interest can be tax-deductible.
Maintaining a good credit score impacts the interest rate you may be eligible for. It’s always a great idea to shop around for the best rates and never borrow more than you can afford.
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- Credit cards are evil
Credit cards have benefits as long as you pay them off to avoid the interest. Some credit cards provide interest free for a certain time frame, allowing you to pay off other loans or credit cards that do have interest.
It’s important to be disciplined enough to keep track of spending and on time payments.
Many credit cards offer cash back or travel rewards. Paying regular monthly bills like utilities and phone can help you rack up points which can be redeemed for cash or other benefits.
Being responsible with credit can help to maintain or even increase your credit score. A good credit score can help you qualify for the best interest rates when you’re ready to buy a house or car in the future.
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- You should put your money in “safe” investments
The #1 rule in investing is to not lose money, but stashing money in “safe” investments may not be the best bet.
So-called “safe” investments can actually be riskier over the long run. The best savings accounts can have interest rates of only 1%. Investing in bonds, money market funds or CDs typically only have 2 or 3% interest or less.
With inflation hovering around 2% to 3% per year, that means your savings might not even grow enough to keep up with rising costs of living. In other words, your money could actually be losing value the longer it sits in these “safe” accounts.
The old saying, “don’t put all your eggs in one basket” applies. In a word. Diversify. Your money should be spread out of different types of investments to maintain a healthy balance.
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- Your expenses will go down in retirement
You may assume expenses will go down in retirement once you leave your job. Expenses like the daily commute, clothing and other work related expenses go away, but consider what you’re looking forward to once you’re no longer working. What other things will you be spending money on?
Now they have more time to do more things. More travel, more hobbies, more shopping, more eating out. Most people put off travel until retirement, which will cost a lot more.
Healthcare is another expense that typically is more expensive as one ages.
Planning for retirement means figuring out how much you expect to spend each year. Don’t assume. Get some financial advice before you decide to retire.
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- The only way to save is to cut expenses
Cutting expenses may provide some relief in the short term, but not only is it difficult to grow that money if you don’t plan, but you’ll feel deprived and may end up spending more.
If you do decide to cut out extras like gourmet coffees, lunches out everyday, subscriptions and so on, then take those savings and put it in an interest account.
Learn to be money smart and let your money work for you.
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Debi
Create A Business To Love
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