How much do you really know about money? Sure, you know it's the key to realizing life's goals, such as purchasing a home or living out a secure retirement. You probably also know that there is no shortage of money experts who like to dole out advice on how you should be managing it.
What many people do not know, however, is that there are many misconceptions and myths about managing money. We've demystified some of the most common ones below:
Myth #1: To save, you have to make a lot of money.
Not true. Saving money isn't about how much you make, it's about discipline. To be a successful saver, you have to be committed to it. That means, paying yourself first. If possible, set aside a fixed amount for savings each pay period. As you make more money, increase that amount.
Myth #2: Credit is bad.
Untrue again. Having debt is not good for your financial health, but having access to credit is essential for reaching your goals. After all, few people can afford to purchase a home without getting a mortgage. If you use credit cards, pay off the balances each month. This will allow you to maintain a good credit score, which will help you obtain the credit you may need to reach your goals later.
Myth #3: You're too young to save for retirement.
Nope, not true. The fact is, the earlier you save for retirement the better off you'll be. That's due to the power of compounding interest.
Myth 4: Buying a home is smarter than renting.
Not always. The decision to purchase a home depends on many factors, including how long you will live in the home, and your monthly budget. If you plan to live in a home only for a few years, buying a home may not make sense. And with property taxes, insurance, and maintenance costs, buying a home could end up costing you a lot more than renting one.
Myth 5: Always pay with cash.
Again, not always. With credit card reward programs available today, it may make sense to pay with credit. However, if you do use credit, it's essential that you pay off the balance. Otherwise, you will end up paying interest, which will cost you significantly more. Many people pay with credit cards for another reason – to track their expenses more easily. It's not a bad idea, as long as you are disciplined to pay off your balances in full.
These are just a few of the many money myths circulating today. The best way to manage your money is to be prudent, committed, and informed. And that's a fact.
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