There are many personal finance myths out there that are constantly floating around. This is not good though as it can lead to someone encountering mounds of debt because they took in the wrong information.
Below are four personal finance myths that you may have heard before:
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1. You need a lot of money in order to save any money.
While this may seem true to many of you, it is not the case. There are countless wonderful true stories out there about families who are able to save for retirement on a low-income. With more money usually comes more problems, do not forget about that.
If you budget well enough and cut your expenses, you should be able to save at least something. It all depends on how bad you want it.
2. You only need to pay the minimum payment.
This is a personal finance myth that I have heard all too often. You need to pay more than the minimum on your credit card bills or you will have to pay interest fees. This can add up so quickly and you can feel your debt spiraling out of control.
If you have other loans as well, such as a car payment or a home payment, you may want to pay more than the minimum monthly payment as it can help you pay off your debt more quickly.
3. You need to have a balance on your credit card in order to improve your credit score.
Nope, this is false! I’ve been able to improve my credit score year after year and I have never carried a credit card balance. There is absolutely no need to pay interest charges or late fees in order to work on your credit score. That is just a disaster!
Instead, pay off your credit card balance in FULL each month. You can still improve your credit score and it will be higher this way than if you took part in the myth.
4. Renting means you are wasting money.
There are some people out there who believe that all renters are just throwing money away. However, that is not always the case! There are many positives to renting your home.
There are several instances where renting may make much better sense:
- You do not plan on living somewhere for very long. The rule is usually if you plan on living somewhere for less than 5 years, then renting is probably want you want to do. This is because there are a lot of costs associated with buying that may make buying more expensive.
- You live in an area where renting is much cheaper. There are many areas where renting is much cheaper and you may not be able to afford to buy a home. If you cannot afford it, then do not rush it! Your time will come.
- You hate all of the responsibility that comes along with renting. Just think about it. You are responsible for maintenance such as a broken furnace, a hole in the roof, the lawn, and more. Not everyone likes having to worry about that. Renting is much more carefree.
What personal finance myths have you heard?