The 6 Money Myths That are Holding You Back Financially
It seems everyone has an opinion when it comes to money. Well-meaning friends, colleagues, parents, and other relatives are quick to dispense advice about every financial decision we face. Not to mention the myriads of "experts" making recommendations on the radio, television, newspapers, and online. Some of this advice may prove true, but much of it is just plain wrong.
Let's face it, bad financial advice is everywhere. Some of these "truisms" are merely outdated but others are practically criminal, they are so devastatingly misleading. The following are some popular bits of financial "wisdom" that you should ignore.
MYTH: Cash is king; credit cards are bad
Truth: Using only cash can help over-spenders stay on budget, but as a general rule, using cash to pay your bills has some serious downsides. Cash is untraceable and easy to steal. Credit cards, on the other hand, offer greater protection as well as other benefits such as travel insurance and extended warranties. Credit cards are not the devil's instrument, as long as you use them wisely and pay your bill in full every month.
MYTH: 10% is the sweet spot for retirement contributions
Truth: How much you need to save depends on your age, when you start saving, what other sources of funds you have, and where you plan to live in retirement. A 28 year old who plans to spend his retirement traveling the country in an RV needs a lot less than a 43 year old who wants to live in a gated retirement community in Boca Raton. There is no one-size fits-all approach to retirement savings.
MYTH: Expect to spend two month’s salary on an engagement ring
Truth: Guess which financial guru came up with this piece of advice? None. That's right, this idea was invented by the DeBeers Diamond Company back in the 1980's. Don't let a marketing campaign decide how much you should spend; spend what you can afford.
MYTH: Renting is just throwing money away
Truth: Buying a home can be a wise investment, especially with today's low mortgage rates, however that doesn’t mean it's for everyone. Homeowners “throw away” a lot of money, too. Property taxes, homeowner's insurance, and maintenance costs can add up quickly to more than the rent for a similar property. My advice – unless you know for certain that you are going to be living in the same place for at least four years, and the monthly mortgage payment would be at least 25% less than rent would be, you should strongly consider renting.
MYTH: Education is always a good investment
Truth: It depends what you want to do. Most people assume that a college degree is necessary for a good career, however this is not necessarily true. Many great jobs require only an associate's degree, a few certifications, or even just some experience. Carpenters, medical technicians, realtors, and web developers all make good money and do not require a college degree.
Bottom line: Think long and hard about your future career goals before spending hundreds of thousands of dollars on a college education.
MYTH: Money can't buy happiness
Truth: Actually, according to recent research done at Princeton University, money is correlated to happiness, at least up to an income of $75,000. As income increases, overall life outlook as well as emotional well-being increases as well.
If you're looking for more strong, sound financial advice, we're here for you. Check out our resource of articles and guides to help you with whatever your financial status is.
About Naftali Feig
Naftali Feig holds a bachelor’s degree in finance as well as an MBA.