No one wants to waste money, and because of that fact, some people can be a little too cautious about finding new ways to improve their bottom line. When you understand your financial position fully and learn what money myths are holding you back, you might be able to make better decisions. Check out these seven common beliefs about money and discover how they may be costing you a fortune.
Myth #1 Saving Is the Key to the Future
Although putting money into savings for the retirement or other eventualities is important, it can only take you so far. When you've mastered your budget and are paying bills, saving each month and spending responsibly, continuing to just make deposits to your savings account is not going to achieve much in the long run. Eventually, you have to take those savings and invest it in something that will show more growth than just the minuscule amount of interest the banks offer.
Myth #2 Having a Credit Card Balance is Good
There is no double that having access to credit is key to financial success. With no credit history, you won't be able to get loans or buy a home. But what lenders are looking for when they check your credit is a strong history of making payments on time. They don't want to see a large, stagnating balance on your credit cards that may ruin your income-to-debt ratio. The best strategy for credit cards is to use them but also pay them off each month.
Myth #3 Working During Retirement is an Option
Many people believe that if they run out of money during retirement, they will just get a job to make ends meet. But it is not that simple. You never know whether you will be physically able to take on a job in your 70s. Plus, it can be difficult to get hired the older you get and the more unfamiliar you are with changing technologies. It is always a safer bet to save and invest more when you are younger than try to earn lifestyle-sustaining income after retirement.
Myth #4 Money Is Safest in the Bank
Money is always safer in the bank than buried in your backyard, but bank accounts are often not that advantageous. For example, savings accounts generally earn almost nothing in interest. Plus, checking accounts are vulnerable to identity theft via stolen debit cards. Outside of your emergency savings, the better place for funds you have saved is in investments. Choose low-risk investment options that offer a steady payout over the long-term, and you'll end up earning more money.
Myth #5 Life Insurance Is Mandatory
Life insurance is a good idea for people who have dependents or own a business that depends on them. It is also a good idea for stay-at-home parents. But a single person with no children doesn't necessarily need life insurance since no one is depending on his or her income to make ends meet.
Myth #6 Investing Is for the Rich
The options for investments vary widely, so even people who don't earn a lot can benefit from the process. With a just a few hundred dollars, you can start building your nest egg using one of the many online-only options that are available. It is never too late to start saving for the future, so these opportunities are worth looking into.
Myth #7 Cash Rules All
Although using cash to pay for most small purchases is a good personal policy to have, it does have its drawbacks. If you want to be able to make large purchases in the future, such as a home, you'll need to have a history of good credit. That means buying items on a credit card. Just be sure to pay that card off each month.