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7 Top Myths About Money That Keep You From Growing Financially

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Have you been following some old “sage” advice and not gotten anywhere, or may have gotten into more financial trouble? No, not advice from FFL, but from a time when this advice was sound, but times have changed and it is now outdated and even detrimental and can keep you from growing financially.

Let’s go over 7 money myths:

1. Buying a House is a Great Investment

You may have heard that you should buy a house because it’s a great investment and is better than paying rent.

This may have been true back in the time when couples married young, bought a house, had a family and stayed with the same job their whole career. Nowadays, with folks focused on careers, staying single longer, traveling and whatnot – buying a house just isn’t a great idea.

Also, having a house isn’t always an “investment”. Investments are supposed to grow in value over time, if you’re lucky and live in a prospering city and neighborhood, you’ll see your property value increase and you’ll get some profit back when you sell. Many times this isn’t true as home values can be as shaky as the economy and you could actually lose money on your purchase.

A better solution for this day and age is to have a rental property where you can make money off your investment and rent a place for yourself. This way if you need to move, your rental contract is easier to solve than selling a home. The rental property can remain and earn money no matter where you head off to.

2. Investing is for Rich People

How many times have we seen in movies and television that investors are representing as rich folks in suits carrying briefcases and studying Wall Street reports? It insinuates that only rich people are capable of making investments and that’s not true.

The simple fact is that anyone making any type of money can invest, make money and prepare for their future.

Here are some easy ways to get started in investing:

  • Use Acorns – A simple app that lets you invest in several ways – round up your purchases to the nearest dollar and set it aside into savings, transfer a set amount to an investment portfolio, and set money into a retirement fund.
  • Enroll in your employer’s retirement plan if they offer one. Some employers will even match it – free money there.
  • Open a high-interest bank account – find one that offers bonuses for opening a new account, such as getting $300 for opening a TD Bank Premier Checking Account.
  • Use WealthSimple – offers a $50 sign-up bonus
  • Consult with an advisor at your bank.

Start small, pay off your debts and add to your investment amount and keep building it up.

3. Gold & Silver are Great Investments

How many times have we seen those commercials with celebrities endorsing that gold and silver is a great place to put your money? The sad reality is that this is not true.

They claim that gold is a great asset and is safe from the economic up and downs and its value is always climbing. That’s only true if you have invested heavily in the gold market or in gold bonds, but not in physical gold and silver.

Any growth in its value depends entirely on the belief that someone else will pay more for it eventually. Gold is an unproductive asset, it doesn’t contribute to any kind of economic growth.

A pile of gold will stay the same pile of gold no matter what and the only return on investment is the hope that someone will pay more for it than you paid.

If you wanted to play it safe when investing your money, you’re better off with a certificate of deposit (CD). Many banks offer this and the interest rate can sometimes be quite high compared to regular savings.

For example, investing $2,000 at Capital One for 1 year at 2.60% gets you $2,721.44. Buying 1 ounce of gold costs $1,232 and you’ll lose money in one year as it’s predicted to only be worth about $1,060 at the end of 2019.

4. Having a Balance on your Credit Card is Good for your Credit

If you’ve read many FFL posts, you know that this isn’t true at all and that it’s actually the opposite. Having a balance on your card every month only adds to your financial woes.

They might have misunderstood the credit reporting calculation of having your “credit utilization ratio” -what you use versus how much you have to use — below 30 percent.

Thinking if your card’s credit limit is $1,000 then having less than $300 on your balance would result in a having a good score. Report-wise, this is true, wallet-wise it isn’t true. Let’s say you do keep a $300 balance on your credit card that has a 15% APR and a minimum payment of $25 a month is costing you $3.75 a month in interest each month. If you went ahead and paid this off it’ll take 14 months to pay it and costing $27.09 in interest.

Remember this is just on one card – many Americans have an average of 2 or 3 credit cards with the average total of $5,700! You’re better off having 1 card with a zero balance, or paying it off in full every month.

5. My Partner Takes Care of all the Finances, I don’t need to know what’s going on.

This couldn’t be farthest from the truth and can hurt your finances.

First off, how would you know how much you can spend according to their set budget? Hopefully you’re not going over-budget and causing money problems every month. The best thing is to have meetings between the two of you to discuss how the finances are doing and decide together any issues and solutions.

Did you know that couples who regularly talk about money are happier in their relationships than those who discuss finances less frequently? So not only does talking about your finances boost your wallet, but your marriage too.

Secondly, if something happened to your partner, perish the thought, will you know where all your financial information is? Did you know that only 29% of working women and 47% of working men are “financially literate”?

Forget knowing what your bank account number is – do you know how to write checks, balance a budget, or pay off your monthly bills on time?

here are also some financial mistakes people make after a spouses passing – making snap financial decisions, spending too much, trusting the wrong people, and a few other emotional errors.

Avoid this by discussing with your partner all the financial decisions, learning where financial documents are and how to manage the day-to-day money matters, and lastly set up a contingency plan for each of you.

6. Don’t Worry about Retirement while You’re Still Young

Another myth that will cost you in the long run. The truth is you should start planning for retirement as soon as you get a job. This is for the simple fact of compound interest – the earlier you start, the longer your money earns interest, the more you’ll have at retirement.

Let’s compare two different “start dates”, starting at 25 years old and starting at 40 years old with the goal of retiring at 65.

  • At 25 years old you start investing $100 a month in an account earning 6% interest. In 40 years you will have $196,857.22 for retirement.
  • At 40 years old you start investing the same amount, in 25 years you will only have $69,787.66 to retire on.

That’s a $127,069.56 missed opportunity! So, the sooner, the better.

7. Don’t bother with a Savings Account if You’re Struggling

The answer to this is the same as for the retirement fund – the sooner the better. Any amount is much better than nothing.

You should have both a savings account and an emergency fund started, no matter how small. Let’s look at the compound interest again:

  • You deposit $25 a month into a high-interest savings account with 2% interest and in 5 years you’ve accumulated $1,592.44.
  • You deposit $50 a month into a savings account with 0.6% interest and in 5 years you’ve accumulated $3,054.43.
  • You scrimped and cut and are able to deposit $200 a month into the 0.6% interest savings account. In 5 years, you’ve saved up $12,217.74.

Any of those amounts will really help financially in an emergency, so your best option is to search your budget to cut back on any unnecessary spending, pay off as much debt you can and invest as much as you can.

Conclusion

In closing, you should become financial literate and learn as much as you can from as many reliable resources as you can. (And even double-check those resources too).

Shop around for the best financial rates and start investing and saving as soon as you can. Not only will you be financially better off, you’ll be happier and endure less stress.

For other financial advice for a healthy money future, check out these other posts:

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