Money Myths You Need to Forget

Stop listening to these money myths!

So let’s take a moment to go over some common money myths. Some of these are so crazy that I don’t understand how people believe them in the first part but some of them I could see some arguments for. We’ll take a look at a few of them right now and I’ll explain to you why they are myths and why you shouldn’t believe them.

Buying a home is better than renting

This I might not quite say is a myth but the way I feel society feels about it is a myth. Everyone says that buying a home is always better and renting is just throwing away money. This is COMPLETELY untrue. It depends on a person’s situation on what is better, renting or buying. But people who see buying as automatically better than renting just don’t know what they are talking about. First, let’s put it out there and say owning a home is a liability and not an asset. It costs you money to maintain it, you most likely have a loan you pay interest on, and you most likely can’t liquidate it quickly if you have to. Renting is great for many people, no down payments to worry about, maintenance is taken care of, you can usually negotiate short lease terms encase you have to change living situations soon. Don’t get me wrong, I don’t think there is anything wrong with owning a house but it’s a myth thinking buying one is better than renting.

It’s not what you earn, it’s what you spend.

A friend of mine used to say, “you don’t have a spending problem, you have an earning problem.” I always thought it was kind of funny but it’s completely true if you think about it. While it is important to sometimes cut your expenses while budgeting, your more important goal should be increasing your earnings. You only live one life so you should enjoy it and do the things you want, money shouldn’t hold you back.

Money doesn’t matter

I think this is just a lie people tell themselves to make themselves feel better or sound smart to other people. The reality is, money does matter. Look how much it affects everyone’s lives. It causes stress when you don’t have enough to cover bills. You work at a job you don’t like because it pays the bills for your family. The #2 most common reason for divorce behind infidelity is money. Now money won’t make you happy directly but it definitely matters and can alleviate many problems if handled correctly.

You have to be rich to invest/I don’t earn enough to save

I feel like this may be less of a money myth and more of an excuse to not have some financial discipline. It doesn’t take a lot of money to invest, when I started I only put in $300. Granted, I lost it all but it was a learning experience. Also, with tools today you can start investing with nearly nothing. There are apps that will take spare change from your purchases and put it in investment accounts for you. Acorns or Digit are prime examples.

Rich people suck

Wealthy people get a bad rep, everyone seems to think they are mean and bad people but this simply isn’t true. I’ve been friends with and around lots of wealthy people and they are typically some of the nicest people you’ll meet. Sure, there are some bad seeds but that goes for any group of people. This is just a general life lesson but you can’t be quick to judge people.

Carry a small credit card balance to increase your credit score

Who knows where this money myth started but its just not true. Best practice is to pay your balance off in full every month. I personally went from about a 640 FICO score to over 800 in about 2 years and I paid off my balance every month in full. There are definitely some methods to help build up your credit score quickly and efficiently that I will talk about later.

Cash is king

This one I understand and some people have strict reasons on why they only use cash but it’s not always king. Sometimes it is ok to use credit cards but you have to be responsible, it’s worth learning to do though. There are so many great incentives to credit card with points and rewards that it’s a huge benefit to use them. You just have to be smart and pay them off every month and use it as if you were buying the product or service with cash. So be conscious of all your purchases.

Car payments are a way of life

Here is one of those money myths that just leaves you confused, why do people think like this? One of the biggest problems in America is the belief that “payments” are normal. It’s like being imprisoned by the credit companies. While you may need to use a loan to buy a car you have to understand it should only be a tool used to get the car. You want to keep the loan as short as possible and work to pay it off early. A big thing is when you pay it off, that doesn’t mean it’s time to trade it in and get a new one. I know people who literally see paying off a car loan as an excuse to get a new or 2nd car.

I don’t need an emergency fund, I have credit cards

This money myth is crazy. How does that seem like a good idea? Emergency funds are important to every budget, no matter your position in life. It’s important to start right away, even if it’s only $50 a month, just start putting money aside. Using a credit card in an emergency is a bad idea. Since you don’t have the money to pay for it that means you won’t be able to make the credit card payment and you’re going to pay HUGE interest on the payment.

If I get a raise that bumps me into a higher tax bracket, I’ll actually take home less money

This is just not how taxes work, you won’t get penalized in this way for getting a raise. It is the marginal tax rate which means what you are taxed on your last dollar earned. Here are the 2017-2018 tax brackets. So let’s say you got a raise from $37,000 to $40,000, you move up a tax bracket. The only portion that gets taxed higher is the $2,050 that is part of the higher bracket. Anything involving taxes you should consult with your CPA first.

Money Myths You Need to Forget Final Thoughts

Don’t let money myths hold you back financially. The better you understand things and fewer misconceptions you have with financial concepts the better you’re being when trying to hit your goals. Doing things wrong based on money myths will only hold you back. If you have other myths or things you want to check on, let me know and we can discuss them. Hope this article helped you.