There are few personal finance myths which one must debunk at the earliest to grow financially. These myths are potential barriers for people who have less financial management skills.
You might have come across many personal finance advice, from listening to podcasts, social media, surfing the Internet or while chatting with a friend you can get lots of advice on your financial life. But, there are certain things that you don’t agree with easily or don’t want to implement in your life just because you are too lazy to do it. But some personal finance myths are important to be debugged as doing this can bring lots of positive changes in your finances. There are some of those personal finance myths that you should not believe in now.
You need a lot of money to invest
This is one of the most common personal finance myths and is believed by the majority of youngsters. Young professionals who have just started their career always think that they are earning less money and hence cannot afford to invest. But this is a complete myth, an investment can be started even with a smaller amount. For example- one can start a mutual fund SIP only from a small amount of 500. The same is true with life insurance and term insurance, both are kind of investment only and need only 15 to 25K yearly premiums. Investments always yield better results when started early and can help you to save on your taxes as well.
Having an emergency fund is not important
This is again one of the common personal finance myths which can lead to lots of problems in the future if not debugged on time. Creating emergency funds is one of the basic personal finance components. But due to a lack of money management skills and proper knowledge, this gets ignored by many people. Thinking that funds can be arranged easily at the time of requirement is also one of the reasons people don’t care about creating emergency funds. This forces them to borrow money or opt for instant personal loans at the time of emergency. Doing this can cost them much as the personal loan interest rates are very high. So, why not plan for the worst and start creating emergency funds early. To do this, you just need to allocate 5% of your monthly income towards emergency funds.
Investment in precious metals is always a good idea
Investment in gold has been considered to be one of the best investments for decades. But this is actually a myth. If you want good returns from your investment then investment in precious metals is never enough. This is because gold doesn’t witness much appreciation every year. Whereas when you invest the same amount in other investment portfolios you can easily get good returns. For example, investing in fixed deposits or recurring deposits gives an annual interest of 7% and mutual fund interest rate can give you up to 30% of interest.
Credit cards are bad for finances
Credit cards aren’t the problem, but credit card debt is. It is a common belief that using a credit card can lead to financial stress and huge debt, but this can only happen if you are not using credit cards properly. Credit cards offer convenience, security, and huge rewards along with cashback. There are even some cards that come with 0% introductory rates on balance transfers and use. Even rewards credit cards offer everything from cash backs to free travel and best offers to discounts. So, why say no to credit cards anymore.
You should be debt-free before you invest
Many people believe that they should start investing their money only after becoming debt-free. But, this is completely wrong. If you wait until you become debt-free to invest, our finances would have been a mess and you will be at a great loss. Investing early also gives the best results, even if it’s just a few hundred in a month, it’s a habit that you should develop early in life so that you move ahead towards a financially secure future.
Retirement planning doesn’t need focus until the age of 40
If you are a salaried individual your retirement age is 60 or 65. So, do you think planning about it from the age of 40 gives you enough time? Obviously, no! The reason is in the ’40s, the financial responsibilities are at their peak, and you will not give enough time to your investment to perform and grow. Investing a little every month towards retirement right from the time one starts working not only reduces the financial burden but also gives great returns. Also, in 2’0s your financial responsibilities are very less, and hence one can invest more and take advantage of the power of compounding.
All these myths are believable by most of the people. However, decision-making power always lies with you. Also, what is right for one may not be valid for the other, so don’t believe any of the myths until you have proper knowledge about them. Remember, it’s always your financial management skills and habits which lead to financial freedom and success in life.