Top five money myths exposed
There are a lot of money myths circulating and most of them have a grain of truth to them which is why they tend to stick with us. We’re here to expose some of the most common myths and misconceptions people have about money.
- Cash is king: Paying with cash over credit seems like a great idea in theory, since you are forced to stick to your budget, but always paying cash will mean you aren’t building up any positive credit history. This has a big impact if you want to take out a loan, get a good rate on your mortgage or even apply for another credit card. So long as you pay your bills on time each month, using your credit card can help to build a positive credit score quickly. Another reason to pick credit over cash is the perks you often get with credit cards, like rewards points you can redeem for gift cards, or points for airlines.
- Paying off your HECS debt comes first: Another myth is that you can’t start saving until you pay off your HECS debt. Debt is always a concern, especially for uni students who are job hunting, but the truth stands that financial emergencies happen, and you need to be prepared. Having an emergency savings account is necessary to avoid going into more debt if you need to get your car fixed or your pet falls ill. Paying off debt while saving is the key, with even as little as $20 in savings a week, you’ll be prepared in case something unexpected comes up.
- You need luck to get rich: Rich individuals don’t get rich by random luck, but rather opportunity. Opportunity is achievable as a result of having good daily habits, such as saving money by bringing your lunch to work every day, not spending money on impulse purchases, or even not watching as much TV. Making these changes to save money – and time – will increase the chance for opportunity to come along.
- All debt is bad: Many self-made millionaires are entrepreneurs who started their companies by taking on a huge amount of debt and working extremely hard to ensure success. Good debt is debt that will eventually generate significant profits, whereas bad debt causes financial losses. For example, a home loan can be seen as good debt, because buying a home is a significant investment that can increase substantially over the years.
- A penny saved is a penny earned: This saying has been around for as long as any of us can probably remember, but the myth is that saving is enough to build wealth. A better saying would be “a penny invested is ten pennies earned.” While everyone should have savings in case of emergencies, investing your money will make it grow much more substantially in the long term if you buy things that will increase in value, such as stocks and property. The earlier you start investing, the easier it will be for your money to grow significantly by the time you need it.