Don’t believe everything you hear about your money. Urban myths, startling yet plausible tales about saving, spending, and investing, exist in personal finance too. They get shared among friends, on social media, and take on a life of their own. Tjat’s why we’re here to debunk such nonsense so you can prosper by following tried-and-true principles of effective wealth creation and asset management.
Myth 1: Social Security is Going Bankrupt
This misguided view is common among younger Americans, but it’s just wrong. Social Security’s trustees expect the program to remain in the black at least until 2019. And while it’s true that the money put aside will be used up by 2033 if nothing is changed, new money coming in from payroll taxes will still be enough to support almost 80% of promised benefits.
Remember, Social Security is a supplemental retirement insurance program and was never meant to be a pension. You will need multiple sources of income to live comfortably in retirement, including savings, investments and perhaps annuities.
Myth 2: Your Home is Your Best Investment
Homeownership still makes sense for millions of Americans. Deducting mortgage interest is a big tax break for homeowners who itemize, and paying down principal lets you stack up long-term savings systematically. But the days of rapidly rising real estate prices are gone. Tighter lending practices and the millennial generation’s lack of interest in owning homes are contributing factors to slower long-term growth in the housing market.
Think of your home as a place to live, not as an investment.
Myth 3: You Don’t Need a Will
Die without a will and you let complete strangers decide how to split up what you own — and maybe even decide who should raise your children. It’s called dying “intestate,” an act (or, failure to act) that leaves the process to state law. Without a will, the court gives first dibs to a spouse and children, followed by other relatives. No family? Then your property goes to the state.
It’s so darned cheap to write a will that everyone should have one, even if only to spell out funeral and burial wishes. Many people can do it themselves for well under $100 using a Web site like LegalZoom or Nolo.
Myth 4: Renting is a Waste of Money
Renting isn’t right for all retirees, but it does offer flexibility and it frees up cash. It’s a myth that renting is throwing money away. In fact, in some cases, it can be a smarter financial move than buying a home.
Consider your lifestyle, your financial goals, and your personal preferences when deciding whether to rent or buy.
Myth 5: You Need a High Income to Invest
Investing isn’t just for the wealthy. In fact, you can start investing with very little money. The key is to start early and invest regularly, no matter how small the amount.
With the rise of online investing platforms, it’s easier than ever to start investing with a small amount of money. Don’t let a low income stop you from investing in your future.
Myth 6: Credit Cards are Bad
Credit cards can be a useful financial tool if used responsibly. They can help you build credit, earn rewards, and provide a safety net in case of emergencies.
The key is to use credit cards wisely – pay off your balance in full each month, don’t spend more than you can afford, and avoid high-interest debt.
Myth 7: You Should Pay Off Your Mortgage as Soon as Possible
While it may seem like a good idea to pay off your mortgage early, it’s not always the best financial move. In some cases, you might be better off investing that money elsewhere for a higher return.
Consider your interest rate, tax implications, and other financial goals before deciding to pay off your mortgage early.
Myth 8: All Debt is Bad
Not all debt is created equal. While high-interest debt from credit cards can be detrimental, low-interest debt like student loans or mortgages can be beneficial if it helps you invest in your future.
It’s important to manage your debt wisely and make sure it’s working for you, not against you.
Myth 9: You Don’t Need a Budget
Everyone needs a budget, regardless of their income level. A budget helps you understand where your money is going and plan for future expenses.
Without a budget, it’s easy to overspend and lose track of your financial goals. Start budgeting today to take control of your finances.
The Truths Behind Financial Folklore
In a world filled with financial folklore, it’s crucial to focus on the facts to secure your financial future. Remember, Social Security is a safety net, homeownership isn’t always the best investment, and having a will is essential. Embrace renting if it suits your lifestyle, invest regardless of income level, and wield credit cards wisely. Debunk the notion that all debt is bad and realize the power of a well-structured budget. By dispelling these myths, you pave the way for lasting wealth and well-being.