While there’s plenty of advice to be found on how to manage your money, not all of it holds up over time. Some financial principles will always apply, but many of the “truths” from the last decades have become myths that do more harm than good. If you’re holding onto these outdated beliefs, you might be keeping yourself from hitting your financial goals, whether you are saving for a house, planning for retirement, or just trying to keep your budget afloat.
In this rapidly changing economy, it’s time to challenge a few of these old-school ideas. Busting these myths can help you make smarter, better-informed decisions with your money.
Renting Is Throwing Money Away
Homeownership has long been the American dream, but it’s not always the smartest financial one. Depending on your lifestyle, career mobility, and local housing market, renting can actually be a smart choice. Some people overestimate the benefits of owning a home, overlooking the costs of property taxes, maintenance and mortgage interest payments. Renting can sometimes give you more flexibility, and less financial stress—that’s hardly money wasted.
Credit Cards Are Bad News
Credit cards aren’t inherently evil — this myth likely comes from fear of debt. In fact, if you choose to use credit cards responsibly, you can help build your credit score, earn rewards, get access to insider offers and perks like travel insurance. The trick is to pay off your balance in full every month.
You Need to Be Rich to Invest
Investing is a luxury for the wealthy, so many people think – but it’s not. Thanks to apps like Robinhood and Acorns, it’s never been easier to get started in the stock market. A 2023 report by Statista has it that now almost 60% of Americans are stock market investors, and low cost platforms have made this possible. You don’t need millions, sometimes $5 will start the ball rolling.
Car Payments
For years, people have been treating car loans as a regular living expense like groceries or utility bills. Do you really want to be trapped in those monthly payments forever? If you don’t need a car, consider buying one outright or paying off your existing loan as quickly as possible. But that freed up cash can go towards something else, like retirement or a rainy day fund.
Keep Cash in the Home for Emergencies
Stashing cash under your mattress may seem old fashioned and safe, but it’s neither practical nor secure. It eats your money down due to increases in price over time or inflation. Physical cash can be lost or stolen, plus. Experts suggest, however, that you place your emergency fund in a high yield savings account, where it’s safe and can earn interest.
20% Downpayment for the House
This is almost gospel, but it isn’t always true. First time buyers, however, put forth an average down payment of around 9% of the purchase according to data from the National Association of Realtors. 20% can get you off private mortgage insurance (PMI), but it’s not the only way to own a home. In fact, waiting to save that much will likely cost you more in the long run because home prices are rising.
All Debt Is Bad
Not all debt is the same. High interest credit card debt is a financial sinkhole, but other types of debt — like student loans or mortgages — are frequently seen as investments in your future. Americans with college degrees earn about $1.2 million more over their lifetime than those with just a high school diploma, CNBC reports. In fact, used the right way, debt can make you more financially stable.
Retirement Planning Can Wait Until You’re Older
A lot of people fall for this myth when they’re young and they believe they have all the time in the world. The earlier you start, the more the investment will benefit from compound interest. For instance, suppose a 25 year old saves $200 a month in a retirement account that earns 7%, they’ll have over $500,000 by 65. Waiting just 10 years reduces that amount nearly in half. In this case, time really is money.
The Only Way to Build Wealth Is Your Salary
Don’t just count on your paycheck to build your wealth. Rental properties, stock dividends, side hustles — many of these passive income streams are powerful ways to make you more financially independent. Rental property is a common and lucrative way to earn ongoing income outside of your regular job.
Never Close a Credit Card Account
Closing old credit cards can hurt your credit history, but it’s not always a bad thing—it could save you from high annual fees or keep your finances simple. Though the effect on your credit score is often temporary and not as bad as many assume, it can be a blow to your score that goes by the name of a ‘derogatory mark,’ NerdWallet notes. Before you decide, evaluate your overall credit picture.
You Don’t Need Life Insurance If You’re Young and Single
This myth is ignoring the fact that life insurance is usually less expensive when you’re younger and in better health. On top of all that, if you have debts or you want to leave something behind for loved ones, then having a policy can make a world of difference. Even if you don’t think you need it, it’s worth considering early.
Buying in Bulk Always Saves Money
Yes, purchasing 50 rolls of toilet paper may be a steal, but bulk purchases aren’t always the way to go. You can even overestimate your needs and waste food or other perishable items if you’re not careful. Consumer Reports recommends that before you start loading up your cart, you check the unit prices and make sure you will really use everything.
Don’t Invest in the Stock Market as an Average Person
Investing is intimidating, but it’s not a gamble when done properly. By either diversifying your portfolio or investing for the long term, the risk is reduced. Don’t let fear keep you out of the game.
Disclaimer: This list is solely the author’s opinion based on research and publicly available information.
7 Money Rules The Rich Don’t Want You To Know
7 Money Rules The Rich Don’t Want You To Know
31 Forgotten Household Items from the Past
The blueprint of the quintessential American home has undeniably evolved over the decades. Whether you attribute it to technological leaps or the shifting sands of aesthetic tastes, the fact remains: items once deemed household staples have now drifted into obscurity.
31 Forgotten Household Items from the Past
15 Common Mistakes That Unknowingly Make Your Home Look Bad
A home should be a sanctuary, reflecting personal style and comfort. However, minor oversights and everyday habits can inadvertently detract from its appeal. Understanding these common mistakes is crucial for maintaining an inviting and well-kept home.
15 Common Mistakes That Unknowingly Make Your Home Look Bad
