In this blog, we will take a look at the most common “money myths”. Some of these are things we grow up hearing from parents or relatives, others may come up later in life. The goal of this post is to keep you from making some of these crucial mistakes and set you up for a better financial future.
#1. A house is one of the best investments you can make
Growing up, a popular money myth that is you should buy a house as soon as you are able. Why wouldn’t you want a house? The real estate market only goes up! Buying a house is the best financial decision you can make!
The truth is there are millions of people renting homes in America today. There is an amount of flexibility that comes with renting that appeals to a lot of people, especially when you are young. Signing up for a 30-year mortgage before you are really settled in can be a big money trap. The ability to live in their home stress-free not having to worry about the next time they will have to replace the roof or fix the water heater. Consider renting, at least until you have found a place you want to stay a while, and then be really careful picking out that new home.
#2 You must be rich to invest in the stock market
I hope this one isn’t true. I got my start investing with a cellphone and $100. The technology that is readily available, and likely in your pocket right now, has allowed investing to be accessible to anyone, anytime, anywhere. This myth may have been true decades ago, but now you can get started with as little money as you want. Get started, you will be better off for it.
#3 You don’t need an emergency fund
Did you know that over fifty percent of Americans said that they would not be able to cover an expense of one thousand dollars with their savings? That number is shockingly high. As a rule, we like to see an emergency fund that can cover 3-6 months’ worth of expenses. However, we understand that sometimes that isn’t always possible, but we do recommend saving what you can. Even if it is as little as $10 per month it is a great idea to start building up a savings account.
#4 You can’t get a credit card with bad credit
A credit card, if used properly, is a powerful tool. A credit card can be used to build a good credit score and credit history. It is a great starting point when trying to rebuild a credit score that may be low. Using a credit card responsibly can give a significant boost to your credit score. If you currently have a low score, try using a secured credit card to help build back up your score. Show the lender that you are willing to pay on time and your credit score will slowly start to rise.
Unfortunately, sometimes this does backfire. You must show you can handle debt to get more debt, which can lead to bad spending habits. Just make sure you are staying responsible and not spending more than you can handle.
#5 Retirement can wait
Truthfully, it is never too early to start saving for retirement. At twenty-five years old retirement may seem like something that will never come, but it may be here sooner than you think. Even if you must start contributing just a small portion of your salary getting into the mindset of habitually saving every month is powerful. Investing while you are still young gives your money a chance to grow and accumulate time in the market.
#6 I waited too long
I know, I just talked about investing early and how it is never too early to start saving for retirement. However, it is never too late either! If you missed out on investing earlier in life that does not mean you cannot start. As the saying goes, the best time to plant a tree was twenty years ago but the second-best time is now. If you want to start saving, investing, or making overall improvements to your financial wellbeing, there are plenty of tools you can use to get started. Start as soon as you can but remember that you have to walk before you can run. Start simple and work your way up, you've got this!