5 Money Myths That Hold You Back
Are you preventing yourself from becoming financially prosperous? A false belief system about money can seriously affect both short- and long-term fiscal worth. Ditch these five money myths, and you'll be on the path to prosperity.
Do you hold any of these common, erroneous beliefs?
1. Renting is analogous to throwing money in the garbage.
· Do you regard the money you pay out on gasoline to be the same as throwing it away? How about what you spend on electricity? These expenses are both examples of consumables without lasting value that you consistently purchase. However, these things are required for daily living in our society. Rent falls under the same heading.
· It makes complete financial sense to wait until you are financially stable to purchase a home. Don’t be in a rush and make the mistake of not having the necessary savings cushion to home maintenance and repaid – which averages 3% of the current value of your home, and to protect you in the event of illness of job loss.
· Always remember that the cost of owning a home is more than just the mortgage. Homeowners "throw away" money on items like property taxes, PMI, mortgage interest, HOA fees, and home maintenance and repairs, quite possibly totaling more than you're paying for rent. In fact, for the first several years of most mortgages, you're essentially paying primarily interest with your payments.
. For example, on a 30-year, $150,000 mortgage at 7% interest, your first 5 years of payments would total approximately $60,000. Of that $60,000, you "throw away" approximately $51,000 on interest payments.
2. Higher price means higher quality. More expensive items are not always of greater quality. For example, generic drugs are generally regarded to be just as beneficial as their name-brand alternatives.
When determining an item's value, look beyond the price and examine the true value to you. Does that generic brand pain reliever help your aching back? Don't be so sure that paying extra is really getting you something extra. It makes sense to buy quality with major purchases, for example a car, but always strive for middle ground, i.e., the best quality within your budget. Spend your money wisely.
3. You need to make a lot of money to start saving. It's true that it’s easier to save if you have a lot of discretionary income left after paying your expenses. However, in almost all instances, it is possible to find ways to save with the money you make right now. Sometimes it just takes another (professional) pair of eyes to help you find the possibilities. You can get started immediately, if you want to. Saving is one of the keys to building a healthy financial life, so don’t put it off.
4. Keeping a balance on my credit card will help my credit rating. One of the factors that go into a credit score is the percentage of available credit that's being utilized. So, you're better off without carrying a balance. That's not to say you shouldn't use it; just pay it off monthly. There's no benefit for you to pay interest to the credit card companies.
5. Home ownership is a guaranteed investment strategy. As with other investments, home ownership carries a risk that your investment may decrease in value.
· Although commonly reported data say that housing appreciates somewhere between the rate of inflation and 5% per year, this is not always true. In reality, your home can lose value over time.
What's most important is to adopt a personalized money management strategy that will put you on the right track. Continue educating yourself and always be open to learning more about money. It’s never too late to get on the path to real wealth.