ST. GEORGE —It is often said: “If you repeat a lie often enough, it becomes the truth.”
Even in 21st Century America, you can find folks who believe that the Earth is flat, that George Washington had wooden teeth or that a penny that is dropped from the top of the Empire State Building can kill someone.
It’s not surprising, then, that many money-related myths refuse to die, no matter how hard well-meaning financial advisors and educators try to drive a stake in them.
Unfortunately, these myths and misconceptions can cause you to make serious mistakes with your wealth that could wind up costing you thousands of dollars.
In the spirit of helping you make better decisions with your cash, let’s debunk a few uncommonly bad pieces of money “wisdom.”
It’s always better to buy a home if you can
“You must always own your home” is one gem of wisdom that won’t go away. The reason this myth has stuck around for so long is in part because homeownership is considered necessary to achieve the American dream; however, if you are young and just starting your career, owning a home could be an albatross that keeps you staying in one place or with one employer too long.
Further, maintenance, taxes and other costs of homeownership can eat into your disposable income and savings.
But if you’re dead set against renting, an alternative might be to purchase a duplex or small apartment building, live in one of the units and rent the others out.
It’s not worth saving if you can only save a little
This is just not true, particularly if you start young. If you only managed to save 15-20% of your paycheck, and your employer matches your 401k, you could save enough to ensure a pleasant retirement.
Plus, putting even a small amount away each month helps you develop a better money mindset and habits that will come in handy as you get older.
You should never have credit card debt
Proving that you can use credit responsibly is necessary if you want a healthy credit score. A good credit score comes in handy later when you wish to purchase a home, rental property or a new car.
If you make an effort to pay off your balance in full every month, it’s perfectly acceptable to use credit cards. And sometimes using a card with a low APR is a good way to spread out payments on a larger necessary purchase over a span of a few months. Be sure, though, to carefully track your spending and avoid emotional purchases. As most of us realize, it can be difficult and stressful to dig oneself out from under a mound of debt.
An emergency fund is unnecessary if you have credit cards.
If recent disasters such as the economic fallout from COVID-19 have taught us anything, it’s that having emergency funds set aside is essential. Even before this pandemic, it took people an average of four months to find new jobs after a lay-off. If you try and live on credit for that many months, you will have a considerable amount of debt that might prove difficult to pay off.
That’s why experts say that everyone should have six months of emergency cash saved up.
I need to put at least 60% of my investment money into stocks and 40% into bonds
There was a time when the “60/40” rule of investing had some merit. The idea was to invest 60% of your savings into securities and 40% into bonds. However, these days bond yields are anemic.
Other safe money vehicles may give you better returns, along with flexibility and safety. Also, if you are within five years or less of retiring, having 60% of your money in the market is not recommended because any loss might be difficult to make up in such a short time.
These are just some of the money myths that could impact your ability to make sound financial decisions. It’s always a good idea to sit down with an experienced, trusted advisor and get a second opinion before making crucial money decisions.
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