There are plenty of myths about money that we all believe. For example, real estate is a sure thing or money doesn’t grow on trees. That’s exactly where it grows because it’s paper! Still, most of us take these falsehoods at their word and follow them to the death. Sadly, this does one thing: creates a negative culture towards our finances. Rather than spending, saving and investing at the right time, we do the wrong things and get into trouble.
It’s almost too clichéd to put in a post because it happens that much. As you read this, you might realise that you’re part of the problem. Do you believe everything you hear? If the answer is yes, then it’s time to change the false ideas about cold, hard cash. It’s not always easy to do because some of your beliefs are set in stone, so get ready for a challenge.
Still, the following tips should act as a guide by making you aware of the major money myths. Here are the lies to remember and dispel.
Banks Are Best
You’re saving for a rainy day, maybe for retirement or an unforeseen circumstance. So, the temptation is to open an account with a reputable bank and put your money in there for security purposes. After all, a bank account is as safe as houses. Well, unless the market goes bust. Then, the institute is only liable to pay up to £85,000 of your savings back to the holder. Some people have considerably more, which means their money is at risk.
Even if you’re nowhere near the threshold, an account is a waste. Why? It’s because of the terrible interest rates at the moment. If you’re lucky, a high-yield ISA will accrue up to 3%. Save £1,000 in a year, which isn’t easy, and you’ll earn £30. Over ten years it’s £300, which isn’t a lot.
Considering banks aren’t reliable or lucrative, you’re as better off pumping the money into an investment. Stocks and shares and bonds seem risky, and they are, but there are ways to curb the gamble. Opt for traditional, reputable brands and steadily build a nest egg over an extended period. Or, stuff it in a mattress because you’ll earn as much as with a regular lender.
Debt Is Bad
Horror stories of people losing their property and being homeless are quite common. Therefore, the majority of us are wary of getting in over our heads with debt, which is clever. However, sometimes it pays to borrow money. It depends on the situation. Say you have arrears, why can’t you use personal loans to wipe them out? As long as the new one doesn’t add to the cycle, then it will provide breathing space. A credit card is an excellent example as you can transfer the balance when the promotion ends.n
Plus, there is a thing as good debt. What you need to do is figure out when it’s necessary and adds to your lifestyle. No one would own a home if they shunned debt completely. As it is, homeowners see a mortgage as worth the risk. Firstly, the payments are cheaper than paying rent for a lease. Secondly, after the balance is cleared, you own the building. A mortgage is good debt as it gives you the chance to build wealth. All you have to do is be financially savvy for 20 years.
Stay away from the bad stuff, but don’t dismiss the good debts out of hand. They can change your life for the better.
A Penny Saved
Is a penny earned as the saying goes. There is no doubt everyone should put money away for emergencies. A rainy day fund comes in handy when a bill pops up out of the blue and you’re living from paycheque to paycheque. This isn’t the myth; the myth is that it helps build wealth. In reality, the way the 1% made their money is through their earning potential. Bill Gates didn’t scrimp and save; he made a billion dollars by creating Microsoft.
Not everyone can follow in a billionaire’s footsteps, yet this is one aspect of life where we are all similar. Do you have a side hustle which you are passionate about and want to build? Is there a promotion on the cards at work? Hopefully the answers are yes because increasing your earning potential is the only way to develop wealth.
Experts suggest focusing on education and skill enhancement as these are the skills for which employers pay a pretty penny.
Pay With Cash
Pay with the green stuff, or whatever colour it is, and you’ll avoid unnecessary spending. Use plastic and it’s tough to tell when you have gone over your budget. This is a myth with some truth to it as it is hard to gauge how much you’ve spent with a credit card. When alcohol is involved, this is particularly true. The problem, though, is what you miss out on by using an ATM.
Once you pay with cash, there is no recourse. Sure, you can return or exchange an item, but you need proof of purchase. With a card, there is insurance included within the deal. Take airline flights. Tickets get cancelled regularly and airlines don’t pay out unless they are at fault. Thanks to the card company, you can claim the money back and not lose anything.
Also, cards offer financial rewards which make them the most lucrative option.
Be Sure
Before you make a purchase, you need all of the information, right? No, not according to Jeff Bezos. Part of his philosophy is to pull the trigger with 75% of the data. The reason for this is simple: he doesn’t want to miss an opportunity. Yes, it might go wrong but three-quarters of the info is pretty substantial.
Therefore, the next time an opportunity arises, don’t be too analytical. Also, don’t buy into the you-should-investment-in-what-you-know theory.
Research it by all means, yet diversify your portfolio by branching out. Don’t you want to mitigate risk?
*Collaborative post*
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