Talking about money is not something most people do with anyone except family or friends they are closest to (if even that). Money tends to be a taboo subject. And, therefore, the silence has allowed these 12 Powerful Myths About Saving Money to flourish.
Let’s debunk these savings myths and get to the real truth here and now.
1. You Have To Make A Lot Of Money To Save Money.
It is easy to convince yourself that there is no point in trying to save money when you don’t make much money. But, actually there is no better time to start saving money than right now, no matter your income level.
The people who are most successful at saving money are the ones who simply start and stick to it. Even if it is only a few dollars at first.
2. Understanding The Stock Market Is Essential To Saving Money.
Nope, simply not true! First of all, investing in the stock market is not a requirement for effectively saving money. You can use a variety of means to help you save and grow your money.
In fact, using a diversity of tools is smart. The key to savvy money management is to seek advice from credible sources when deciding where to place your money.
Check out these 8 Questions To Help Assess a Financial Adviser from Kiplinger. Good stuff!
3. The Jones Must Be Doing Really Well Financially.
We see their big houses, fancy cars, frequent vacations, and stylish fashion and think that they must be doing great financially. More likely than not, the Jones are actually in debt up to their ears. Yes, some people are spending money that they actually have on luxury items, but many individuals are plunging themselves deep into to debt to finance an upscale lifestyle.
According to a 2017 NerdWallet analysis, U.S. households with any kind of debt owe $131,000 plus. U.S consumers as a whole owe $8.74 trillion in mortgage debt and $1.21 trillion on auto loans.
The grass may look greener, but….
4. If You Don’t Start Saving When You Are Young, You are Sunk!
Not sunk, but you will have catching up to do. Generally, the later in life that you start saving, the more you will have to save per month to meet the same financial goal as a younger person. This principle holds true because the power of time and, in many cases, compound interest.
5. Saving Money Is Complicated.
It does not have to be. I believe we make it so in our minds, because it is an easy, unconscious stalling tactic.
Honestly, starting to save money is as easy as putting your first dollars in a savings account or coins in a jar. Take the money you use to buy something that is NOT a necessity and instead sock it away in savings. Yes, it may take time for the savings to start adding up or for you to build a comfortable emergency fund, but every dollar is a step closer.
6. The Bigger The House, The Better In Terms Of Investments.
This myth has really grabbed hold of many people. The mistaken idea that you should purchase as much house as the bank will give you a loan for because it is a great investment.
The fallacies in the myth include the assumptions that:
- Housing prices go up and not down.
- The main expenses related to homes are simply the mortgage and home owner’s insurance.
- That even if you are paying interest only on your home loan, you still are building equity.
Recent housing bubble busts in places like California and Nevada should be enough to convince us that home prices can become over-inflated and are subject to downward correction. Somehow though, we still think it couldn’t happen to us.
Many people forget significant expenses related to homeownership such as maintenance and repair of home systems, taxes, and moving costs. Finally, if you are paying on an interest only loan, you are NOT building equity. You are not paying down anything on the principal of the loan.
Home ownership can be a wonderful thing under the right conditions. But before undertaking, you should have saved up for a significant down payment and have a full funded emergency fund. Otherwise, renting may really be the way to go.
7. Budgets Really Aren’t Necessary For Financial Success.
Did you know that most financially successful businesses over the long term maintain a working budget? It serves as a roadmap of what the company has going in and coming out monetarily.
The same can be said of individuals who experience financial success for an extended period of time. They are quite familiar with their income sources and their expense outflows. In fact, they find this knowledge key to making their money work hard for them.
8. You Can’t Live For Today And Plan For Tomorrow At The Same Time.
Seizing the day while still planning for your financial future is certainly possible. You just have to understand that their is balance in everything. In other words, you may not be able to travel half way around the world and buy new appliances in the same year.
You may need to spend some on the now and put some away for your tomorrows. All in moderation and steadily moving forward.
9. Everybody Has Credit Card Debt! What’s The Big Deal?
You are correct that lots of people have credit card debt. According to Magnify Money™, in the United States alone in 2018, 122 million people carry credit card debt. The average household among that group carries nearly $8,700 in such debt.
But as you have probably heard your parents or someone else’s say during your lifetime, just because everyone else is doing it, does it mean that you should? Not paying off your credit card balance each month can lead to costly interest charges and penalties. The original price of the items that you charged to a credit card gets that much higher.
You can quickly find yourself in a spiraling circle of debt that can take years to get out of. If you find yourself frequently charging things to credit cards that you know that you can’t pay off within a month, it is time to seriously consider getting rid of the credit cards.
10. Why Save For Retirement? The Future Is So Uncertain.
If we used this excuse throughout our lives, we would never save for retirement. We have got to face the fact that the future, is now and always will be, uncertain. We simply have to push ahead using the best resources and wisdom that is available to us today. Because the future will be here before we know it.
11. Generics Are Not The Same Quality As Name Brand.
A common misconception is that generic products are generally inferior to brand name items. In most cases, this is simply not true. Generics are often every bit as good as brand name without the higher prices. Personally, the only times when I have turned down generic purchases are when I prefer a particular brand name taste or in the case of a few medications.
12. Because Its On Sale, It Is A Great Deal.
Some folks see the sale sign and think a deal is automatically to be had. Not necessarily so, The key is to pay attention to the regular price range that an item hovers in to know when you really are getting a price break.
By separating the myths about saving money from the reality, the path to financial success becomes clearer. To take your financial savvy one step further, check out:
The Organize Your Important Documents Challenge