Keeping a sound financial profile isn’t rocket science. As in most things, the road to becoming financially stable is a process of trial and error. Oftentimes, we hear advice from relatives, friends, and experts on how to invest, get rid of debt, and meet our money goals. While some may be helpful, there are pieces of advice that we’ve been fed with for years that are either already obsolete or simply unwise and impractical. Here are some of the most common financial myths that you should consider eradicating from your money mantra.
Owning a Home is Better than Renting Out
Home ownership has been the end all and be all of many. But the truth is, owning a home isn’t for everybody from a practical perspective. If you see a possibility of having to move cities (or even countries) in the future, tying yourself up to a mortgage loan may not be a wise idea. In addition, home ownership doesn’t start and end with a mortgage loan. Think about the annual land taxes and constant house repairs that owning a home entails. Renting out is best if you want to save up for your future house’s downpayment, which is usually 20% of your loaned amount under a fixed-rate mortgage.
Bankruptcy Solves All Money Woes
Filing for bankruptcy may solve some of your debt problems but it won’t eliminate all your obligations. Student loans, income tax, and child support are just some of the financial responsibilities that would continue to haunt you even if you file for bankruptcy.
Having Debt is Bad
Classifying all debts as bad is also a common financial myth. Not all debts are harmful to your financial profile. Even the largest corporations take a loan (through a bond offering, for example) to fund their expansion or additional investments. Good debt refers to money that you take out on a loan and spend on things that would boost your financial profile over time. Low-interest business or housing loans fall under good debt.
Credit Cards are Bad
Credit cards have gained a reputation of being one of the main causes of financial distress. But with proper spending habits, credit cards can be beneficial. You can build a good credit score if you pay your bills on time, increasing your chance of getting that housing or business loan approved in the future. You can also get great rewards when using the right credit card. These usually come in the form of points or rebates that you can exchange for goods and services for free.
You Can Always Save Up on Sale Items
Any item that you don’t need (or has no use in the future) is always a waste of money regardless if you bought it at a discounted price. So, while scoring that fancy gizmo at 50% off may sound like a great deal, you’d still be throwing away your money if you have no real use of it.
