With so many financial news and articles out there on the internet, how do you seperate between myths and facts?
When it comes to money, everyone has their own personal opinions on it – this includes your friends, parents, or spouse. Hence, we would advice that your best bet is to conduct your own financial research. Keep in mind that listening to misleading advice may harm your financial well-being as these widespread financial myths can negatively affect both your short and long-term net worth.
To help you out, we’ve place the spotlight on the most common financial myths out there and sort fact from fiction. Let’s get into it.
It’s easy to assume that you’ve got a life ahead of you when you’re young. Hence, many of us think that saving for retirement can be put off until later. However, truth be told, you’re never too young to plan for retirement. In fact, the earlier you plan, the quicker you can achieve financial freedom and retire – here’s why.
The bright side of being young is having fewer financial commitments such as mortgage payments and heavy household expenses. Keep in mind that eventually, you’ll have bigger financial obligations to manage as you grow older. Therefore, while you have more financial room to save, there’s never a better time than now.
Furthermore, being young has its upper hand. If you ever heard about how compound interest works – you should start taking advantage of it. As compound interest earns you money over time, the sooner you start, the more you’ll have. Can’t imagine how it’ll work? Here’s an example:
Let’s say, at the age of 25, you’ve started setting aside $1,000 every year in an account with an interest rate of 4% p.a. By the age of 35, you would have earned $2,486.35 in interest – bringing your savings up to $12,486.35 in total. Now you see why you’re never too young to start planning for your retirement?
We’re going to break this myth once and for all! For starters, owning a credit card actually benefits us more than it does harm. Not only is it convenient and safe, you also won’t have to worry about losing all your money at once in cases if you’ve misplaced your bag or lost your wallet. On top of that, credit cards are handy when you have to pay unexpected costly bills such as a car repair or buying an emergency flight home while you’re travelling. That’s not all! Cardholders also get to enjoy financial perks and benefits such as in-store or online promotions, dine-in or takeaway offers, as well as travel points. Of course, these perks depend on the benefit agreement between you and the card issuer.
To clarify, debts associated with credit cards are usually due to recurring overdue bill payments. Hence, all you have to do is spend within your means, pay your bills on time and in full to avoid any chance of going into debt.
A lot of us believe that ,in order to save, we need to earn ‘enough’ to do so. What we don’t realise is, that even just putting $10 to $20 in the bank monthly could be considered as savings. Although it might not seem a lot, putting aside $20 monthly saves you at least $240 a year compared to nothing. The key point here is not how much you save but rather, how you should cultivate a good saving habit.
For instance, even if someone is earning $100,000 a year, without a good saving habit, there still won’t be ‘enough’ to save. Reason being, there will be more temptations like material things and experiences they would want to spend on. If this habit gets out of control, you could still end up having nothing in your savings at the end of the month. Compared to someone who has been practicing the saving habit, they’ll naturally place a fixed amount of cash into their savings account monthly and only spend within their means. Of course, you may save a smaller sum of cash in the begining and slowly increase the amount as you continue to progress in life.
Instead of burning through your expenses and only saving what is left at the end of the month, try putting aside some money for savings immediately when you’ve received your salary. If you’re unsure how much to save, the 50/30/20 per cent budgeting rule is great for beginners. 50% of your income should be allocated to your needs, 30% on your wants, and 20% for savings. Alternatively, you can try out our savings calculator here and we’ll do the calculation for you!
And there you have it, the most popular financial myths debunked! We hope that this article has shown you that not all of the ideas you have about money are true. It’s always best practice to do your own research and make decisions based on facts, rather than myths and misconceptions. Be sure to keep yourself informed and start practising good financial habits today! After all, you’ll only have yourself to thank when you profit in the long run!
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