It’s no surprise that all of us want to be financially successful. While success is a relative term, some things are universal, like avoiding debt and working towards having a sizable nest egg.
We’re only human though, and often times can be our own worst enemies. Some of those instances might be our own doing, but in some cases, it’s due to falling for money myths that are prevalent in our culture. Take a look at this list to see where you might be following a money myth.
Buying a House as an Investment
Buying a house is a big part of the American Dream. Saying that it might not make sense in all instances to become a homeowner usually elicits controversy. In many instances, buying a house can be a great thing – but only if it’s right for you.
However, the investment argument is a myth. Yes, it does mean that you do have your money working for you on one level but it can often hold you back. Whether you have to pay PMI because you lacked enough money for a down payment or aren’t certain if you’ll be moving in a year or two, buying a house becomes more of an obligation than an investment.
Avoiding Credit Cards
Credit cards are viewed by many as the bane of society. When you look at the fact that the average credit card debt per household is just shy of $16,000, according to Nerd Wallet, it’s easy to see why many feel that way.
Credit cards aren’t evil though. It’s how we use them that makes them bad. Not only are they vital to building a good credit score, they can also be used to earn rewards through normal spending. Credit cards are nothing to be fearful of, rather when used wisely they can be an important tool in your financial toolbox.
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Thinking Small Costs Don’t Matter
I often hear from readers that small costs don’t matter. We all have needs each month so why sweat the small stuff? It makes sense, but when was the last time you added up all the “small” costs you were allowing to seep out each month?
One perfect example is your cell phone bill. My wife and I were paying nearly $170 per month for our cell phones through Verizon. When our contracts were up we sought out some cheaper cell phone plans and found we could easily save over $100 per month. That’s money we can instantly start saving each month.
Seeing as 46 percent of Americans spend at least $100 per month on their cell phone bills I’m confident many can do the same thing. It doesn’t stop there though, look at what you’re paying on some of the following to see what can be cut back on:
- Cable TV packages
- Car insurance premiums
- Gym memberships
Thinking Longer Payment Terms are Okay
How long is your car payment? Many need to finance their car purchases, but we’re financing them longer. According to Experian, 25 percent of those financing cars are getting 84 month loans; that’s seven years of payments to have a car! Rather than being a wise purchase it simply means one thing – you’re overbuying.
Those lower monthly payments may seem like a good thing. They fit in your budget after all, but they only add up to you paying thousands more for a car.
Waiting to Save Until Next Year
How many times have you either said to yourself or heard someone say, “it’s okay if you don’t start saving money until ‘next year?’” A follow-up question, how often does “next year” actually happen? Probably not very often at all.
Instead of holding off until “next year” start looking for ways to start saving now. Don’t give into the belief that you don’t make enough to save money either. Anyone can save money, they just have to want it bad enough.
A Big Tax Refund is a Good Thing
The average tax return for the 2014 tax year was just over $3,100. It’s often viewed as a good thing to get so much money back from Uncle Sam, but it could be holding you back. Thanks to the current interest rate climate you really can’t use the “interest free loan” argument, but it doesn’t have to stop there.
Just ask yourself what you could do with an extra $250 per month?
- Could it help you pay off more debt?
- Could it help you save for retirement?
- Could it help you save more for your children’s college?
While forced savings can be a good thing, you might be overlooking ways to make that money work for you more effectively.
Buying on Sale is a Good Thing
Saving money is rarely bad, but ask yourself this – was that item you purchased for 25 percent off in your budget? If not, you just spent 75 percent of the rest without knowing where you’ll find the money.
If you like shopping sales, consider setting a specific amount each month to take advantage. It allows you the freedom to buy on sale while also having the confidence you can spend when you find a good deal.
We all make mistakes, but often times we may be acting without realizing that what we’re doing could be holding us back. The key, as with anything financial, is to analyze your personal situation and do what’s best for you.