Money Myths That Can Secretly Harm Your Finances
When I was 18, I got my first charge card, and the rest is history—and not the sort of history you need to recall. I rapidly fell into the plastic way of life, and when I was 23 years of age, I had piled on $30,000 in charge card unpaid liability to oblige my $20,000 in understudy credits. I was living in New York City scarcely making $30,000 every year so…you could state I hadn’t generally hit the post-graduate walk I was seeking after. As a single parent it’s even more vital that you take personal charge of your money and understand exactly the pitfalls that can help and hurt your finances. Read on to learn about these 7 common money myths from Dave Ramsey the money guru that will change your way of thinking about money.
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Legend #1: Debt is a Tool
Truth: Some tools help you fix things. Other tools help you break things. So in that sense, debt is a tool—it’s a sledgehammer to your financial future.
Another way of putting it: Debt is the enemy of your income. The monthly payments you send to credit card companies are monthly savings you could be putting toward your retirement, your kids’ college, and your down payment on a new house! Your income is your most important wealth-building tool. Don’t surrender it to debt.
Resource – Dave Ramsey
Instructions to get remedy it:
Ideally, don’t let debt accumulate. If you can’t avoid it due to student loans, or a necessary large purchase you absolutely must make then pay it off as soon as you possibly can.
Pay with cash as often as possible and don’t live beyond your means.
Legend #2: Car Payments are a Way Of Life
Truth: If you believe debt is a tool, you’re just as likely to believe car payments are a way of life. The average car payment these days is $504 per month. That’s over $6,000 a year you’re putting into something that decreases in value. Instead, save that money every month for a year and buy a nice, used car for $6,000.
The best car is the one without a payment.
Resource – Dave Ramsey
Legend #3: Lending Money to Your Family Shows You Care
Truth: Loaning money to family members is a terrible idea because it rarely gets paid back. And if it does, the time between always makes for awkward family dinners. When Uncle Jim mentions his upcoming vacation at Thanksgiving dinner, you’re left wondering, If he still owes me $500, how did he just pay for a vacation?
Step by step instructions to get over it: If you have the money, make it a gift. Not a loan.
Lending money is the best way to ruin a relationship.
Myth #4: You can’t go to College without Student Loans
Truth: You absolutely can. Will it be easy? Maybe not. Will it be worth it? Totally. Whether it’s through college-specific scholarships and grants or federal and state aid (that’s aid, not a loan), going to college without debt is completely possible.
And what about paying for college out of your own pocket?
Rachel Cruze talks about college planning all the time. There are alternatives to loans when it comes to funding college tuition.
Many colleges offer work-study opportunities, which are essentially part-time jobs offered on campus. And no one’s stopping you from getting a part-time job off campus. Working as a barista, waiting tables, or even finding a retail job can bring in some cash to offset your school expenses.
The most effective method to get over it: Consider even creating your own side business using your skills—tutor other students, pick up some freelance gigs, or start a pet sitting service. There are plenty of options to generate income while you’re still in school.
Myth #5 – Eventually You’ll Make Enough Money to Catch up on your Retirement
Truth: Prepare for retirement now. But make sure you’re out of debt and have an emergency fund of three to six months of expenses before you start. After that, you’re ready to start building for your future. Don’t put off preparing for retirement if you’re able to start today! According to the AICPA, 49% of non-retired Americans say they aren’t confident they’ll reach their retirement goals.(2) The more you save now, the less you’ll worry later. Chris Hogan explains how to retire with dignity in his national best seller Retire Inspired: It’s Not an Age; It’s a Financial Number.
Myth #6 – You Already Keep Track of Your Money So You Don’t Need a Budget
Truth: If you go online and know about how much you have in your bank account, that’s good. But that’s not a budget. When you just track your spending, you’re looking back at how you already spent your money. A budget looks forward.
You plan how you’re going to spend your money. When you do this, you can prioritize paying off your debt, saving for your emergency fund, and planning for the future. Without a plan, you’re wandering aimlessly through your paycheck.
You don’t have to keep falling for these money myths! Reshape your belief system today and positively change your future.
Resource – Dave Ramsey
Legend #7: Making more cash will take care of your monetary issues.
As a general rule, it doesn’t make a difference how much cash you make. We jump at the chance to give cash a great deal of meaning, when indeed, it can’t really do anything for us except if we instruct it to.
Say you are 30 years of age and you put $25 consistently into a container on your counter for a long time (until the point when you retire at 65).
You’d have $45,500. On the other hand, in the event that you put that $25 every week into a Roth IRA, you would over have $177,000 when you retire.
Once more, it doesn’t make a difference how much cash you have; it is important what you do with it.
Step by step instructions to remedy it: Take out a bit of paper and work out what your fantasy life resembles.
It is safe to say that you are traveling? Purchasing a house? Saving for College? Money related planning isn’t one-measure fits-all. Your arrangement should serve where you need to go. On the off chance that you don’t have a clue about your last goal, you won’t recognize what ventures to take to arrive.
According to Forbes magazine more people are ditching the 9-5 and carving out career paths of their own such as starting their own blogs to the tune of $5,000-$20,000 per month.
Read more about how to be a digital nomad in my book on Amazon!