5 common personal finance myths busted for smarter money decisions
What's the story
Personal finance is a topic mired in a lot of myths, which can lead you astray in your financial decision-making.
These misconceptions often result in poor financial choices, impacting your savings and investments.
By debunking these myths, you will be able to make more informed decisions about your money.
Here are five common personal finance myths, busted for you to navigate your financial journey confidently.
Rent vs. buy
Renting is always throwing money away
Many think renting equals wasting money, and buying a home is always a better investment. But that's not always true.
Renting provides flexibility and lower upfront costs than buying a home, which comes with huge expenses such as down payments, maintenance costs.
Depending on your lifestyle and financial goals, renting may be more appropriate than buying property.
Credit card misconceptions
Credit cards lead to debt
While credit cards are often perceived as gateways to debt, they can be beneficial if used responsibly.
Paying off the balance in full each month avoids interest charges and helps build credit history.
Plus, credit cards offer rewards programs that can provide cash back or travel benefits.
The key lies in disciplined spending and timely payments.
Savings flexibility
You must save 20% of your income
The idea that everyone should save 20% of their income fails to consider individual circumstances or financial goals.
While saving is important, the percentage should be in tune with your own situation, such as income, expenses, and plans for the future.
Some may have to save more at certain life stages, while others would find 10% adequate for their needs.
Investment accessibility
Investing is only for the wealthy
Investing isn't just for the rich; it's for anyone willing to start small and learn in the long run.
With mutual funds or exchange-traded funds (ETFs), you can start investing with small sums of money.
Knowing your risk appetite and diversifying your investments are key steps toward building wealth from investing.
Budgeting benefits
Budgeting means deprivation
While people think that budgeting is limiting, it's actually an empowering tool to manage finances well.
A budget not only keeps a tab on your spending habits, but it also ensures that your essential expenses are taken care of before you spend on things you want.
More than deprivation, budgeting gives you control over your finances by prioritizing your needs over wants without letting you live completely.