Almost everyone has financial advice to give. From parents, teachers, leaders, and even your kids! But what are some myths and misconceptions that we hold about money from all these spheres?
Let’s attempt to debunk some of the lies or half-truths you’ve been told about saving, investing, and debt management. They could be holding you back from financial well-being.
Myth #1: You Need a High Income to Save and Invest
“Everything is in excess except money; therefore, it should be well managed,” Lailah Giftie Akita. This quote shows that the belief that you will start saving when you have more is only an excuse to hide from reality.
Small amounts saved over time can add up significantly and help you achieve your financial goals. Set aside a percentage of your income as savings. To make savings effortless, you can automate the process by putting standing orders at specific dates.
Myth #2: Investing is Risky and only for the Wealthy
Investing is only risky if you don’t know where and how to invest. The earlier you start investing, the better. You take advantage of low-risk investments like a workplace 401(k) plan or a Roth IRA as a starting point. Even if you set aside $20 a month, it will compound to a considerable amount after a period. As Einstein put it, compound interest is the eighth wonder of the world.
You can also explore low-cost index funds because they provide broad market exposure. Robo-advisors can give you insights on the options to consider without losing your shirt in the process. No matter the amount you earn, you can set aside a percentage for investment.
Myth #3: All Debt is Bad Debt
If you ask the ultra-wealthy in this world, you can only grow your wealth through debt. But does this mean you should be on your way to the bank if you don’t have a loan? Far from it. Good debts like student loans and mortgages help you leverage future income to build your asset base.
Debt, if well managed, can help you build your financial muscle. You should have clear payoff plans and avoid consumer debts, like high-interest credit cards, which could put you in a debt cycle. It’s good to mention that all debts have some level of risk, so it’s worth evaluating whether the risk is worth it.
Myth #4: Saving Can Wait Until Later
Suppose you procrastinate your saving journey for 10 years; that could mean foregoing over $5,000 in yields for saving $50 a month for 10 years in a monthly compounding interest scheme. Although this could seem like a small amount, if you increase the savings, it could mean a significant amount.
Starting now, even with a small amount, helps you build a stronger financial future. And you don’t have to clear your student loan or mortgage to start saving. As the adage goes, the best time to start saving was yesterday; the second-best time is now.
Myth #5: Financial Success is All About Luck
The wealthiest people in the world agree there is an element of luck in their financial success. However, that only accounts for a small percentage of their success. Knowledge, discipline, and smart financial decisions play a critical role in achieving your financial goals.
You can’t solely rely on luck to build lasting wealth. Taking control of your finances starts with financial education and taking action. Investing in books, courses, and forums that guide you on savings, spending, and investing can help lay a strong foundation.
Conclusion
Financial well-being can only be achieved through unlearning and relearning. Some information we hold as the truth could be misleading, holding us back from achieving our goals. So, use reliable sources to make informed saving, investing, and debt management decisions.
The financial professionals at Barnum Financial Group have a large amount of experience with these topics. Contact us today to answer any questions you may have.
