Personal finance management can often be challenging — even more so because we tend to avoid talking about challenging things. Let’s face it, saving money is not exactly easy, and we have several myths attached to our personal finance. Having a lot of money is actually very convenient, but we tend to see it in a bad way, especially when it comes to discussions about it. Well, we don’t complain about billionaires like Bill Gates and Warren Buffet, do we? Then why do we feel uncomfortable talking about money? It is time we change all that. It is important for the next generation to learn from us, and if we shy from money-related talks or keep believing in the myths that our forefathers forced on us, we will only lose. Let us debunk some of these myths and create a fresh approach towards money. It will help us save more, and we can have a much more comfortable life that way.
Myth#1 – I can only start saving when I have a bigger salary
Many people go by this myth where they believe that their earnings are too meager for saving, at least at the moment! Once they start earning big bucks, only then can they start saving. This is a terrible myth! Experts cannot emphasize more on the fact that saving money should be a priority early on even if one has a meager salary. The years count more than the amount. You can, of course, increase the amount as you start earning more, but you need to start as soon as you work. For example, if you started saving when you’re, say 25, and went on to put $3000 in your retirement fund (that gave you an interest of 8%), and you keep doing it for 10 years. Guess how much you will have in your account when you retire? $472,000. On the contrary, if you start saving at 35 and keep saving the same amount until you are 65, which is 30 years, then you will have $367,000 in your account.
Myth#2 – I must avoid credit cards
The misuse of credit cards has created the myth that they should be avoided at all cost. But one needs to understand that credit cards are not bad at all, and it is how we use them that matters. If you are responsible and wise enough to use the card, and if you pay your bills in time, there is nothing to fear. In fact, it can become one of your most important financial tools when used properly. It helps you build your credit score which can play a crucial role in your finances. A high credit score makes it easier for you to apply for a loan, brings down your interest rate when paying a mortgage, and even gives you higher borrowing capacity. Just don’t make the mistake of paying the minimum amount for your credit card loan. The interests are often terribly high and will keep you in debt for years. If you know that already, you are good!
Myth#3 – Tax can be saved if I have an insurance policy
Saving tax is important. There are several ways to invest money which can provide enough proof to the government that you are eligible to save tax. To save tax, we always do what others do or what our parents had taught us to do – have life insurance policy. Most people fail to realize that insurance policies are nothing but a trap that forces you to shell out money for a product that you might not even need.
Myth#4 – Equity investments can be risky
Most of us want aim to be financially secure at some point in our lives. Taking risks is highly discouraged by our peers and parents alike. But did you know that it might help you to earn a lot more if you did! Fixed deposits can also give you bad returns if there is inflation. So it is not entirely risk-free! Equity investments can give huge returns as they are associated with the market, however, the risk is bigger here. But there are ways of investing where you can take calculated risks and diversify your money in various kinds of investments. That will give you higher returns and keep it safe, too.
If you are not comfortable working things out yourself, take the help of a financial planning advisor. It will be immensely helpful in the long run and give you exactly what you want. A planner can you tell about all the options you have, and thus, you can make better decisions regarding personal finance.
