“Never spend your money before you have earned it.” — Thomas Jefferson
Not everything that you read about personal finance is accurate. Mainstream knowledge isn’t always the most accurate. Commonly accepted “facts” about dieting, life, love, and fitness, have been circulating through society since the beginning of time. Some of these “facts” are easy to accept, while others come off as a complete myth. I wanted to dispel a few money myths today.
Let’s look at some money myths…
You need money to make money.
This one is a classic. You need time to make money. You need ambition to make money. You need motivation to make money. You need great ideas to make money.
In 2010 you don’t need big money to make more money. Sure it helps to have a heavy amount of capital waiting on the side to invest into a McDonald’s franchise. It helps but it isn’t necessary. Don’t let your lack of funds discourage you from pursuing your dreams. Not everyone is going to be born into money. We al have the ability to start saving up.
A bad credit rating is permanent.
This is only true if you don’t change up your financial habits and take responsibility for your finances. Over time you can surely improve your credit rating.
How? You can start off by consolidating your loans. Then you should strive to pay off your debt (and make payments on time). Once you get things in order and begin to eliminate your debt, your credit rating will slowly improve. It won’t improve over night, but you also didn’t destroy your credit rating over night.
It’s always better to buy than rent.
There is no one-size-fits-all answer when it comes to renting or buying. There are so many factors at play that I will only list three for the sake of brevity.
- How stable is your job? You don’t want to be building the home of your dreams on a salary that comes from an uncertain job. Job stability plays a MAJOR role when deciding on whether you should rent or buy.
- What city do you live in? Depending on the city you live in, it might be much easier to make your final decision. Many of my readers from the Bay Area have stressed the savings that come from renting as opposed to buying in their community. Every city is different and nobody knows your own city better than YOU.
- What are your goals in life? Do you want to start a family? Do you want to travel the world? The guy that plans on starting a family soon might want to settle down and buy a home. The 25 year old bachelor might just need a place to store his stuff while he travels the globe.
Check out the ultimate home buying guide for more detailed information on this topic.
Saving money is pointless because you can lose it all one day.
With this logic in place let’s look at other areas of life: Why bother eating healthy? Why bother taking care of yourself? Why hang out with family and loved ones? Why bother trying to do anything good? Positive’s social responsibility corporate program is just one example of a company that tries to do good things while providing a necessary service, for example. I certainly agree that life is too short to stress about minor stuff. However, there’s nothing wrong with at least attempting to save 5-10% of your annual salary “just-in-case-stuff-happens.”
There are no guarantees in life (aside from taxes and death) so if you’re concerned about losing your money in the future, what will you do when an emergency comes and you need liquid cash to bail you out?
What money myths have I missed?