6 Personal Financial Myths to Avoid

by Gina Blitstein · 0 comments

Finances are not a subject in which most people get a thorough, practical education. We’re often left to our own devices and, as a result, make some ill-informed decisions and come to some faulty conclusions. That financial misinformation can cost us big time, leading us down a rocky financial path. Let’s tackle a few common “financial myths” that abound, and discover the truth and some fiscal wisdom along the way.

Myth #1

It’s always best if possible to buy a home so you can deduct your mortgage interest and real estate taxes on your tax return.
There are many reasons why it’s better to buy your residence than to rent (like the opportunity to grow equity in your property), but it’s not a wise financial strategy to lay out money for interest on your mortgage and for real estate taxes solely to be able to have a hefty deduction on your taxes. At best, the tax “break” merely offsets your expenditures.

Myth #2

All debt is bad.
While overextending yourself with too much debt is irresponsible, borrowed money can be used to create wealth when used to begin or grow a business, gain pertinent education and to afford big-ticket items (like vehicles) at low interest rates. Repaying loans is also a means of demonstrating financial responsibility to future lenders and maintain a healthy credit score.

Myth #3

There’s such a thing as a guaranteed rate of return on an investment.
Sorry, Charlie! All investments entail a degree of risk. Investigate any investment opportunity carefully and take all the time you need to determine if it’s right for you. If it sounds too good to be true, it probably is.

Myth #4

You have to spend to save.
Money provides the resources to spend wisely and save. Spending simply to save, however, is irresponsible. Make certain the purchase on which you’re saving is one you would make even without the opportunity to save. Making purchases solely because of a discounted price is frivolous.

Myth #5

Cooking at home is as costly as eating out because I have to buy all those groceries.
Think of cooking at home as an investment. There’s an initial outlay for ingredients, many of which won’t be used up when cooking a single meal, like spices, condiments and assorted staples like rice, dry beans and pasta). Those unused ingredients go into your “bank” of ingredients and will be available at no additional cost for subsequent meal preparation. When planning future home cooked meals, keep your bank of available ingredients in mind so you can utilize that which is already on hand, without having to buy everything for a recipe every time you cook. Assemble a “go-to” list of dishes that utilize what’s already in your kitchen. This website demonstrates just how much food can be prepared for very little money – even breaking out the costs by individual ingredient – emphasizing how inexpensive it can be to prepare meals at home.

Myth #6

“One size” financial advice fits all.
Every individual, family, situation and circumstance is unique. Financial advice, while well-intentioned and generally sound, won’t fit everyone in every scenario. Try to glean the essence of the advice and take to heart what applies to you. Avoid trying to follow any financial advice to the letter; analyze your situation beforehand and customize advice to your unique situation in order to get the most benefit from it.

Every financial myth debunked will increase your knowledge and decrease the likelihood you’ll fall victim to misinformation.

For what financial myths have you fallen? Which have you debunked?

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