Many people subscribe to inaccurate beliefs about money, and it’s really not their fault.
After all, almost everybody is having the same beliefs. And these money myths have been passed down for generations.
Someone might’ve told you about these myths, or you might’ve picked it up unconsciously while you were growing up.
Here are 5 money myths that you must change today.
1. I shouldn’t invest because it’s too risky
I’m sure you’ve heard of people who “played with stocks” and ended up losing a lot of money.
Maybe it’s happened to a friend, or a family member. Or maybe it’s happened to you before.
You might think that putting your money in the bank is less risky than putting it in stocks or real estate.
However, you need to know that choosing to save your money is also a form of investment (one that depletes your purchasing power in the long run).
The truth is that the interest rate on most saving accounts barely covers for a fraction of inflation.
And of course, you shouldn’t invest without first learning how to do it properly.
Investing in the stock market is actually one of the best ways for most people to grow their wealth, especially if you start investing early.
However, you should stay away from individual company stocks unless you’re willing to spend some time to learn about investing and the company you’re investing in.
2. The price of something is a good indication of its value
That’s what advertisers want you to think…
In reality, the price of something is an inaccurate reflection of its true value at best.
In the market, price is determined by demand and supply, which is constantly fluctuating. At an individual level, sellers can set pretty much any price they want.
Is a $2,000 product ten times better than a $200 product?
Chances are that it’s just slightly better. But a strong brand positioning and some persuasive advertising allows the first seller to sell something at a much higher price.
The price of something doesn’t always reflect its true value.
Always keep this in mind when making purchasing or investing decisions.
3. I don’t need to start planning for retirement because I’m still young
The best time to plan for retirement is when you’re young.
You don’t have much commitment, and you still have a long time ahead of you – which means that the power of compounding has a lot of time to work its magic.
Also, if you only start planning for retirement when you need it, then it’s too late.
Let’s say you rely on savings alone to fund your retirement, and assuming that you work for 40 years, you’ll need to save about $2,000 a month to retire comfortably.
Some people don’t even earn that much!
Yet another good reason to start investing as early as possible.
Not only would the value of your assets appreciate, you’ll also get passive income in the form of dividends.
4. I don’t need insurance because nothing will happen to me
The time to get insurance is when you don’t need it.
Of course, the best case scenario is when you don’t have to use it. But not being insured is a huge risk to carry.
A sudden emergency can totally wipe out all your financial plans and might even put you in a huge debt.
Accidents are a fact of life, and it can happen to anyone (even those that are always very careful).
5. I can pay that off when I get a raise
Some people buy things with the expectation that their salaries are going to increase in future. And some people have commitments that squeeze their income until there isn’t a single cent left.
If you can’t afford it right now, don’t buy it.
We’re extremely bad at estimating our expenses, so if we plan our expenses to exactly our income, it’s almost certain that we will exceed it.
Always leave at least 10% as buffer when you’re planning your expenses.
Over to You
What do you think about this article?
Do you have money myths that you believed in the past but have since gotten over it?
Share with us in the comments below.
Featured Image Credits: www.dailyfinance.com