Let’s face it, there’s a lot of conflicting financial advice out there. This conflicting and sometimes misleading advice can make it difficult to make the right financial choices. Should you take out a loan? Are you saving enough? Will you be able to retire? It’s all unclear, which is why we’ve compiled this list of common money myths that may be limiting your success.
Myth: Having a Car Payment is the Way to Go
Many institutions would have you believe a car payment is inevitable. But is it? Believe it or not, it’s possible to save up enough money to buy a decent car using the finds you’d otherwise be spending on a car payment — and keep that interest in your own pocket.
According to Experian’s State of the Automotive Finance Market Report, the average payment for a new car is $523 a month. And if you plan to lease, you can expect to spend that much or more each month for the foreseeable future. But what if you didn’t have a car payment? What could you do with that money? If you invest it wisely, you could enjoy a comfortable retirement. And if you save even a portion of the interest, you’ll be prepared for maintenance and repairs — almost as if you had your own warranty program.
Myth: You Must Consistently Save 20 Percent
The 50/20/30 budget rule says you should save 20% of your income to attain financial security. The first 50% goes for bills; the remaining 30% for wants. However, not everyone has enough money left over after paying bills to purchase all they want, let alone put money into their savings.
Well, there’s good news! Putting away even a small amount of money from each paycheck really adds up. According to Fidelity, putting away $50 per month can add up to $40,000 within 25 years thanks to compound interest and market growth. What’s more, a small nest egg can help pay for unexpected expenses, like a blown tire or unplanned medical bills.
Myth: All Debt Is Bad Debt
In recent years, debt has become a bad word. However, not all debt is bad. According to Debt.org, debt that increases your net worth or future potential is good debt. Student loans, for example, could be considered good debt if they raise your income bracket. Similarly, debt that improves your current financial standing, such as a low-interest consolidation loan, may be considered good debt.
Bonus Myth: It’s Too Late to Start Saving for Retirement
Statistics show many Americans are not prepared for retirement. A little over 30% of Baby Boomers have less than $25,000 in retirement savings, which is not nearly enough. However, that doesn’t mean it’s too late for them to get their retirement plans in shape.
Every little bit helps, and it’s much more desirable to enter retirement with a small amount of savings than it is with zero savings. What’s more, compound interest, employer-match and catch-up contributions can help you put aside more money than you realize for retirement — and faster, too.
Not all financial advice is factual. Especially if it’s not coming from a certified advisor. In fact, much of it can be misleading. Don’t get discouraged, though. Instead, study your personal financial situation and do your homework before making any decisions. The more information you have, the more informed your decision will be.