Today we’re going to expose 4 money myths that you might have learned as a kid, and guess what? They could be hindering your money mindset! 😱
A field of study called “behavioral finance” is now combining psychology into the mix to uncover the reasons behind our money mistakes.
According to researchers, belief in “money myths” is to blame for many of the fumbles we make with our finances.
This myth-believing is even a threat to our financial future, and the culprit is none other than ourselves!
This post explores money myths that are hurting your finances.
🤫 Let’s fill you in on the secret
Myth #1: Owning is always better than renting
You may have heard this before, but let’s set things straight: Rent money isn’t different from your other living expenses. 💰 So, that means you can’t go around saying that the money you spend on food or gas is wasted, right? 🍔⛽️
These expenses might seem like they disappear into thin air, but guess what? They are essential for your daily activities! Unless you paid cash for a home (hats off to you, if you did), you’ve got mortgage interest to deal with, plus other expenses like property taxes, insurance, and maintenance.💸💼
The truth: In the first five years of paying off your mortgage, you’re mostly throwing money at interest. As an example, let’s consider a 30-year, $250,000 mortgage at 7 percent interest. Your first 60 payments would total around $100,000. But wait for it… out of that, you’re basically “throwing away” 🗑️ about $85,000 in interest payments alone. Ouch, right?
Now, you might be thinking, “Doesn’t the home mortgage interest tax deduction save the day?” Well, not quite. It’s definitely helpful when filing your taxes and figuring out if you can afford a mortgage, but it shouldn’t be the sole reason for buying a home. The money you do save from the deduction is simply a reduction in the costs you’re already paying.
So, while tax deductions are 👍, they aren’t the end-all-be-all when it comes to homebuying decisions. Keep this in mind as you ponder over your living expenses and consider your housing options.
Myth #2: A near-perfect credit score will get you the best loan rate
Turns out, every expert, credit bureau, and loan officer has their own opinion on what makes a credit score excellent. And don’t even get me started on that “near-perfect” label. Does it mean “close to excellent” or “perfectly flawless”? 🤔
Turns out, different loans and lenders have different standards too. But fear not, my priceless peeps! Generally speaking, any credit score in the mid 700 range and up is considered excellent. 👏💰
But here’s the kicker: once you reach the high end of the credit scoring game, those extra points don’t make a big difference in loan terms. Even if your score is soaring past 800, it’s not going to give you any major loan perks.
But hey, those extra points aren’t completely useless! 🙌🛡 They can actually act as a buffer when a negative item shows up on your credit report. For instance, imagine maxing out a credit card (oopsie!). That could ding your score by 30-50 points. 📉 If you have an extra 50 points to spare, they’ll absorb the hit and minimize the damage.
There’s no “magic number” when it comes to credit scores. So don’t stress yourself out trying to get that perfect score. 🪄✨ Instead, understand that lenders consider more than just your score. They look at your overall credit file, any negatives lurking in there, and your income to determine if they should lend to you.
So, if you’re aiming for that dream loan, make sure to rock a high credit score, maintain a clean credit file, and flash that cash-flow!
Myth #3: You need to earn more to save more
Your ability to save isn’t determined by how much you make, but by your rock-solid discipline to sacrifice and set aside a percentage of your spending.
No matter how big or small your savings, the earlier you start stashing cash and earning that sweet, sweet interest, the more time you’ll have for the magical powers of compound interest to work their magic. 🪄✨
Thanks to online savings accounts, you can kickstart your saving game with even just a little bit of money. 📱📈 While traditional bank savings accounts might offer low interest rates, High Yield Savings accounts got your back with more competitive rates that actually make a difference. It’s all about making your money work for you!
So, here’s the truth: saving isn’t some random amount you pick out of thin air. It’s all about that discipline, my peeps. Sacrificing a bit of your spending now sets you up for financial security in the future. It’s all about deciding how important that security really is to you. 🤔
Busting these myths is the key to taking action, changing your money mindset, and securing that financial bag. 🛡💰
📰 In the News:
The author of ‘Happy Money, Happy Life’ says you can afford everything you want — but there’s a catch.
Jason Vitug, the author of “Happy Money, Happy Life,” wants you to know that you CAN have it all. Yes, EVERYTHING you want! There’s just one catch: you can’t have it all at once. That’s where “saving purposefully” comes in.
According to Vitug, saving money is all about securing that inner peace, baby! 😌 As a certified yoga and breath work teacher, he knows what he’s talking about when he says that saving with purpose gives you an optimistic view of life. And when you give your savings a specific goal, you’re actually honoring your investment.
But how do you get started with this “saving purposefully” stuff? Let Vitug break it down for you with his 4 steps:
Saving for income disruptions
No one wants to face a financial crisis, but saving for potential income disruptions is crucial for happiness and financial security. Building an emergency fund is a smart move to protect yourself from sudden expenses or unexpected job loss. Set up an emergency fund in a high-yield savings account to earn more money on your savings.
Saving to limit credit use
Let’s face it, we’ve all been tempted by shiny credit card offers. But going into unnecessary credit card debt should be avoided like stepping in gum on a hot summer day. Especially with today’s high interest rates! Use credit responsibly, and try to avoid carrying a balance from month to month.
Saving for wealth creation
Saving purposefully leads to making your money work for you, and that’s the ultimate way to live financially free! Sounds great, right? This might involve a side hustle, rental property, or even royalties from a book. Get creative, and let that money improve your life.
Saving for purchases
Saving purposefully allows you to afford the life you want in a sensible way. Set savings goals, plan for expenses, limit credit card debt, and save money for the stuff you really want.
Saving on purpose not only gives you financial security but also helps you achieve a happy life. You need to be good with money to get where you want to be. Utilize money as a tool to bring you closer to your goals. 💪💰
One of the biggest money myths… 😳💰
Time to bust another major myth that’s been lurking around for far too long. 🙅♂️ Here it is: the idea that credit cards are evil out to ruin your finances.
Reality check peeps: Credit cards are only bad for your financial health if you go wild and spend more than you can actually afford! 💸💥
Credit cards can actually be pretty sweet if you use them smartly. They come packed with all sorts of protections and benefits, like rewards points that can score you awesome stuff and cash back that’s basically like getting paid to swipe. But you gotta play it smart. 💡
The golden rule of credit cards is simple yet powerful: always pay off your balance in full every month. Boom! 💥 By doing that, you avoid those pesky interest charges that can sneak up on you.
It can be challenging to keep track of all those rewards, cashback deals, and offers. I mean, who has time to juggle multiple credit cards and remember every single promo? Not us!
Say hello to Savvy – Spend Smart! 📱💰
This app is like your personal money-saving superhero. 🦸♀️💸 It swoops in to save the day every time you swipe and does all the hard work for you. It won’t let those sweet offers slip through your fingers, because it automatically notifies you when a deal is available and activates it for you. I
If you’re ready to make your credit cards work for YOU and save some serious cash in the process, go ahead and check out Savvy on the app store.