Myths about money that need to be broken
There are a lot of ideas floating around about money. Many of them are wrong by enough to cost you money. Here are some of the most common money myths that aren’t always correct.
1. The myth of the savings account.
Having a savings account doesn’t really mean you’re saving money. It’s a great place to have your emergency money and it’s earning you a small amount of interest. However, if you have high debt with high interest rates, you are losing money by putting it in a low-interest savings account. You should be paying your debts first. Also, if the account is earning very little, inflation could be higher than the interest you are earning. In the long run, investing isn’t really working for you, it’s costing you.
2. The myth of the big sale.
I know many wives who use this. If you buy something on sale, you must be saving money. Not precisely. The item must have been something you would have bought if it hadn’t been on sale. You can’t buy something just because it’s on sale and save money. You had already decided not to buy it at full price. This truth has some exceptions. If you put the difference in a savings account, you are motivating your savings through a purchase sale.
3. The myth of refinancing.
You don’t save money by refinancing your home every time. Most people will refinance at a lower interest rate, but again for a 30-year term. If you’ve already paid off your mortgage for five years, you’re essentially extending your mortgage to a 35-year mortgage. You will likely pay more in the long run than you will save in interest rate.
4. The myth of the credit card.
Zero percent interest credit cards are a big draw for consumers. If you have a 0% interest credit card, you can save money if you already have the money with which you would have bought the items in an interest-bearing account. If you don’t, you’re not saving anything. If you don’t have the money to pay off the card when the introductory interest term ends, you’re spending money to spend money.
And the only way to save with a cash-back credit card is if you pay the balance in full each month and there’s no annual fee for the card. If you carry a balance, your interest will be higher than the cash refund.
5. The myth of more money.
Earning more money does not mean you save more money. It just means you’ll have more money to spend. Most people spend more as they earn more. They never really save.