When you first begin to make money, you may experience one of the most satisfying sensations in all of this world. Because of this, the grocery list gets longer. Plus, the search for places to go on vacation in your dreams fits on your phone. Not to mention, there are a lot of other “very important” additions like these.
And last, you find yourself thinking about money entirely by mistake. Therefore, if you have made money, it is equally as crucial to invest that money and use it correctly.
When it comes to our finances, we all have the unfortunate habit of coming across odd pieces of advice, some of which we may have naively followed. However, not all of the advice is actionable. The following are some misconceptions about personal finances that need to be dispelled:
Top Finance Myths Busted
1) Don’t Check Your Credit Score – It’ll Fall
When you check your credit score, the act of doing so does not affect your score. This is because checking your credit score is considered a soft inquiry, which means it doesn’t hurt your credit score. This is true irrespective of the type of loan you are taking, whether a door-to-door cash loan or an unsecured loan. Checking your rating for any of the loans has no bearing on your score at all.
A hard inquiry is when a potential lender looks at your credit report to decide whether or not to lend you money. Hard inquiries could hurt your credit score because they let potential lenders know you are looking for a new loan.
It is strongly suggested that you don’t check your credit score in the days before you apply for a loan or credit card. Instead, you should focus on keeping a good credit history by ensuring all of your payments are on time and keeping the total amount of your debts low.
2) Only High-Net-Worth Individuals Use Financial Advisors
One of the most significant shifts that have taken place in the world of finance over the past few years has been the increasing accessibility of financial advisory services and investment opportunities made possible by advancements in FinTech.
Because of the business model that was utilized to generate profits, investment firms and financial advisers used to be uninterested in working with you unless you had a significant sum of money available to invest. But times have changed.
Apps like Wealthify, Tickr, and Clim8 made it possible to invest in funds. You can invest without needing to be knowledgeable about the specific companies and shares that are appropriate to purchase and sell at any particular moment. Plus, you can also get loans for such investments if you’re short on finance. Some companies provide various loan options such as door-to-door cash loans, quick cash loans, and loans for bad credit for their borrowers.
3) Focus On Retirement Shouldn’t Begin Until Age 40
One of the things that are probably one of the last things on your mind when you are in your twenties and thirties is perhaps how you are going to fund retirement. Likely, you’re still climbing the professional ladder. Plus, you must have more immediate monetary objectives in mind.
This is because your pension is essentially an investment. It’s probably the largest one you’ll make, other than perhaps property. If you start to think about it early on, you can help yourself to reap huge rewards later on.
If you are working for someone else, the most critical piece of advice would be to ask your human resources department to talk to you about how your pension is being invested. You need to make sure that you are automatically enrolled in the plan. And you must find out how much money both you and your employer are contributing to the plan every month. This can be done in person or over the phone using a program like Zoom.
If you have any room in your finances, you should seriously consider increasing the percentage that you contribute to your pension by one or two percentage points. This will significantly impact the total amount you accumulate, but it won’t cost you very much in the near term.
4) You Do Not Require Liquidity Funds for Emergencies
You might think you don’t need to worry about your financial future if you have a steady monthly paycheck or other sources of income and a healthy savings portfolio that includes fixed deposits, mutual funds, and savings for retirement.
Many people find themselves in this situation as they believe the myth that it isn’t essential to save money for things that might go wrong.
For you to be able to handle a crisis, you need to have the right tools. What happens if you get hurt while on vacation in a country that doesn’t accept your health insurance? (Seriously, make sure you have health insurance before your vacation!) How will you pay your bills if you don’t have health insurance?
Or, as many salaried workers who have stable jobs have learned, what if a global pandemic causes the economy to go into recession, which in turn causes companies that are doing well to start laying off workers and doing other things to reduce their workforce? This is a situation that many people who get paid a salary are used to.
People who don’t know much about money and finances, in general, tend to have a lot of wrong ideas about money. If you don’t have much experience managing your own money, you might be more likely to believe some of these common misconceptions about money management. On the other hand, if you learn more about personal finance, you might be able to disprove these myths and make more financially sound decisions.
You can also find a lot of free information online that can help you learn about different parts of money. They may be a good way to get started because they give you an overview of the basics of the subject without asking you to do anything.
If you know someone who works in the financial industry, ask them for direction and advice. They might be able to help you out. This is a great way to get started because you will have access to tips and information that only some people know.