Although managing money is one of the most important tasks people do on a day-to-day basis, the sad fact is that most people receive little or no financial education and may not even be aware of how to manage their cash. Even worse, a lot of the information that people do receive from the media or from well-meaning “experts” is actually not really correct and can sometimes be detrimental.
To help make sure you are making smart money moves, consider these money myths and learn why they aren’t the true facts that you might believe them to be.
- Credit cards are bad and shouldn’t be used
There are some who believe that credit cards lead to debt and that they shouldn’t be used. In reality, bad spending behavior leads to debt problems and not the tool that you actually use to spend.
Credit cards can be a useful and wonderful tool when used properly. By paying for items you would buy anyway using a rewards credit card, you can earn points that get you cash back, free trips or other merchandise. Stores are charged a fee for taking credit cards and this gets passed on to consumers in the form of higher costs.
If you aren’t using credit cards for your spending, you are in effect subsidizing the cost of providing these rewards to smart users. Don’t fall into that trap and compare credit report providers, find out your credit score and then apply for a card that you can use wisely.
- You have to carry a balance in order to develop good credit
You probably know that your credit score is very important, as it helps you to get good rates on loans and to qualify for loans in the first place. However, you may believe that it is necessary to carry a balance in order to have positive information reported to the credit bureau. The reality is, this simply isn’t true.
Having a credit card, using it and paying it off every month before you are ever charged any interest will help you to earn and maintain a good credit score. As you compare credit report providers and then start to look at your credit score regularly, you will see that carrying a balance does nothing for you other than cost you in interest.
- You save money when you buy on sale
When you purchase an item that is on sale, you still have to spend some money to buy that item. If you don’t need or want the item and you would not have bought it if it weren’t for the sale, you are wasting money and not saving it.
Even if you do save by buying an item that you want when it is on sale, you aren’t really saving unless you actually put that money into saving. If you spend it on something else, it hasn’t put you in a better financial position over the long term.
- You have to make a lot of money to get out of debt
Anyone can be smart about money, set a budget and find extra cash to put towards their debt. You just have to be disciplined and find ways to cut unnecessary expenses.
Even putting a small extra amount each month towards the debts that you have can make a big difference in the savings from interest payments. As you begin to pay down debt and less of your money goes towards interest, you will be able to make progress even faster.