There's plenty of money advice in the world. Probably you've heard quite a bit already. Some of it is helpful, and you'll benefit by following it. Other tips may be excellent but inappropriate for you at this time in your life. And some of that advice is based on myths. Here are seven common pieces of money advice you should ignore.
1. Investing is Only for People With Money
Even though your immediate priorities are to save for emergencies and get rid of high-interest debt, you don't have to wait until you're wealthy to start investing. You can begin even when your income is small. For instance, in addition to your IRA, put away small amounts into a mutual fund to increase your retirement savings. Mutual funds are long-term investments with low risk. Investing is the only way to increase the return on your savings.
2. Renting is Like Throwing Your Money Away
You've probably heard this one if you're a renter. People say that paying rent is like throwing money down the drain. While it's true that you won't see a return on your rental income, you're not guaranteed to see one from a real estate purchase either. In most cases, buying your home is a safe investment. However, you also have the additional costs of the mortgage, insurance, and home repair. Being house poor is no fun. Renting is better if you're starting your career or haven't yet decided where you want to live.
3. You Should Never Use Credit Cards
One of the most common pieces of money advice is that you should go cash-only and toss your credit cards. Pre-COVID, this advice may have made some sense. But today, the pandemic has proven that having cash on hand is critical. Credit card debt will rob you of money you can put into emergency savings. So, you want to be cautious when using your credit cards. But for now, it might be smarter, assuming you can pay the bill, to use your credit card for purchases, and keep your cash at home.
4. Store Rewards Credit Cards are Like Free Money
Watch out for the retail rewards credit card agents. They catch you by offering a significant discount at checkout, usually 25%. Every time you shop in that store, you'll receive a discount. However, the interest rates on store rewards credit cards are high, and you can only collect the rewards at that store.
5. You Should Always Buy in Bulk
Reducing your expenses will increase the amount of money you have for emergency and retirement savings. It will help you achieve the financial New Year’s resolutions you make in these areas.
6. If You're Not Using a Credit Account, Close it
Your credit score is based on a mix of information, including your credit history and credit utilization ratio. It hurts your score to close accounts. As long as your credit account is in good standing, you should keep it open, even if the balance is zero. Maintaining accounts in good standing and with zero balance will improve your credit utilization and overall credit score.
7. It Takes Money to Make Money
This common piece of money advice can dampen your entrepreneurial spirit. You don't need a lot of money to launch a company or a side hustle. You can do many things in today's digital world to build your brand with almost no investment. Platforms such as WordPress help you get your website up and running in little time. Social media channels offer endless opportunities to promote yourself. You don't have to invest in paid ads. YouTube hosts thousands of helpful videos on how to create and market content. All you need is commitment, persistence, and patience.
If you are burdened with high amounts of credit card debt and are struggling to make your payments, or you’re just not seeing your balances go down, call Timberline Financial today for a free financial analysis.
Our team of highly skilled professionals will evaluate your current situation to see if you may qualify for one of our debt relief programs. You don’t have to struggle with high-interest credit card debt any longer.