6 Money Myths That Need to Be Busted!

6 Money Myths That Need to Be Busted!

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Felt an itch recently? If it was on your right palm, you could be on the verge of good news. It’s usually related to the inflow of money. At least that’s the popular myth that some people in different parts of the world still believe in. 

Have you ever received a wallet as a gift with some cash tucked inside? More than likely, your gift-giver believes in the superstition that money attracts money.

With a myriad of myths floating around, it can be really hard to know which money-related advice carries merit. 

You may want to think twice before listening to a well-intended advice passed from your grandmother’s neighbour’s son who once worked in a bank.

Read on. When these 6 money myths are busted, you will be able to differentiate between fallacy and reality. And you will see through the clichés.

1. “Cash is good…credit cards are trouble”

Credit cards good or bad?

Spending cash seems so much simpler. You spend whatever is in your wallet. No temptation to overspend. No banks hounding you to pay up and no interest accumulated. 

And we’ve all heard a credit card horror story. Someone who splurged and lived in a credit bubble. Eventually racking up a sum that grew into a financial monster which ruined his/her life.

But credit cards themselves don’t cause huge debts. It’s the owners who use them recklessly, lacking the ability to manage their card usage and payment properly. A credit card is very useful when you know how to optimize its benefits.

There are benefits like cash back incentives, zero interest installment plans on big purchases, points collection for redemption, etc. You can review your spending real-time online or through your monthly credit card statement at one glance.

Even if your card is stolen, the company will expedite a replacement card as soon as you cancel it. But if your wallet full of cash is gone, that’s too bad…

Provided you can control your spending and utilize the card features to your advantage, it can work wonders and help you build a good credit score. A credit card can be a better friend to you than cash.

2. “A good salary is equivalent to better finances”

Photo by Sharon McCutcheon on Unsplash

Despite popular belief, you could earn a good salary but still struggle to pay all your bills. You may be surprised that it’s common for people to spend more than they earn. Lacking in budgeting, they spend all the money to upgrade to a better car or splash out on more extravagant meals. At the end of the month, the paycheck that flowed into their bank accounts flowed right out again.

As income rises, so can debt. Even if you’re prudent enough to avoid loans and splurges, you’ll need to save for an emergency fund. So that you’ll still have a peace of mind at night when unexpected medical bills or car repairs sneak up on you.

A good income definitely helps. But it doesn’t work if you don’t have proper money management skills to keep in control of your money.

3. “You must earn an X amount of money by a certain age”

Photo by rawpixel.com from Pexels

Have you ever heard your mum talking about so-and-so is earning X amount? And that X amount, in all probability, is multiple times greater than your salary. Worse, the so-and-so is a few years younger than you!

Some people think they know exactly how much money one should be making at different stages of life. No prizes for guessing, but there’s no such thing. You should actually be well-advised not to fall for such misconceptions and demotivate yourself.

It’s great to set yourself a target income to achieve by a certain age and work towards it. But there’s no point comparing yourself negatively to your peers with higher salaries. Or, let others judge you based on what you earn. Focus on your own growth because the only competitor is your own self.

4. “I’ll start saving later, there’s still time”

Let money work for you.

If there’s one lesson we can all learn from the ‘Oracle of Omaha’ Warren Buffett, it’s to start early. The world most famous billionaire-investor started investing at the age of 11. 

He understood quickly that the longer a sum of money is given to growing, the more interest it earns over time.

Even a few pennies increase at relatively low rates, they add up to considerable sums over a long period of time. You can never be too early to invest.

But if you leave it too late, you’ll definitely miss the big boat! You might regret one day when you realize a huge chunk of amounts you could have earned had you started earlier. Let your money work for you. Time will help your money grow through the power of compound interest.

5. “You need lots of money to be an investor”

Only the rich can invest? Photo by Andrew Worley on Unsplash

Only people with big bucks and driving expensive cars can invest? Most people don’t realize that anyone can invest — yes, even you. Perhaps you’ve always been reading business news highlighting millions of ringgit in investments. Don’t get intimidated by the misleading impression that investments only involve sums with many zeros.

In fact, you don’t need thousands of ringgit or to be a whizz at maths. Even as little as RM100 can kickstart your wealth-building journey. There are numerous ways to invest your money with a low initial capital requirement.

More importantly, you need financial discipline. If you’re going to invest RM100 every month in a PRS, for example, keep to the plan and create reminders if necessary.

Once you’re more comfortable with it after learning the ropes, you can slowly step up your game. The most important thing for now is just to get started.

6. “Paying rent is a waste of money, buy a home instead”

Freedom or lifetime loan? Photo by rawpixel on Unsplash

People may tell you that renting is like throwing money down the drain. And that your rent money could be better used to pay off your own home mortgage instead of someone else’s. Plus, having your own home comes with long-term benefits. This conventional wisdom does carry merit, but it still can’t be a blanket rule for everybody to follow.

It requires years of planning before smoothly pulling off probably the biggest investment of your lifetime. And paying the monthly home loan installments is only a part (albeit a major one) of the entire story. You should also consider the numerous other costs involved. Other than a minimum 10% of your property cost as the down payment, the renovation costs, maintenance costs and what not might burn a hole in your pocket.

It’s not necessary that every boy and girl in their mid-20s or early-30s can afford all of it. Going ahead with home-buying plans without proper preparation can lead to considerable financial and psychological stress in the future.

Renting in also comes with other benefits that may work for a lot of people. Like freedom to move around without hassle according to the demands of your career. Or, freedom to stay according to your budget and affordability. These are the things that you shouldn’t brush aside.

Regardless of whether you rent or buy, experts generally advise spending no more than 30% of your monthly income on housing.

Don’t blindly follow the “you must buy a house now” myth. Instead, start researching and planning if you think it’s time to take a plunge. 

Originally published on BBazaar Malaysia. This article was edited and republished on The World BizWeek with permission.

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