The internet has opened us up to the world of “influencers” – and the personal finance industry is full of them. Unfortunately, influencers don’t always share the best advice and are often paid by companies to promote their products or services.
Ultimately, the only person that’s going to care the most about your money is you. Therefore, educating yourself on how to manage your money effectively is the best way to ensure you have a strong financial situation. You – and you alone – are responsible for your financial actions.
Here are some common myths about personal finance:
- Avoid Debt at All Costs. Many people have a misconception about debt – that it should be avoided at all costs. But the real problem is the overuse of credit that cannot be repaid. Using credit cards and loans responsibly can improve your credit score while resolving immediate financial difficulties. If you can make your payments on time, there’s no reason to fear debt. Credit can still be a helpful tool to pay for travel and car repair bills in emergencies.
- Save 10% of Your Income. It is possible to build a nice financial safety net by putting 10% of your income into monthly savings, but this concept does not work for everyone. Everyone has their financial situation to consider, which sometimes requires saving a little more or a little less. Essentially, no set percentage universally works. Your savings are based on your income, expenses and plans.
- Use Your Retirement Fund for Emergencies. About seven in 10 Canadians are preparing financially for retirement, either on their own or through a workplace pension plan. No matter what type of retirement plan you have, whether it’s an RRSP or other investments, avoid tapping into this money for expenses. While your retirement fund can be used as a last resort for emergencies, you are usually better off exploring other financial options. The better your credit score, the more opportunities you will have. Even if you have bad credit, if you have a job, some lenders may help you.
- Stocks are the Easiest Way to Build Wealth. Financial commentators in the media often cite the stock market as the quickest path to wealth. This may be the case for millionaires who inherited their parents’ portfolios, but for the average person who knows very little about market dynamics, it can be bad advice to assume that stocks always rebound after going down or that stocks that keep moving up.
- Real Estate is Always the Safest Investment. For decades, real estate has been considered a bulletproof investment, despite its ups and downs along the way. But in many markets, house prices are skyrocketing, and people are spending way more than they can afford. With increasing interest rates, many people may be at risk of losing their home.
At SolveYourDebts.com, our team of credit counsellors are here to help clarify anything to do with your finances. Let us help debunk any financial myths you may have heard. Book a free consultation with us today.