You may have noticed that the internet, as powerful of a learning tool as it can be, is flooded with bad advice from novices. Why is this the case? It starts with one bad article that sounds good and appears to be credible, then other writers duplicate the same content with different wordage. One thing that you have to remember is that you are responsible for your own financial actions. The following personal finance tips reflect common misconceptions that you should seriously question.
1. Avoid Debt at All Costs
Due to the credit crunch, many people have a misconception about debt – that it should be completely avoided. But the real problem is overuse of credit that cannot be repaid. As long as you use credit cards and loans responsibly, you can actually 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 sometimes to pay for travel and car repair bills in emergency situations.
2. Save 10% of Your Income for Retirement
It’s possible to build a nice financial safety net by putting 10% of your income in savings every month, but this concept does not work for everyone. Each individual has his or her own financial situation to consider, which sometimes requires saving more or less. Essentially, there is no set percentage that universally works. The amount you save is based on your income, expenses and future plans.
3. Use Your Retirement Fund for Emergencies
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 options you will have. Even if you have bad credit, as long as you have a job there are lenders who may help you.
4. Stocks are the Easiest Way to Build Wealth
Financial pundits in the media often cite the stock market as the quickest path to wealth. For millionaires who inherited their parents’ portfolios, this may be the case. 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 are moving up keep on moving up. If you have an interest in stocks, do not assume that personal finance tips from economic experts on TV are always accurate.
5. 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, housing prices are unstable. In some cases, your asset may be lower in value than your investment.
Remember that there are many factors that control the real estate market, including the overall economy, how well you maintain the property and how well your neighbors do the same. Banks can also have a significant impact on the real estate market regardless of what is happening with supply and demand. If you are interested in real estate investing, do not simply trust personal finance tips you hear from real estate professionals. Do your own research as well.
For personal finance tips you CAN follow, stay tuned to the Solve Your Debts blog! Or, visit the Tips section of our website for more information.