Sasquatch. The Flying Dutchman. As a society we love telling each other stories, but the story itself can take on a life of its own; growing and evolving until even the most dedicated internet sleuth can have a hard time separating fact from fiction. Myths are perpetuated across generations and we are often introduced to them by parents, grandparents, or other trusted adults who really sound like they know what they’re talking about. When it comes to financial myths, too many of us rely on hearsay to control our spending. I don’t know about you – but I want to base my financial plans on facts. Here are 5 financial myths you may have heard or are even perpetuating yourself:
- Myth #1: I don’t need to know the details – my partner handles all the finances
It’s very important for every individual to understand where their money is coming from and where it’s going. You should also understand as a household how much debt exists, how much the monthly bills are, and how you’re going to achieve your goals together. It’s important to be financially honest as a family and understand what each member brings to the table – good and bad.
- Myth #2: I can keep a mental budget
It’s important to write it down and actually see how much money is coming in and where it’s being spent. Many people are surprised how much they spend on eating out or groceries, for example, when they actually see a total.
- Myth #3: I don’t need an emergency fund – that’s what credit cards are for
This one can be dangerous and has been something I’ve seen perpetuated many times. At the risk of sounding like a broken record, your goal should be to build a savings account to cover about 6 months of expenses in case of job loss or medical emergency, for example.
- Myth #4: Only rich people invest in the stock market
The stock market is affordable and accessible for everyone. When I was in college I started a Scottrade brokerage account with $500. Even a small amount can turn into big gains over several years. Find a company you believe delivers an exceptional product or service, review their financials, and invest a small amount long-term and see where you end up.
- Myth #5: I don’t need to start thinking about retirement yet
It’s never too early to start thinking about your future and how you want to prepare for it. Time is your best friend when it comes to retirement because it allows for compounding growth that will increase your account faster. As Albert Einstein once remarked, “compound interest is the most powerful force in the universe.”
What other financial myths have you heard? Let me know in the comments below.