Efficient management of personal finance is a skill that only a small percentage of people possess naturally. Thankfully, the skill can be learned through the proper advice and guidance of professional experts. Moreover, with the huge amount of information available on the subject on the internet, through TV channels and podcasts, and even books and articles, most individuals end up feeling more confused rather than enlightened. Complicating things further are the various myths related to personal finance that act as potential barriers for people with limited skills and knowledge in the field. Debunking these myths is essential for individuals keen on enhancing their personal financial growth. The most common of these myths and the truth behind them are discussed in brief as follows.
Saving For Retirement Can Should Start After the ’40s
Most people believe that saving for life after retirement is something that they can start only after reaching their ‘40s. This is because most people retire around the age of 60-65 years. So if they start saving for their retirement when they turn 40, they can accumulate enough funds in the next 20-25 years to enjoy a good life after retirement. However, such people often tend to overlook the fact that they are likely to be facing peak financial responsibilities by the time they reach the age of 40. This makes saving for retirement during this phase of life an extremely difficult task. On the other hand, the financial responsibilities of individuals are significantly lesser when they are, which enables them to save more for their retirement.
Emergency Funds Have Become Obsolete
A vast majority of people feel that they no longer need to set aside money for an emergency fund. This perception has been fuelled by the easy availability of quick loans online as well as the growing popularity of credit cards. However, the loans, even when taken for the smallest amounts, need to be repaid, and that too with a pre-decided interest. This holds true for credit card usage also, which may put an additional financial burden on the individuals. However, having an emergency fund can help people avoid such complications and help them to overcome a financial emergency in a relatively stress-free manner.
Precious Metals Are A Smart Investment Option
The growing demand for precious metals, especially gold, has caused their prices to skyrocket. This has made people believe that investing in precious metals would be a great choice as it is likely to minimize the risk of loss. However, precious metals tend to be extremely volatile and undergo major price swings, which can turn into a significant loss for investors. Moreover, the returns to be gained by investing in precious metals are not that promising as compared to other options such as real estate and the stock market.
Buying A Home Is Better Than Renting
Owning a home is a dream cherished by most people and hence is often a major investment decision. The rapid real estate development, easy availability of home loans, and extensive promotional campaigns have made people believe that buying a home is way better than renting. However, buying a home may not always be a feasible option for an individual. There are various factors associated with this decision that need to be thoroughly analyzed to ensure minimize the risk of landing in a financial mess. At the same time, renting is generally a cheaper option and saves the individuals from the various formalities and expenses that are required to be undertaken regularly upon buying a house.
Savings Are Meant Only For People With High Income
This is perhaps one of the biggest and weirdest myths associated with personal financial management. Most people believe that their income is too low for them to put aside any amount for savings. However, this is just an excuse used by individuals to cover their poor financial planning and bad spending habits. Quite often, such people are found seeking instant loans and even repaying them from their low income. The problem is that people feel that unless they save a decent sum regularly, initiating the process does not make any sense. They seem to overlook the fact that when it comes to saving money, every single penny counts and, even a meager amount saved regularly can grow into a considerable amount over a given period.
Saving Should Be Started Only After Paying Back All Debts
Most people today are involved in some form of debt repayment which they consider to be a major financial liability. Such individuals often believe that they should start saving only after they have fully repaid their debts. However, this is a completely wrong approach towards saving money as waiting until they have paid back all their debts can result in major financial complications for such individuals. The best thing would be to save a minimal amount each month so that by the time individuals have become debt-free, they have already developed the habit of saving and enhancing their financial security.