We all know the basic financial advice: spend less, save more and invest early. While this is sound guidance, other money management tips aren’t quite as valid. Read below to separate fact from fiction.
1. Debit is always better than credit.
Paying with money already in your account often is the best choice — but using credit cards has value, too. If you plan to pay your statement in full each month, a credit card enables you to earn rewards like airline miles and cash back. Plus, using and paying off credit cards is a great way to build your credit. Many credit cards offer purchase protection or an extended warranty which makes them a smarter payment method for big-ticket items.
2. It’s better to buy than rent.
Renting gives more flexibility than owning if you plan a move or just aren’t ready to put down roots, and can be a better budget option if you live in a super-expensive area.
3. Investing is for only rich people.
Anyone with a small pile of funds can get a foothold in the stock market. A smart investment strategy puts you on the track to financial independence.
4. My partner manages our finances, so I don’t need to think about money at all.
Every adult should have a handle on their family’s finances. While it is fine for one partner to actively manage the money, it’s important for both partners to know about the family finances and to be able to manage household expenses and investments.
5. Credit cards will get me through any financial crisis.
Depending on credit cards to get you through a financial emergency is the perfect way to dig yourself into debt. With interest (and possibly late fees), you’ll pay back a lot more than you spend. It’s also easy to overspend when you pay with a credit card. It’s best to build an emergency fund consisting of three to six months’ worth of living expenses so you’re completely covered for the unexpected, like a job loss, divorce or illness.
6. I’m young and don’t need to think about retirement.
There’s no better time to start planning and saving for your retirement than when you’re young and have many years before you retire. Give yourself a comfortable, stress-free retirement by maxing out your 401K contributions (especially if you have an employer match — that’s free money) and/or opening an IRA or another retirement fund. Start today and watch interest work its magic!
7. I have enough in my account to cover my expenses, so I don’t need to budget.
Budgeting is for everyone. Without a realistic budget in place, even those who earn six figures easily can spend their way into debt. A budget will help you make responsible money choices and be fully aware of your financial situation.
City CU offers free financial counseling to anyone. To learn more, click here.