Frugal American presents you: myths that make you lose money
Oh well, I’m not happy to admit this, but our world is full of myths that make you lose money. There are plenty of online courses, books, videos, podcasts—you name it—that teach people everything they need to know about saving money and enjoying their lives.
While everybody says that they’re experts in the industry, it can get pretty hard to analyze all the information they give you. So, who’s right and who’s wrong? What should you do with your savings so you can have a good time, but not live paycheck by paycheck, or maybe Social Security check by Social Security check?
Before we continue, I have to tell you that I’m not an expert in this domain, but I tried a couple of things throughout my life, and I want to share with you all of these myths that make you lose money. I noticed them myself, so if you want to learn more about my experience and maybe get some ideas from them, keep reading!
Let’s begin with these myths that make you lose money! It’s going to be a good article!
1. Emergency fund and being wealthy
One of the worst myths that makes you lose money is assuming that you don’t need an emergency fund if you already have a lot of money. Wrong! You can never know when something can happen, and you’d better be prepared for anything, which is why it’s important to set money aside.
Whether you have a high-earning side gig or a job where the wage is great, start building a substantial emergency fund that you can easily access when you need it. I suggest you have at least three to six months of living expenses saved, whatever your income level is.
If you have a high income and lots of expenses, you might want to put aside a larger amount of money so that you can be covered in case a disruption to your actual lifestyle or disaster happens.
What do you think about these myths that make you lose money?
2. Budget and money saving
Is there someone who likes setting budgets for everything? Maybe not, but even if you like it or not, one thing’s for sure: they’re useful and they work. Lots of people have a love-hate relationship with budgets, and I can personally understand them because I’m part of that category too.
There are individuals who prefer to see all their spending laid out in a spreadsheet or on a piece of paper because it helps them keep track of every single cent they spend. But for others, this isn’t helpful and is only an additional source of anxiety.
Since we’re talking about common myths that make you lose money, one of them is thinking that a budget is essential only if you want to achieve a particular financial goal, such as being necessary or saving money.
However, that’s not the case. Regardless of your financial goals, knowing exactly what you spent money on is imperative because it can give you more insights into the areas you overspend, so you know what changes to make in the future.
Even if you have a lot of money on a daily basis and you’re happy with it, keeping tabs on your expenses is going to help you save even more, which is pretty amazing, if you ask me.
There are many other myths that make you lose money! Keep reading to discover them!
3. What about savings accounts?
Another one of these popular myths that make you lose money is putting all of your dollars in a savings account and forgetting about it. While that’s not a bad idea if you don’t plan on investing in something or getting something, this piece of advice is a little outdated.
The typical savings account only earns you a meager 0.1% interest on your money, and that’s not that much considering the inflation rate that keeps getting higher and higher.
Your hard-earned money stays in a savings account and does nothing, but it actually devalues, meaning that you’ll pay more and get less with that particular amount in a couple of weeks, months, or years.
This technique is great if you want to put some money aside for a month or a couple more and then use it to get something, but considering the inflation rate, keeping your money locked in a savings account for a few years isn’t your best option.
If you want to understand more about these myths that make you lose money, I recommend you start your financial education journey, because it’s going to help you a lot! Here’s a good book to start your learning session!
4. All credit is terrible
We still have a couple of myths that will make you lose money to talk about!
Credit is considered by many people to be one of the worst things ever, but that’s not always the case. Of course, there are many myths that make you lose money, and credit is indeed a slippery rope and has a terrible reputation due to the fact that many individuals destroy their financial future with just a few credit mistakes.
Of course, if you use credit responsibly, it can help you in many situations, but you need to fully understand how it works and what you can do with it so you can properly make the most of it.
Using credit cards to pay for things you wouldn’t normally be able to is never a smart choice because it creates the unrealistic idea that you have as much money as you want and can buy whatever you wish. Just a year or two of using your credit card in a thoughtless way can negatively impact your credit score for years to come.
Let’s continue with these myths that make you lose money because, when it comes to credit cards, things can be tricky. For instance, there might be times when you need to use a credit card, but that can give you a couple of benefits if you know how to deal with it.
For someone who’s younger and only at the beginning of their credit journey, using a credit card responsibly can actually help them build their credit score over time. For instance, they can pay for basic needs, such as groceries and gas, then pay the balance off every month to stay away from accruing interest.
Another reason why a credit card might sometimes be good is when you purchase things online. Credit card companies are responsible for protecting individuals’ purchases and making it easy to commit fraud, compared to debit cards, which require a lot more effort to be protected from con artists who try to put their claws into your actual money.
5. Investing is only for the rich
Investing makes a lot of people shy, but that shouldn’t be a problem. There are many myths that make you lose money, and the thought that investing is only for the rich is definitely one of them.
If you think about making money work for you, then I can’t recommend you enough to do your research regarding this topic and see what works for you. Doing little things that make your dollars do all the hard work for you is going to help you reach your financial goals for you and your entire family.
Speaking of myths that make you lose money, you should know that you can start your investing journey with as little as $50. Financial experts say that there’s a low barrier to entry so that everyone can start from somewhere, and plenty of companies offer tools and access to free advisors that can help you with your particular situations so that you don’t have to worry about these myths that make you lose money.
It doesn’t matter if you have a lot of money to start this or not; you can always have a tiny amount of money to contribute to a smart investment account because that’s a great way to understand the principle and then work from there. See, you shouldn’t believe these myths that make you lose money until you know the facts!
If you want to read something else from Frugal Americans, here’s a good article for you: Senior Discounts: 12 Grocery Stores That Offer Them
