Four Myths about Personal Finance
There are a lot of financial myths out there that simply aren’t true! Making good financial decisions starts with having the correct information you need to make those decisions. I’m going to go through four common myths about personal finance to get to the bottom of those misconceptions.
1. “Paying rent is throwing away money.”
Paying rent is a living expense just like food, clothes, gas, or other transportation costs. This myth is usually coupled with “homeownership is the ONLY surefire investment” (which is also not true). Think about it: the point of paying rent is to have a place to live, right? So, if what you are paying for (a place to live) is getting you what you need, that is by definition NOT throwing away money. Owning a home is a big commitment and it isn’t for everyone. There are lots of pros and cons to this decision, so be realistic about your needs and which approach best meets those needs.
2. “Bad credit takes forever to rebuild.”
Good credit is an asset! Having bad credit can feel like a hopeless situation. There are some things that take longer to correct on your credit report, but that is not the same as hopeless. There are a few things you can do right away to put yourself on track to a higher credit score.
3. “I’m young – I have plenty of time to save for retirement!”
Being young is definitely a major advantage for retirement planning and the fact is, you do have plenty of time. The challenge is that you have no idea what that time will bring (both ups and downs), so the earlier you prepare, the less you will need to save as you get older. Check out this retirement calculator to see how much of a perk being young is when it comes to retirement planning.
4. “I’m old – it’s too late to save for retirement”
Every day is a new day. Although you can’t change the choices you made in the past (if you figure this one out, let me know, okay?), focus on what you can do now to prepare for life in retirement. This may mean making some adjustments to the traditional ideas of retirement – that can mean anything and you get to decide what it means for you. I changed careers at when I was over 40 because I simply wasn’t going to have enough to retire in my 60s. If retirement age is approaching fast and you feel like you’re running tight on time, start where you are now.
Get a clear picture of your current situation and then design your “encore” years. Once you know where you are going, you can create a plan to get there. I simply LOVE this woman’s approach to dealing with the shift in her retirement reality.
Saundra Davis is a nationally recognized financial coach and educator. Her experience in the U.S. Navy, where she made every money mistake possible, and her 20 years serving community-based organizations led her to the reality that the best way to help people find a path out of poverty is to help them become their own financial expert.