Handling money can be a tricky business. If it wasn’t, there wouldn’t be nearly as much debt as there is in this country. Along with having money comes the many myths on how to handle it. All of these come from well-meaning people who have your best interest in mind. In fact, they may have used some of these myths and it’s worked out for them. However, the exception is not the rule. Below is a shortlist of some of the more common myths surrounding your finances.
Pay Off Large Debt First
Large debt that has high interest rate can be very stressful and is important to take care of. However, you shouldn’t necessarily put all your money towards those large debts. Personal finance expert Dave Ramsey suggests a snowball method. Start with the smallest debt. Once it’s paid off, take the money you would pay towards that and lump it in with the next smallest debt. You’ll progressively be able to pay more and more, eventually getting rid of all your debt. It works and paying off that small debt will make you feel accomplished.
Don’t Use Credit Cards
There can be some logic to this. Afterall, you are basically taking out small loans and paying them back. But there are upsides to having a credit card. Some come with cashback or rewards points, incentivizing use and rewarding full payments. Credit cards aren’t difficult to manage. Just don’t use more than what you can pay and pay back what you’ve used in one payment. This will also build your credit score.
Buy Used Cars
It’s true that used items are less expensive than new ones. That’s because they’re used … by someone else … you most likely don’t know … or trust. The point is a used vehicle may seem like a great deal, but you could just as easily buy a clunker and not even know it. Suddenly, you’re racked with mechanics fees. Buy smart, not cheap.
Take Advantage of Sales
Again, this isn’t necessarily bad thinking, but it comes with its limits. Just because you’re getting a screaming deal on something doesn’t mean you should spend money on it. For instance, just because an Xbox is discounted by $50, doesn’t necessarily make it a worthwhile purchase. You’re still paying several hundred dollars.