Misconceptions about Money



Not all debt is bad, renting a house doesn't mean throwing money out the window and talking about money isn't uncomely.

When it comes to money management, you will hear a lot of rules and advice.  For example, "Spend less than you earn", "Start saving and retire early" or "Stick to a budget plan".  But besides that, you also have to remove a lot of wrong views from your mind.

1. All debts are bad

 We are advised to avoid debt at all costs.  But there are actually so-called "good liabilities" - ones that carry low interest rates and can help you build wealth over time.  These are things that will add value in the future, like home loans or college tuition.

 And "bad debt", like high-interest credit card debt, can quickly get you into financial quagmire.  "Credit cards are one of the most dangerous things, worse than bad investments or keeping money in the house," said Michael Resnick, personal finance expert at GCG Financial.  And even good debt can turn into bad debt if you can't afford it.

Misconceptions about MoneyRenting a house doesn't mean throwing money out the window / ph: pexels

2. Renting a house is throwing money through the window

 Buying a home can help you accumulate asset, if you expect it to increase in value in the future.  However, this approach doesn't always make financial sense.

 "Buying a home can be a great investment in the long term. But it's not necessarily suitable for everyone," said Trina Patel, chief financial adviser at Albert App.

 There are many costs to buying a home, ranging from upfront payments, transfer fees, insurance, property taxes and repairs.  For people who plan to live in only one place for a few years, renting a home is even more financially beneficial.  "Why risk losing money in real estate in the short term, not to mention transaction costs?", Resnick said.

3. You will spend less when you retire

 You don't think you need to save anymore, your installments are over, or you simply don't have to go to work every day, so you'll spend less.  However, that is a mistake.

 Usually, people will have a list of "Things I want to do in retirement".  Those are the things that cost money.  For some people, retirement is even more expensive than working.  "Many of our clients spend even more when they retire, because they end up with time to travel, buy a house, or help their grandchildren pay for college," says Chad Chase, Director of Customer Service at Garrett Investment Advisors said.

4. Talking about money is uncomely

 For many people, talking about money is considered taboo.  However, for some people, like your spouse, being honest about money will help manage your expenses and save more effectively.  "If you have kids, teach them as early as possible about money management," Patel said.

 It can also be beneficial to discuss this topic with colleagues and friends.  Sharing your salary (say the exact number, or the range if you're afraid) can help you see the difference and find ways to narrow this down.

 When you talk about your budget and how to save money with your friends, you will gain the experience of adjusting your plans, or giving others tips for strengthening their finances.

Acoording to Patel, we can learn a lot from each other when we talk about money. If you just keep it for yourself, you won't know what you don't know and what else you can do. 

Misconceptions about Money

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