Five personal finance myths you need to debunk
Personal finance is fertile ground for myths . There are many beliefs that, for me, arose from ignorance about such an important topic in life.
Some of these urban legends don't stand up to even the slightest scrutiny. Let's analyze five of them, give you my perspective, and explain why they're so harmful to maintain. I'll also give you a simple recipe to help you overcome them.
Someone who earns a lot could save a lot. Someone who doesn't earn much could save a little. The point is that everything is proportional . For someone who saves 10% of their income , a lot or a little isn't relative. It will be 10% of their income, and in 10 months, they'll have a salary saved.
It may seem small, but we work 30 days to reach that amount, and we live off it. I suggest taking a portion out, period. No excuses or apologies. Otherwise, we'll have to go into debt, and that will reduce our ability to save , and even our ability to live a quality life.
2. You can't invest without a lot of moneyWe can now invest with very little. It's a matter of having the savings and finding the right financial instrument. This way, we'll make that little bit grow while continuing to nurture it. Mutual funds are a good example of an excellent option for achieving returns for large investors with a small investment.
Only with coins and until it's full. Immediately, that money must be transferred to a financial investment instrument. The problem with saving larger amounts in a piggy bank is that, because it's so close, it can serve as a backup plan.
Having the option, we aren't as careful with our savings . It's recommended to set up an automatic debit so the money goes directly into an investment account. Removing it from reach turns it into a long-term savings account .
Everything is relative. When we have the capacity to have them and we use them, then yes. If we don't use them, the points they could add up to are lost. Using a small portion of their capacity isn't a good sign either if we have a lot of them. And if we don't pay them off in full, it's not a good sign either.
On the other hand, the sum of the limits they have reduces our credit capacity . Even if we're not using it, it's part of what we have available. If we want to take out another type of credit, such as a mortgage, it reduces our capacity .
People who can't take a percentage of their income won't take it when their income increases. I call this " The Percent ." We will always increase our spending by the percentage we use of our income.
If we spend 100% of our income, it will always be that percentage unless we change our mindset . The solution is the same as in point three.
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