Source with thanks from goodhousekeeping.com
There are so many misconceptions surrounding finances that it can be hard to know what to do or where to turn. Far easier to simply spend your cash or stick it in a savings account and forget about it, right? Wrong! Getting a grip on money matters is integral for peace of mind and future security – both for you and your family. Here are six common money myths, busted:
There are a lot of people, especially older folks who tend to shy away from investing. It usually due to some misconception or another about finances in general. Instead of trying to unravel the concerns, they tend to avoid investing which is not such a good idea for the long term. In the article below, the author tries to dismantle some common excuses or myths actually that will help you feel better about managing your hard earned wealth meaningfully. Team RetyrSmart
Excuses or myths that come in the way of good money management
- Investing is too risky
It’s not unusual to feel wary of investing in the stock market, confusing investing with gambling or perceiving it to be too risky.
The truth is, when it comes to investing, the key is to first identify your risk profile – ie how much investment loss you can withstand. You should also consider your investment goals and age. Whatever your appetite for risk, there are investments available, whether you’re the more cautious investor or the more aggressive
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- Saving and investing are the same thing
Absolutely not. Saving is money put aside with a bank or building society that accrues a stated amount of interest each month, while investing is buying and selling assets on the stock market with a view to benefitting in the future.
There is little to no risk in savings accounts, but the interest rates are usually low.With investing, the rewards can be much higher, but so is the risk factor. So, why invest? Statistically, over time, investing will make you more money.
However, the smartest way to manage your finances is to utilise both savings and investments – a savings account for life’s ups and downs, and investments for future stability.
- I don’t need an emergency fund; I have credit cards
Having an emergency fund of anything between three to 12 months of expenses is essential for peace of mind in turbulent times.
When it comes to questions over job security or health worries, knowing there’s a pot of money that’s immediately accessible means you can better focus on the emergency at hand, rather than adding money worries on top. Put this emergency cash in a separate savings account and leave it be.
Just bear in mind, however, that cash is not risk-free as inflation will reduce its spending power over time making it a poor long-term investment.
- Investing is too complicated
Jargon-heavy (and male-oriented) advertising surrounding finances has a lot to answer for when it comes to creating the myth that you need an economics degree to invest your cash.
The truth is, investing can be as simple or complicated as you want it to be, depending on your level of involvement.
Alternatively, let financial experts invest for you, while you sit back, relax and (hopefully) watch your portfolio grow. Perfect for the novice investor.
- I have no spare cash to invest
Are you sure about that? A survey by The Share Centre found that people on average waste £71 a year on clothes they barely ever wear and 30% of people buy one new item of clothing a month.
If, instead of buying clothes that will never see the light of day, you took that £71 and invested it for three years, your £213 would have grown to almost £250, or £450 over five years. It’s time to reassess your ‘essential’ monthly outgoings.
- Only rich people invest
This is simply not true. Many investment funds accept smaller monthly deposits To start a portfolio, it’s as simple as setting up a monthly direct debit – a smart move as the amount becomes part of your monthly outgoings (and almost forget about it).
Think of it as another essential expense, like setting up a direct debit for a TV entertainment package, and attach a meaningful goal to the amount, such as ‘my daughter’s wedding fund’ or ‘my retirement villa in France’, so it becomes an exciting investment for the future.
This small habit can have a huge impact on your overall pot in future years.