From loans to shopping to investing—getting wrong with our finances – it seems – has actually become regularity today. We don’t know how to save money. Period! For everyone who has heard and internalized the age-old maxim, “ten percent of your paycheck should go to your savings” – financial management assumes an onerous shape. Why? It’s quite simply because you’re just trying to save money and not investing anywhere. If yours is not a generous paycheck, do know for a fact that the money thus saved will not see you through your retirement. Documented below are more such money-saving myths that you should be aware of.
Myth #1: Getting a credit card the moment you are out of school is risky
On the contrary, however, using credit cards with lower limit can well be your introduction to adult finances. Something with a credit limit $500 or $600 would not really destroy your life. On the other hand, it can teach you that you should not use credit cards to finance short-term needs. You can use them as a training wheel – setting it up on autopay.
Myth #2: You should save every penny you are making
You like to believe this because you think that once you invest your money, you’re basically losing control over it. However, investing is as important as saving. One of the most notable merits of investing is compound interest. For instance, you may start off with an investment worth $1,000 only to secure a 10% interest in the next year. In the following year, you will end up earning more (another 10% in this case) without really investing further!!
Financial experts, in fact, prioritize investments that transcend “direct financial gains”. They largely advocate, for instance, investment in “self”. It is very important to invest in skill development that will help professionally (and at times personally too). You will continue reaping dividends from these types of investments for a long time to come.
Myth #3: I will never take quick loans
You think they are expensive. They are easily available. Irrespective of what your financial condition is, you can access Lendgreen quick loans online. Once approved, the money will be transferred to your account within 24 hours. You blithely let go of these considerations because you think they are expensive.
However, do know for a fact that opting for a traditional long-term loan (i.e. for 5 or 10 years) is actually a more expensive proposition than you would have ever thought. Quick loans are generally accessed to meet short-term needs like paying rent or sponsoring small business inventory etc. Applying for a cumbersome traditional loan (they take excruciatingly long to be approved) does not make sense when you need money fast. So, ruling out the significance of fast cash loans itself remains a financially unwise decision.
Myth #4: You should start thinking about cash emergency fund as soon as you graduate
You end up overthinking about the creation of an emergency fund. If you have a 401(k) through your job and have actually started putting money into the same then you are already working towards the creation of your emergency fund. In other words, your 401(k) is actually your emergency fund! There are no two ways about that! In case of a financial emergency, you can definitely take money out of the same – even if that means that you have to pay a penalty. However, the money is there to serve your needs when you need it the most.
Treating 401(k) as an emergency fund is often considered risky in the short-term but its long-term benefits clearly outweigh the short-term risk – if any!