There are so many myths about money management that can make anybody strapped. You all know that managing money is not that easy, but many of you do not pay heed to what is to be done to avoid being in the red.
As long as money is flowing in, you throw caution to the wind. You stop worrying about stashing away cash, and you feel like floating in the air.
Some myths are dangerous when it comes to money. If you do not debunk these myths and take control of your finances, you will soon be broke. Here are some of the myths that you should immediately stop following.
Myth 1: savings are enough
It is good to have savings because they can help you tide over during financial emergencies. If your business is running on empty or you have lost your full-time job; or have caught up a medical emergency, these savings will help you manage your regular expenses. Do you think it is enough?
Of course, it will not be sufficient. Savings do not grow proportionally to the inflation rate. The value of money today is higher than the worth of the same money in the future. It means the quality of your savings will gradually go down as the inflation rate increases.
Savings can help you have peace of mind, but they cannot build your wealth. You should figure out the ways how you can create your investment portfolio. You generally think that you do not have enough money to invest, but it is not set in stone that you need to invest in real estate. You can start by investing in stocks, mutual funds, and bonds. Investment in diversified stocks can help you earn the right amount of money.
Myth 2: credit score is not important
Since direct lenders have allowed for borrowing with bad credit, many think it is not worth paying attention to it. Lenders emphasise repaying capacity, and hence there is no need to bother about a credit rating.
If you think that repaying capacity is enough for the approval of a loan, you are wrong. Whether you take out a short-term loan or a long-term loan, a lender will review your credit file to know about your credibility.
Repaying capacity is essential to consider, but it is not enough to define your credibility. You likely made defaults despite the ability to settle all dues. Further, the interest rates are determined based on your credit report.
Of course, a borrower with 570 credit score will be more interested than the one with 700. Try to have a good credit score so that you get a loan at affordable interest rates.
For instance, suppose you lose a job and apply for loans for people on benefits, you will need to have a good credit score to get it at lower interest rates. You will also need a good credit rating while applying for a mortgage.
Myth 3: you do not need budgeting
Staying on top of your expenses without budgeting is not possible at all. It seems hard and monotonous to make a budget and most people give up because they do not want to track their expenses every day. Accept it or not, budgeting is crucial to avoid being on edge.
If you do not like to make a budget on a spreadsheet, you can install budgeting apps. You can use these apps to achieve multiple goals. You can set a limit for your expenses so that it notifies you when you are closer to the set limit. It is how you can avoid overspending.
You can use budgeting apps to prioritise your payments so that you do not miss any repayment date of your loan or utility bills. It can automatically remind you as the due date comes.
Myth 4: you need a pay hike to earn more money
No matter how your budget looks like, it is always good to have extra income. You do not need to rely on a pay hike to earn extra money. You can start a home-based business or grab a freelance project.
There are several business ideas you can pursue without shelling out a lot of money. You do not need even a physical location as they can be run online. As far as it is about investment in your business, you can take out same day loans. These loans will be enough to fund your online business.
If you do not want to face money problems even at the time of financial emergencies, you should debunk the myths mentioned above. Try to make more money and be sensible about your spending. If you stop believing these myths, you will get on the financial track.