The Sunday Mail
Maybe you’ve heard them — a good salary equals financial security, money always has a way of working itself out, or it’s never too late to start saving.
But as it turns out, these money misconceptions aren’t just untrue, they also can be downright bad financial advice.
Learn more about the most common money misconceptions, plus how to handle your money the right way.
Good salary equals financial security
One common misconception is that once you make a good salary, you will be financially secure. Even with a good salary, it can be difficult to pay the bills.
It’s always possible to spend more than you earn, especially if you don’t have a budget. Living costs tend to go up with salary increases, so it’s important to create a realistic budget and stick to it.
A good salary is only part of being financially secure.
Everything will work itself out
If you take the approach that everything will work itself out, you may find yourself in debt or behind on your financial goals.
Putting it simply: If you are not actively planning and saving for life’s big events, then you will not be ready when the time comes for you to do them. Additionally, if you have a large amount of debt and don’t have a debt pay-off plan, you will likely find yourself in even more debt in the future.
Budgets take too much work and doesn’t really help
Another common misconception is that budgeting takes too much work and may not even help you change your situation.
While it’s true that the first few months of budgeting can take extra effort, it also takes time to create a budget that actually works for your situation.
I can start saving for retirement later
While saving for retirement is probably the last thing on your mind when you’re 20-something years old and working your first full-time job, it shouldn’t be.
While you may think you have all the time in the world or may rationalise putting it off by saying you’ll have a larger salary later, keep this in mind — although your income will increase as you get older, so will your expenses. You should make saving for retirement a priority and stop using excuses to stop yourself from planning for your future.
I don’t need to worry about my debt
Only making your minimum payments each month doesn’t always put a dent in your debt, especially if you have a high interest rate.
Your debt-to-income ratio can show you how serious your situation is. Once you have a realistic picture of your debt, then you can make a debt pay-off plan.— www.thebalance.com