Staying on top of one's finances can be a daunting challenge made more difficult by money-management myths we believe and little lies that we often tell ourselves. In some areas of life, a little white lie might be perceived as harmless. But when it comes to money matters, the myths and misconceptions we believe can do some serious damage. To help ditch those misconceptions that might be holding you back economically, think about whether you're guilty of subscribing to – or telling yourself – any of the following six money-management myths:
Money Management Myth #1: It's Someone Else's Fault
Be honest. Have you ever blamed someone else for one of your financial predicaments? Perhaps you rue the day you met your ex-spouse, because he or she ruined your credit. Or maybe you're convinced that your efforts to garner a promotion and raise have been sabotaged by a nasty-co-worker. Alternatively, your entire financial life may be a mess and you've been subconsciously pointing the finger at your parents. After all, you figure, they never taught you how to manage finances properly.
Financial Truth #1: Your Finances Are a Direct Result of Your Own Action
I hate to break it to you: but the truth of the matter is that your finances (both the good and bad facets of them) are a direct result of your own actions. It's a very hard reality for many people to accept, but your own personal state of affairs actually is directly linked to what
you've done – or what you've
failed to do. If you can accept responsibility for your own condition, it's not self-defeating. On the contrary, it's empowering, because it gives you license to begin taking control of your situation and to correct flaws or rebound from setbacks.
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10 Urban Money Myths
Money Myths That Just Won't Die
There is an awful lot of bad advice out there when it comes to managing your personal finances. Like rumors, these myths get told and retold as if they were true and spread like wildfire even though they are flat out wrong.
Click through our gallery to see 10 urban money myths that you would do best not to believe.
(To see the 10 myths, mouse over the photo at left and click on the right arrow.)
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10 Urban Money Myths
Money Myths That Just Won't Die
There is an awful lot of bad advice out there when it comes to managing your personal finances. Like rumors, these myths get told and retold as if they were true and spread like wildfire even though they are flat out wrong.
Click through our gallery to see 10 urban money myths that you would do best not to believe.
(To see the 10 myths, mouse over the photo at left and click on the right arrow.)
10 Urban Money Myths
Money Myth No. 1: This is a Great Opportunity to Buy Stocks
If you believe that, I have some real estate in Florida (with just a little water on it) that's also a great buy. If your financial advisor is telling you that now is the time to buy, fire your broker. Are you kidding me?!
We know that you are desperate to make back some of your investment losses, but buying stocks in this environment isn't the way to do it. The bottom is nowhere in sight right now, and this is no time to invest new money -- don't let anyone tell you otherwise.
10 Urban Money Myths
Money Myth No. 2: Everyone Needs Life Insurance
Think the insurance agents are behind keeping this money myth alive? Here it is in a nutshell: If you have someone who really DEPENDS on your income -- then, yes, you likely may need life insurance to help them maintain their standard of living if you're gone.
If you're single, retired or part of a dual income household with no dependents, you may not need life insurance at all. And, please, don't count on life insurance as a savings plan or as a source of "emergency money" that you can cash in down the road.
10 Urban Money Myths
Money Myth No. 3: Credit Counseling Will Hurt Your Credit Score
No, no, NO! We're going to scream this one from the rooftops till we get through! Credit counseling will not affect your credit score one iota.
In fact, Fair Isaac (the company that calculates credit scores) does not factor enrollment with a credit counseling service into their scoring criteria. However, some lenders will see that "in credit counseling" notation on your credit report as a red flag, so you may have trouble getting new credit while you are in counseling.
10 Urban Money Myths
Money Myth No. 4: Money Markets are FDIC Insured
A money market mutual fund is most certainly NOT FDIC insured. However, a money market DEPOSIT account -- which earns interest at a rate set (and paid) by the bank -- IS FDIC insured.
The fact that the names of these two vehicles sound similar may be the source of the confusion. Just suffice it to say that, basically, any deposit-type of account where your bank pays you interest is probably insured (but double check!) That includes any traditional type of bank account -- from checking and savings to CDs and IRAs. All of these are insured by the FDIC up to the limit of $250,000 per qualifying account.
10 Urban Money Myths
Money Myth No. 5: You Get What You Pay For
Despite overwhelming evidence to the contrary, this money myth won't die.
While it's true that sometimes there IS a link between price and quality, more often than not, you can get a great product at a great price if you shop around and/or know what to look for.
Take generic drugs, for example. They often use the exact same ingredients as their higher-priced name brand counterparts, and many are considered to be just as effective when stacked up against the big names. So why pay more?
10 Urban Money Myths
Money Myth No. 6: Co-Signing a Loan is No Big Deal
Think co-signing a loan for a friend or relative is "not a big deal"? Think again.
Your signature is essentially telling the lender, "Sure, come after ME if my loved one defaults ... or even misses ONE payment. I'll take care of it!"
And, yes, this even applies to your own children. We know of one couple who co-signed a loan for their grown son -- one day, he just stopped making payments. Guess who's now making those car payments for him ... to avoid ruining their own credit?
10 Urban Money Myths
Money Myth No. 7: You Don't Need a Will if You're Leaving Everything to Your Spouse
More than half of Americans die without leaving one. Big mistake.
Don't make the all-too-common assumption that your spouse will automatically get everything -- the house, the car, your investments -- upon your death. Without a will, there's no guarantee. That goes especially if you have children and/or surviving parents. The law in most states will award one-third to one-half of your property to your surviving spouse and divvy up the rest between your children and your parents, if they're still living.
10 Urban Money Myths
Money Myth No. 8: Your Debts Will Be Wiped Out When You Die
It's a sad fact: Your debts may live on long after you do. Sure, some of your creditors may choose to forgive your debts, but more often than not, they'll try and collect from your estate.
If you have a trustee, that person is legally obligated to contact and pay off any debts before distributing money or property to your heirs. But, even if you don't have a trustee, your creditors can still stake a claim against your estate.
10 Urban Money Myths
Money Myth No. 9: You Need a Certain Amount of Money to Start Investing
Don't let this money myth rob you from investing in your future. Even if you can only invest a few dollars every month, you still have plenty of options.
As a first step, you can open an online savings account that pays interest. Or you can buy stock directly from a company, though a Direct Stock Purchase plan. You can also pick up a low-cost mutual fund for as little as $50.
10 Urban Money Myths
Money Management Myth #2: If I Just Earned More Money...
This is an enormously popular misconception – and one we're all apt to buy into when we're struggling financially. The myth essentially boils down to this line of thinking: "If I just had a little more cash, then most of my problems (or all of them) would go away." Unfortunately, nothing could be further from the truth.
Financial Truth #2: It's About Your Spending; Not About What You Earn
No matter how much money you make, if you don't control your spending, you'll never achiever financial security. Numerous instances of extremely well-paid celebrities going broke prove that how much money you make is far less important than what you do with that money. Consider the examples of actor Nicolas Cage and the late singer Michael Jackson. Despite earning $20 million a movie, Cage is allegedly mired in a world of financial troubles, including reportedly owning the IRS more than $6.2 million, and recently having several of his homes foreclosed upon. Meanwhile, Jackson is said to have once had a net worth topping $500 million. Yet, when he died in 2009, he was reportedly $400 million in debt.
Money Management Myth #3: I'll Get to That Later
Procrastination is an enemy of good financial planning. Yet, many of us put off so many financial tasks that we know we could, and should, do today. The little lie we tell ourselves is: "I'm too busy, so I'll get to that later." Needless to say, tomorrow is not promised to anyone.
Financial Truth #3: You'll Regret It If You Run Out of Time and Haven't Tended to Your Financial Affairs
Sometimes, our biggest regrets in life aren't over the things that we've done – but over the things that we neglected to do. Nowhere does this truism manifest itself more than the area of personal finances. If you fail to do basic financial housekeeping or to address various money-management issues as they arise, you put yourself and your family members unnecessarily at risk.
Money Management Myth #4 Financial Help Is Too Expensive
Have you ever wanted to hire a financial advisor, or maybe pay someone to create a plan for you or do your taxes, but then squashed that idea, based on the grounds that financial help is "too expensive?" If so, you bought into an unsubstantiated financial myth – and one that could be costing you dearly.
Financial Truth #4: The Cost of Failing to Plan Far Exceeds the Price of Getting Help
In reality, not getting help costs you far more in the long run than making a short-term sacrifice to get any professional guidance you may need. Think of hiring quality financial help as an investment in your future. The advice and services of a good financial planner, accountant, stock broker, or other financial specialist can pay huge dividends. Besides, sometimes the very same people decrying the cost of financial help are simultaneously spending chunks of money on luxuries, like eating out, or extra electronics.
Money Management Myth #5: Just This One Time Won't Hurt Me ...
To be an ace at managing your finances doesn't mean you have to achieve perfection in all money matters. But it does mean you should have a track record of regularly practicing prudent financial habits – as opposed to sporadically giving yourself license to commit financial transgressions that can throw your finances out of whack. It can be a slippery slope when you tell yourself that you'll make a questionable money move because "just this one time won't hurt me."
Financial Truth#5: Financial Lapses and Shortcuts Aren't Worth It
Allowing yourself to make financial goofs, or to do unwise things with your money, simply isn't worth it. Ever. For example, say you decide "just this one time" to let your auto insurance lapse. As (bad) luck would have it, that's the one time you may wind up getting into a car accident.
Money Management Myth #6: People Like Me Never Get Ahead ...
When you're stuck in a financial rut, and everyone who looks likes you also seems to be experiencing economic challenges, it's easy to accept the misguided notion that "people like me never get ahead." The "people like me" part of the myth may be tied to anything: your gender, race, age, professional title, religion educational background, or some other factor. No matter what the category, though, it's flat out wrong to lump all such people – yourself included – into one financial pot. Despite certain odds, economic success knows no racial, gender or religious boundaries.
Financial Truth #6: People Of all Backgrounds Can Get Ahead Financially
The problem with this myth is that it makes the assumption that certain groups of individuals are always held back by outside forces, individuals or institutions. In truth, however, no matter what your background, you can get ahead economically and many others in your same boat have likely already done the same thing – even if you don't know about such successes. So don't buy into the wrong-headed notion that people like you can't get ahead. Know that your financial destiny lies in your own hands, and that your economic fate isn't dictated or determined by others.
When it comes to money matters, don't believe the hype. And that's just what myths and lies are -- a bunch of hype that could be holding you back financially. By recognizing these falsehoods, however, you can start to conquer them and thrive.
Lynnette Khalfani-Cox, an award-winning financial news journalist and former Wall Street Journal reporter for CNBC, has also been featured in top newspapers including the Washington Post, USA Today, and the New York Times, as well as magazines ranging from Essence and Redbook to Black Enterprise and Smart Money. Check out her personal finance community site, and ask Lynnette a question at:
http://askthemoneycoach.com/
