With the best intentions, financial advice gets passed on through generations. Parents, grandparents, aunts, and uncles lovingly share the practices that have worked for them, but some of the guidance may not apply to today’s economy as our world has evolved. In this blog, we are reviewing timeless advice and financial practices that may need to be updated to reflect our new economic realities so that we can make the best financial choices. Let’s break down some of the most common money myths you might have heard and how financial literacy has changed.
Credit Card Money Myths
- Old advice: Never use credit cards. Cash only!
- Modern reality: Using credit cards responsibly can help build a credit history and scores, and offer financial incentives such as discounts, cash back, travel benefits, and purchase protections.
Credit cards can be a financial asset when used strategically. Instead of avoiding credit cards altogether, learning how to use and manage them wisely can play a significant role in positively impacting your finances. For example, credit cards can boost your credit score so that getting loans, renting apartments, or getting better financing terms are within reach. Overall, the wise use of credit cards can benefit today’s economy financially.
There are a few simple things you can do to improve your credit score right now – 5 Things You Can Do to Improve Your Credit Score
Housing Myths
- Old advice: Buying a home is always better than renting.
- Modern reality: With home prices skyrocketing, unstable interest rates, and rising costs of home repairs, owning a home is more financially tricky than ever. Depending on your lifestyle, local housing market, and financial goals, renting might make more sense than buying a home.
Housing decisions are not a one-size-fits-all option. Whether you rent or buy, make housing decisions based on your circumstances, job stability, finances, financial goals, and location flexibility.
Education Myths
- Old advice: Get a college degree at any cost!
- Modern reality: College degrees are not required to get a well-paying job, and not all college degrees have a good return on investment.
When pursuing higher education, consider the cost of education against potential earnings and career outcomes to bust this money myth. Look into alternative education options, like trade schools, apprenticeships, and certifications that offer high-paying career opportunities without the financial burden of college debt.
Before you decide your dream school is financially out of reach, do some research – Our Favorite Free & Reduced Tuition Colleges
Savings Myths
- Old advice: Save all of your extra money in a savings account.
- Modern reality: Saving money in a savings account isn’t enough, with inflation outpacing traditional savings account interest rates.
While an emergency fund in a savings account is beneficial, a balanced approach to saving and investing to reach financial goals is better than putting every extra dollar in savings. For example, consider investing in stocks, bonds, and other investments if you want long-term economic growth.
Easy ways to cut back on spending to get out of debt or focus on saving – 10 Small Changes to Start Saving Money Today
Job Security Myths
- Old advice: Stay with one company or business for your entire career.
- Modern reality: Loyalty does not guarantee job security. Research suggests that switching jobs can lead to significant salary increases compared to staying in the same position. Some studies even indicate salary increases of 10%-20% or more when employees switch companies.
Overall, the job economy has changed dramatically with more opportunities for remote work, higher rates of freelancing, and more people pursuing side hustles. Most people now find job security in having multiple income streams and building transferrable skills across industries to earn money instead of relying on company loyalty.
Retirement Money Myths
- Old advice: Social Security benefits will be all you need to retire.
- Modern reality: Social Security is only one piece of the puzzle in retirement finances and shouldn’t be your only retirement plan.
To prepare for retirement, start planning for retirement as early as possible. Time and consistency are your most significant assets in retirement investing, so consider multiple income streams through investments, businesses, or real estate to be more financially stable later in life.
How much money will you need to live comfortably in retirement? – Spend Safely: Don’t Run Out of Money in Retirement
Tax Myths
- Old advice: Always take the most significant tax refund possible.
- Modern reality: A large tax refund often means you’ve given the government an interest-free loan throughout the year.
Aim for strategic tax planning instead of celebrating a big tax refund. For example, adjust your tax withholdings to keep more money in your pocket throughout the year. With the extra money each month, save and invest it wisely.
Explore what you need to know to navigate tax season easily every year – Navigating Tax Season: Timeless Tips for Every Year
Keeping Up with the Joneses
- Old advice: Success means having what others have.
- Modern reality: Comparison and pressure from social media can create unrealistic standards of wealth, leading to unnecessary debt.
Create a financial plan that fits your lifestyle and goals and includes wise spending, economic independence, and living within your means. Ultimately, worry less about what others have and focus on building a life that suits your family’s values.
Know what drives your spending habits to make wise and informed financial decisions – Spending Triggers and How to Avoid Them
Think Critically About These Money Myths
It can be challenging to balance advice from our elders while realizing that our world and financial realities have changed. We must understand the water we’re swimming in with our modern financial world. So, we can take financial advice from previous generations with a grain of salt while thinking critically about common money myths and our financial decisions. Overall, the financial landscape of our world can change quickly. Therefore, being informed, researching financial practices and topics, and having an open mind to making different financial decisions than those modeled for us can help us make confident and informed decisions.
