There’s a lot of misinformation related to personal finance. It is easy to become confused when wading into personal finance. We will discuss the top 10 money myths and tell you what the truth is about all the myths.
1. Buying insurance online can fetch you a good deal
Premium can be low because of a reduction in insured value, change in plan features. Term plans are cheap and the price decreases importantly if you buy online. However, you cannot get such discounts when purchasing medical, vehicle, or travel covers. Although online distributors claim that one can save a big amount by buying motor insurance online, the low premiums are frequently because of a drastic cut in the insured declared value. If you’re purchasing medical or car insurance online, ensure you check the features of the new policy.
2. Online mega sales offer fantastic discounts
The ‘super-saving deals’ that you really want to get aren’t as attractive as e-commerce businesses want you to believe. A study found the average selling cost of products on shopping sites during sale days is 17 percent lower than normal. This isn’t an important cut, considering the routine sales that go on through the year to push unsold stock.
3. Too many credit cards push you into a debt trap
Many credit cards have no bearing on your spending. Several people feel that owning more than one credit card will lead to overspending. That isn’t true. It’s a characteristic trait and one can live beyond one’s means without plastic. Multiple credit cards have benefits. Multiple cards give you a high credit limit that, in turn, decreases the credit utilization ratio.
4. Small savings schemes offer fixed returns
Rates are market-linked and alter every quarter. For the investor who is average, small savings schemes are synonymous with assured returns and zero returns. However, even small savings schemes provide safety, the returns are not fixed. Interest rates provided on small savings schemes are associated with government bond yields. So, they’re market-linked now, with rates revised every quarter.
5. Bankruptcy is a clean slate.
Bankruptcy isn’t a cure-all for debt issues. While it can remove specific obligations, it can’t remove student loans, child support, alimony, and income tax liability, and more. Plus, bankruptcy appears on your credit report for 7-10 years, deflating your score and making it much hard to borrow in the future.
6. All debt is bad.
Excessive debt should be avoided. It will lead to poor credit, bankruptcy, and financial ruin. But borrowing is sometimes essential. Many people need a loan to acquire a car or purchase a house. Plus, financing, when used correctly, builds credit. If you live and borrow within your means, you can maintain good financial health.
7. Credit scores do not matter if you do not borrow money
Credit scores are essential for many reasons. They can be a factor when you apply for a job, and they’re a factor in determining your car insurance premiums. And because you can receive a free credit score without a credit card, there is no excuse to ignore your score.
8. Credit cards are bad for the finances
Credit cards are not the problem but credit card debt is. Credit cards provide convenience, security, rewards. A few cards come with zero percent introductory rates on balance transfers and purchases. And the good rewards credit cards provide everything from cashback to free travel.
9. The life insurance policy should cover 10-times your income.
That is a very, very broad rule of thumb for younger applicants with dependents. In actuality, the insurance life of everyone needs change, depending on their present debts, existing and future expenses, assets and many years their family needs support. You can easily find out how much coverage you should have, using free life insurance calculators.
10. Cash is King
Making the switch to cash can certainly be helpful if you are struggling with your spending. But if you are disciplined enough to pay off the credit cards monthly, there is no advantage to avoid them. Not do credit cards provide protections that cash cannot, but most offer some kind of incentive you can take advantage of.
Cashback and reward cards can offer sweet perks that can outweigh the benefits of cash. One of the reasons people frequently prefer cash is because it is been shown that you spend less when you pay in cash. The psychological barrier to buying helps you save.