7 Myths Behind Personal Financing Decisions

What people tell us about personal financing, we usually believe. For instance, the saying “always save for a rainy day” does not necessarily have to ring true; what about investing your money through buying bonds? Would you not, in a sense, earn more money and put it to good use as well?

People are all individuals and need to remember that they should tailor their financial decisions to their specific needs.

Listening to financial advice from others can be helpful but not everyone understands each individual’s unique financial situation.

Need some help with debunking personal finance myths? Here are seven common sayings:

1. You must always set a budget before going out to buy an item.

While this does sound rather intelligent, the downside here is that the consumer might end up spending towards the upper portion of their budget. The customer may also overlook each individual product’s qualities because of the focus on price. Sacrificing quality over quantity is not always a benefit.

2. The more you earn, the greater amount of money you will have.

This does not always ring true. Think of the people who suddenly win the lottery and go bankrupt or the pro sportsmen who spend all their money within five years of retirement. The problem with having more is that a person ends up buying many things they don’t need just because they can.

3. A higher education degree always leads to a larger salary.

A college degree does, on average, earn an individual more money. However, people holding higher education degrees in fields like editing or electrician work did not witness a significant salary hike.

4. Money doesn’t buy happiness.

This, in a sense, is not true because money can buy happiness up to a certain point. Studies show that as salaries increased up to the $75,000 mark; people described themselves as increasingly happy.

5. Financial aid only goes to those who need it most.

This is not necessarily true; families who need financial aid can apply for merit-based aid if their children want to attend expensive universities.

6. There is only one main formula used to determine your credit score.

This is not true; there are dozens of scoring models, such as FICO. Individual credit bureaus also each have their own ways to calculate a credit score.

7. You have thoroughly planned for your financial future.

Plenty of adults don’t know how to save their money or plan out how much they need to spend on a monthly basis. People also often have debts they need to pay off.