When we think of money and our grand financial plans—both short-term and long-term—we tend to cling to those old, time-tested maxims about saving money that we’ve heard over and over again, starting from when we were young and filling up our first piggy banks. We assume that most of these maxims are true—after all, they’ve withstood the test of time and if we hear something enough times from enough people we tend to accept them at face value.
But…have you ever stopped and thought about whether or not these money-saving notions are actually true, or still hold up in today’s economy? Let’s take a closer look at some common money saving myths, and see if they still hold up.
1. Debt is bad.
Who hasn’t been told early on by someone in a trusted position that “debt is bad” and that we should always strive to live a life of total economic freedom, unshackled by the evil forces of debt, which only serves to cripple us financially. If this was something you simply accepted as true—think again.
Responsible debt, which means borrowing money or utilizing credit within a range that makes realistic financial sense for you and your economic situation, is actually an effective way to establish a good credit history, and lets you build sound long-term financial habits and behaviors. Getting comfortable assuming debt, which can help you build your abilities with handling maintaining regular repayment schedules and understanding interest rates and other key financial terms, can really help set you up for responsibly handling future loans, purchases, and investments.
2. Buying cheaper is smarter.
Lots of us are guilty of this one—when considering a purchase we research a wide range of options at various prices and convince ourselves that the cheapest option is the most financially responsible choice. After all, we’re saving money, aren’t we? Well…maybe not.
The truth is, it’s only sometimes true that purchasing the cheapest option is the smart approach. Why? Because it’s often true that cheaper isn’t better and you’ll wind up spending more money in the long run on replacements for the cheaper item when it breaks vs. buying the more expensive, higher quality item that lasts first.
3. Owning is better than renting.
This notion is about as old as the first mortgage and as pervasive as it gets…but is it true? Like many things in life, this isn’t so black and white, and the actual answer is…maybe.
The truth is, it depends on your situation. While it’s often true that using your money towards paying a mortgage and owning property is a smart move when compared to paying rent to help someone else who owns the property, you have to keep in mind that owning property comes with many additional expenses, including property tax, land tax, and maintenance and upkeep fees, which renters often don’t have to worry about. So, depending on your financial situation and resources, buying a house may also be buying you a set of financial concerns that you may not be ready to take on.
Furthermore, the terms of a mortgage can vary wildly, and as we’ve seen during the recent mortgage crisis and housing bubble, depending on your mortgage things can get financially risky fast. The bottom line: it’s in your best interest to take a full, in-depth financial inventory before determining if buying or renting make sense for you right now.
4. You don’t have to save money until I’m older.
Many younger people fall prey to this notion, that they have plenty of time in the future to start worrying about saving money and being financially responsible. After all, isn’t it the privilege of youth to be carefree and irresponsible, and worry about the important stuff like money when they’re older?
It might not surprise you that this is an extremely shortsighted and foolhardy approach to money saving. The truth is, it’s never too soon to start saving money and developing sound financial habits. Furthermore, once you get into the mindset that you can put something off until later, it only gets easier to keep operating under this principle, and later can quickly become too late.
The truth revealed
Okay, so now you know the truth—some of those old money-saving myths we’ve all been told may or may not hold up for you, depending on your current financial situation and short- and long-term financial goals. That said, make sure to always take stock of your current financial situation and outlook when making any serious financial decision, and if you can consult with a financial expert, even better. Good luck!
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