In case you don’t know what money myths are, then here is your answer- money myths are traditional thoughts that people have related to money. Many of these may be developed because of wrong guidance or you may have heard this from someone, but today we are going to burst some of them, and introduce you to the truth to help you upgrade your personal finance game.
So here are the 7 most common money myths –
1. Fixed deposit is the only safe investment option – We understand that any person would want their money to be safe, and you may find equity risky due to a lack of your knowledge. But there are many other options that are safe and provide better returns. Many people out there are unaware of other options. Some of these are AAA+ category bonds, they provide good returns and are the safest option out there. Also, there are bonds issued by the government known as treasury bills, investing in these bonds provides good returns and is also guaranteed by the government. There are bonds issued by PSU and other companies that are also a great option. If you are looking for something different than bonds, then you may invest in a moderate-risk mutual fund that provides inflation-beating returns, also the money invested in these mutual funds is invested by experts so there is no need to worry. If you want some more options then there is ELSS. ULIP, NPS, PPF. Some of these even provide tax benefits and a retirement fund, so better than investing money in FD you can choose any of these options.
2. Investing in equity (stocks) is gambling – This is the most common money myth, and this is the reason less than 2% of the population of India invests in the stock market. But let me assure you it’s no gambling, it’s all about following basic rules and investing with caution. But it can be gambling, if you invest without sufficient knowledge, without your own research, or if you follow someone’s tips. Before you start investing in the stock market take a look at the basics, there is plenty of educational material on the internet you can access and invest in them. Also learn to do your own research, all the information about listed companies is available on the internet, you can search it up, check financials, and then invest your money, and in the long term, it would surely earn you great returns. So it is good to invest with caution and to earn good returns from your investment you would need to invest in equity, and if still, you aren’t confident enough then you have a mutual fund where your money is invested by professionals.
3. Credit card would lead you to debt – This is a money myth, that would keep you away from all the benefits that come with a credit card. You get rewards and use someone else’s money interest-free, what can be better than that. Also if you are a regular shopper then you would know that usually, credit cards have more offers as compared to debit cards, these are benefits that come with credit cards. It can be debt if you are careless, if you pay your bills on time make sure don’t overutilize the credit limit, then you are just going to be fine. It’s better to get a credit card if you have an option and enjoy the benefits.
4. You can’t save if you earn low – You don’t need to earn more to save, you just need to spend right to save. If you are someone who just doesn’t earn enough to meet your expenses, then it’s time to either increase your income or start a side hustle or reduce your lifestyle expenses. And you don’t have to save a particular amount, you have to save a percentage of your income, this can be as pre-decided by you which should be a minimum 10% you may prioritize your needs over savings and maybe then concentrate on your wants. If you follow this you would be able to save, and saving is very necessary for everyone out there.
5. You are young, you don’t need to save for retirement – I don’t understand how this makes sense, but as for an ideal retirement fund it should be at least 35 times your annual expenses and you may even consider inflation, so starting early would help you take advantage of compounding and gain better returns. Also if you develop a good retirement fund, you can retire early, rather than working your whole life. So start early because a small difference in a number of years can make a severe difference in compounding, so make sure you start early.
6. You are in good health and condition so you won’t require an insurance – This could be the dumbest way that you save money. Because insurance is necessary because a small premium would help you huge in difficult times. And having health insurance is one of the basic necessities and you should surely buy one for yourself as well as your family, and it should be your priority. And also other insurances such as cars and bikes are must buys, so don’t ever try to save money on insurance.
7. Real estate and gold must invest – Yes, real estate and gold can be good options, but one needs to know that times have changed. There are better options out there, equity, mutual funds, and bonds. Buying physical real estate and gold isn’t feasible and requires a huge amount, you can’t start small, you have better options that provide better returns and even an option for passive returns. But if you still want to invest you have options such as REIT and GOLD ETF, which allow you to start small and get returns
conclusion – It’s important to avoid these myths and to educate yourself about personal finance so you can make informed decisions and achieve your financial goals. Investing is possible for anyone with any amount of money, debt can be beneficial in the right context, and saving and investing both play important roles in achieving financial goals.