There are so many money myths floating around these days. Here are 3 money myths that I would will demystify today, to help you save some money and be more aware of your financial situation.
“A Cash Budget is the Best Budget”
There are so many tactics that people use to budget and track their spending. There is the envelope method, the cash method, the credit card only method and tons of other methods that can be effective. However when you are creating a budget it’s most important to determine which method will be most effective for you. There many experts that recommend people try the cash only method. To do this, you would use only cash for your spending and have set amounts for each budgeted item, such as clothing, food etc. This has gained popularity as it prevents people from adding onto their credit card debt and over swiping their debit card. Unfortunately, most people who I have seen try this method, realized it made them spend more. Although they would only spend the cash that they had with them, they often could not remember what they had spent the cash on, which forced them to withdraw more money out of the bank. If you are unable to truly track your spending and have a clear understanding of what you are spending your money on, you will continue to spend all that you have and never truly know where your money is going. Using a debit card at least lets you review all of your purchases and know exactly where your money is going each month. So the cash budget is not always the best budget.
“I’m not going to contribute to my employers retirement plan, I don’t plan on being there long.”
This is a major mistake young professionals make all of the time. Just because you don’t intend on staying at your job forever, you should still take advantage of any retirement plan they are allowing you to contribute to. If you don’t make contributions while you are there, you will potentially miss out on your company matching your contributions, which is basically free money and the ability to reduce your taxable income, which gives you more money back at tax time. Don’t think about contributing to your company’s retirement plan as investing in your company, think about it as investing yourself and in your future. If you do eventually leave the company you can take the funds with you!
“I never check my credit score, I heard it will make my score drop.”
You should know and be aware of your credit score just like you are your age. Checking this information does not reduce your credit score at all. It’s your credit, you are free to check it as often as you like. There are numerous free resources that will allow you to constantly view your credit report and your credit score. Website like annualcreditreport.com allow you to obtain your complete credit report from all 3 major credit bureaus once a year. For instant access to your score and your report in the palm of your hand you can use free apps such as Credit Karma and Credit Sesame. These apps were created by the credit bureaus so you are ensured the information is accurate.