Here are some of the money myths that might be holding you back:
Myth 1. The key to success is a good job.
While a good job can certainly provide you with a decent paycheck and a greater feeling of security, it’s important to understand that relying too heavily on a job can lead to financial disaster. As many Americans learned during the last recession, anyone can lose his or her job.
If you lose your job—or even if you keep your job but your hours are dramatically cut—you could find yourself in financial difficulty. A job is not a guarantee that your income will always be the same or worse, be discontinued. In fact, no matter how good it may be, a job still leaves you at the mercy of someone else.
You don’t have to quit your job and start a business to break free, but it is a good idea to look for ways to diversify your income so that you aren’t completely dependent on a regular job for your financial wellbeing. Look into side income (if it is not against your employer’s policy or a conflict of interest), investment income, or some other resource so that you have something to help you through the difficult times if your job falls through.
Myth 2. Buying a home is better than renting.
As with all things personal finance, the reality depends on your individual situation and goals. However, it’s a bad idea to assume that buying a home is always better than renting. The myth of homeownership is that it is an investment that pays off over time, but if the collapse of the housing market proved anything, it’s that the value of your home may not be there when you need to cash in on it. By the time you pay all of the maintenance and repair costs and the interest on your mortgage—even if you take a tax deduction—you might be lucky to break even.
The fact is that some people are actually better off renting and investing their money elsewhere. Renters have more flexibility in terms of moving, and if they can pay lower rent costs, they can invest what they save to make a higher return over time.
Myth 3. I can’t invest unless I have a large lump sum.
Too many people limit themselves because they believe they need a lot of money to invest. The good news is that this myth is easily overcome. If you have $25, you can open an account at most online discount brokerages, and you can often invest as little as $50 a month.
If you start with a low-cost index fund that doesn’t require you to pick individual stocks, you can take advantage of dollar cost averaging. Over time, you can do fairly well by consistently investing what you can in index funds and buying the maximum number of shares possible with each purchase. Investing is one of the best ways to build wealth over time, so it makes sense to start as early as possible, no matter how little you think you have.
Myth 4. Canceling a credit card will boost my credit score.
A common belief is that if you pay off a credit card and you are trying to get rid of debt, canceling the card will boost your score.
This is a myth. Instead, canceling your credit card could potentially damage your score because this action can impact your credit utilization as well as the overall length of your credit history. Unless you can’t stop yourself from spending, it may be better to leave your credit card alone after you pay it off.
It’s important to remember that each credit reporting agency has its own model for evaluating your information and assigning your credit score, so your score will vary between each agency.
Once you understand your finances better and identify money myths, you’ll be able to make better decisions and improve your ability to manage your money.
Miranda Marquit is a freelance writer and professional blogger specializing in personal finance, family finance and business topics. She writes for several online and offline publications. Miranda is the author of Confessions of a Professional Blogger: How I Make Money as an Online Writer and the writer behind PlantingMoneySeeds.com.
Equifax maintains this interactive forum for education and information purposes in order to allow individuals to share their relevant knowledge and opinions with other members and visitors. We encourage you to participate in discussions about personal finance issues and other topics of interest to this community, but please read our commenting guidelines first. Equifax reserves the right to monitor postings to the forum and comments will be published at our discretion. Do you have questions or comments about your Equifax credit report or customer-service issues regarding an Equifax product? If so, please contact Equifax directly. All opinions and information expressed or shared in blog comments are solely those of the person submitting the comments, and don't necessarily represent the views of Equifax or its management.