Amazeview Team
Do you still believe in outdated financial advice like “checking your credit score lowers it”? If you were thinking of approaching your financial planning for the next year with the same old perspective, let us stop you right there.
The year is coming to an end, and so should these misconceptions! Apart from budgeting, saving, and investing, there is more to money management.
If you are not clearing out these false beliefs, you are ultimately keeping yourself from the benefits of financial literacy. We have outlined some of the common myths that become hurdles when you are growing finances. By the end, you will surely understand why financial literacy is important.
1. You need a lot of money to start investing.
Most of us believe that we need enormous capital to start investing in stocks, mutual funds, options, etc. This is simply not true. Strategic financial planning is all about investing your money from as little as a few dollars and letting compound interest work for you.
Image Source: Investopedia
As part of long-term financial planning, you must delay the expectation of instant returns. Reinvest all your returns (although insignificant), and after a few years, you may enjoy tremendous returns compared to your initial investments.
2. Debt is something to be scared of.
Most money management tips teach you to completely avoid debt. Little do they know that sometimes debt is not a financial burden but a strategic move.
It is all about the return on investment (ROI) rather than owing money. When you borrow money for something that will likely pay you more than the loan amount, it is a risk worth taking.
For example, student loans are one way to secure a better future for yourself or your children. Even mortgages are a wise investment when the property is high-value.
When well managed, certain types of debt, like personal installment loans, are a great tool. The money can be used as an investment, for large expenses, or emergencies.
You could even opt out of saving for emergency expenses and instead invest that money. In times of urgency, you can then take out quickly approved “no-credit-check personal loans.” Many reputable online lenders (like My Payday Loans Online) offer credit at low interest rates.
3. You cannot save money while also paying off debt.
People believe that while they are in debt, all the extra money should go into paying it off. What if we told you there is another way? How you manage your money changes everything here.
Prioritize repaying when the debt is high-interest. If not, you may balance both savings and repayment so that you have an emergency fund built up afterward. You can do this by repaying only the minimum payment on your debt and saving up the rest.
4. Credit cards are bad for your credit.
It is a widespread belief that having a balance on your credit card (owing money) lowers your score. However, this is not entirely true. There are multiple factors to consider.
If you have a balance of less than 30 percent of your credit limit, pay it back in full before the due date, and do not roll over the owed amount using credit cards; this is a good way to boost your score. With regular repayments, you show lenders that you are financially stable.
This is essential for future financial decisions, like buying a house.
Why is my score different on different sites?
Another common confusion you might have faced at any given point is “Why is my credit score different on different sites?” It is nothing to worry about since different agencies use varied scoring models. The score also changes based on the length of credit history you check for.
Does checking your credit score lower it?
Checking your credit score does not lower it. We check it through a “soft inquiry.” These checks are not done for potentially borrowing credit. What may hurt your score is a “hard inquiry,” which is done by a financial institution (such as a lender or credit card provider). Even then, your score will be lowered only by a few points, not drastically.
5. Real estate is a safe investment.
Although it may be, but not always. Everyone is attracted by huge returns on investment, but what we fail to see sometimes is the risk involved. For good long-term financial planning, you must always take calculated risks before putting your money on a property. Try relying on different investments rather than hoarding all your capital in one industry.
You may even consult a financial planner or an advisor. They can help you build your portfolio, often by spreading out rather than playing in one field.
6. You need to buy a home to build wealth.
Another prevalent opinion is that homeownership is the way to build long-term wealth. While it may be a path for some, there is no proof that this strategy works every time.
As we mentioned, it is best to diversify your assets. Any fluctuation in a particular market will not impact your entire portfolio.
7. Retirement planning is only for older people.
This brings us back to the first myth we debunked. Remember? When you are young, it is natural to remain in the trance that you have time to build your retirement fund.
While the government surely offers monthly checks in the form of Social Security payments once you are retired, relying solely on it is detrimental. With prices for even the most basic goods rising now and then, it is best to stay prepared right from the beginning.
8. Investing in stocks is TOO risky.
People say that it is a gamble because they do not have proper knowledge of the stock market. Learning about financial literacy comes back to the 2-3 points that we have been repeatedly talking about. Diversify your portfolio and compound interest.
In this case, refrain from investing all your money into a single stock. Keep learning about the market through books, webinars, courses, YouTube, social media, and blogs.
Stay in the know of trends and invest consciously to avoid losing money. With practice, it is not impossible to learn about it and you can make some decent returns in the long run.
9. Financial freedom is only for the wealthy.
This is a subconscious thought that prevents us from building the financial security that we truly desire.
Through smart saving, disciplined budgeting, and calculative investing, anybody can create financial freedom for themselves. It is not about how or where you start, but the consistency you show in the process.
After all, it is just about learning and making better choices although it sometimes means failing at the moment.
10. You don’t need a budget when making enough money.
The classic, age-old belief that more money solves all financial restraints. Those people who earn a lot can simply “spend it all.” High earners do not need to “track” their spending.
This is the root of what we call financial illiteracy. No matter how much you earn, if you are not budgeting, you will end up overextending yourself and get trapped in lifestyle inflation. Building savings is also important. Understanding where your money goes is the first step toward financial literacy.
Key Takeaways
To maximize your financial capabilities in 2025, consider learning more about how to manage your money and strategically plan your finances. The key is to be realistic and stay committed to the goals you have set for yourself. Focus more on long-term financial planning rather than returns at the moment to make the best possible decisions in this domain. As long as you are consistent, it hardly matters where or with how much you start.
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