Six Money Myths To Ignore

Managing your money is a really personal thing. What works for you won’t work for everyone, and any advice I give won’t be suitable for everyone out. It depends on your priorities, circumstances, and you as a person. Because of this, there are lots of harmful money myths out there that people still believe. I’ve spoken about the mistakes I’ve made with money before, but now it’s time to look at these money myths.

Here are some money myths to ignore.

Money myths- All credit is bad

Money myths have made us think that all credit is bad. But there’s a difference between good debt and bad debt. We’re often taught to fear credit and be ashamed of owing money. But it’s entirely possible to use credit safely and help build your credit score in the process. It can be just as damaging to have no credit as it can be to have bad credit. The most important thing is to not over-commit and not take out more credit than you can afford to pay back.

Taking out loans that can further you and your future such as student or business loans can be beneficial. Taking out a mortgage and investing in bricks and mortar is seen as good debt as generally, your property will increase in price over time.

Credit cards are bad

I still know people who are dead set against ever having a credit card due to hearing money myths about them being bad. Yes, they can be negative if you can’t control your spending or you open too many. But having a credit card and using it smartly is a great way to positively impact your credit score. Applying for and getting accepted for a credit card in the first place is a big tick against you. But making some purchases on it and paying it back on time shows you are reliable and can afford the repayments.

You can score extra points on your credit score if your limit is increased showing the credit card company are willing to offer you more as you’re reliable. And you can get extra points if your credit utilisation is low. So if you could borrow £1,000 but you only have £200 on your card you’re utilising 20% of your credit. Keeping this number pretty low is good as it shows you’re responsible. If you don’t have a credit card this is a great way to boost your credit score.

Money myths- Checking your credit rating makes it go down

I remember hearing this myth loads when I was younger. People would tell you to not check your score too often because it would negatively impact the very score you were looking at. I still hear people who are scared of checking theirs for fear of damaging it. But that couldn’t be further from the truth. It’s so important to keep track of your credit score with the three UK credit reference agencies: Equifax, Experian, and Transunion. You can use Clearscore to see your Equifax score. Experian for your Experian score. And Credit Karma for your Transunion score.

By checking you’ll have the opportunity to challenge any mistakes such as incorrect addresses. And you’ll be given helpful tips on how to improve your record. You will see a soft search on your credit each month when you get a new report from these companies. But it won’t negatively impact your score.

There’s no point saving if I can only save a small amount

Saving is a great thing to do regardless of how much you can put away as it all adds up. Whether you save £50 a month or £1,000 a month, every penny will make a difference. And starting to save gets you into good habits. So if you start earning more you’ll already be in the habit of saving.

If you’re able to gradually increase the amount you save as well then you’ll be able to hit your financial goals even earlier. You can try and cut down your bills and fixed expenses to save more. Start a side hustle or a way of making some extra money on the side to save.  Use cashback sites on anything you buy or round up your spending to save a small amount.

Money myths- Investing is only for the wealthy

Investing has always been open to the masses, but in recent years it has been made far more accessible for the everyday person. Previously you’d need an investment company or financial advisor for this sort of thing and they’d only be interested if you had a large amount of money to invest. But now there are apps to help you like Freetrade and Trading12 where you can do it yourself. With both of these, you can start investing with just £1. And most banks now offer Stocks & Shares ISA’s if you don’t want to pick your own shares.

It is a myth that investing is only for the wealthy. Yes, those with more money may be able to invest more, but it doesn’t stop you. In fact, you may already be investing without realising it if you have a pension through your employer.

You don’t need to think about your pension until you’re older

This is one of the biggest money myths we need to get rid of. I’ve spoken a lot about pensions on this site before including why you need one, and why you should keep your auto-enrolment pension (if you have one). When you’re in your twenties and thirties, retirement age feels like a long long way away. And you’re still navigating life, building a career or a family, and finding out what you want from life. And your financial goals are likely to be very different, maybe you’re saving to buy a house or a fancy car. But the earlier you start saving for your pension the less money you actually need to put aside. This is because of compound interest.

Because your pension is basically an investment the longer it is tied away the more it may make, and the more interest you’ll make. If you leave saving for your pension until too late chances are you won’t be able to save enough to put away a healthy sum for retirement.

What money myths have you heard?

Pin It