Myths about money are all around us – Some have been passed down from generations while others are simply a result of popular opinion. Unfortunately, it is these myths and false beliefs that can prompt you to make reckless financial moves that can ultimately derail your finances.
Take this example for instance:
If you think you lag behind in money management because you don’t earn enough, you couldn’t be more wrong. If A earns more than B, that doesn’t make A better at managing his finances compared to B. In fact, when you start earning more, you may be tempted to start spending even more.
Below we’ve tried to debunk some more myths about money that you might still believe.
Budget cuts can make you rich
A penny saved is a penny earned.
We have all heard this saying and most of us follow it too. However, securing your future and collecting the amount of money you may need for retirement will not come from saving extra pennies. Following this method, even if you manage to save AED 500 extra in a year, will you be able to provide for your future or your children’s education? The wiser option is to focus on the bigger picture instead. Try to maximize your earning potential and remember to pay yourself first. Secure your savings and invest them cautiously so your money works just as hard as you do.
You are too young for retirement planning
There is no minimum age to start planning for your retirement. As soon as you join the workforce, you should start planning for your retirement. Why? If you start saving AED 20,000 every year for retirement from the age of 25 rather than 35, you will automatically end up with AED 200,000 more. The later you start, the more you will have to save to make up for the lost time, and the more difficult it will be to secure a financially comfortable retirement.
Paying with cash will help you stay on-budget
In principle, paying with cash or even your debit card is pretty foolproof when it comes to sticking to your budget, right? Not always. If you only deal with cash and debit cards, you’re missing out on credit card reward schemes like cashback, loyalty reward points and airmiles. Credit cards when used cautiously can help you save big. If you make it a habit to pay your monthly dues on time, there is no reason why credit cards should negatively affect your finances.
You should diversify your investment portfolio
Diversifying one’s investment portfolio to reduce risk is a great habit considering the fact that you have enough money to invest in various places. But since most people don’t end up saving substantial amounts and have to work with smaller investments, over-diversifying can ultimately defeat the purpose. If you diversify whatever little savings you have in various investment products without understanding them properly, you can end up losing money. Instead, choose and stick with two or at most three investment options that you really understand.
Only the rich can consider investing
Investment is not only for the rich. In fact, most rich people have made their fortune because of their investment skills. You can talk to a financial advisor, gain some tips, learn about the market and start by investing with a small amount (let’s say, in a low-risk mutual fund or systematic investment plan).
You should be good at Math to manage finances
There are people who are extremely well-versed in mathematics and have no problem crunching numbers. But if numbers and calculations give you a mini panic attack, you’re not a lost cause in terms of financial management. The internet is brimming with financial calculators that can help you figure out the amount you need to save for your retirement, the interest on your credit card, the mortgage you can afford, and everything in between.