Common Money Myths We Should Abandon

Kate Robinson
Greater Nevada Credit Union

In today’s world of social media and instantaneous communication, we can get news and information about pretty much anything in just a few seconds. We also get a lot of information, since so much content can spread so fast without moderation. Hopefully by now you know that Bill Gates is never going to give you $5,000 no matter how many times you repost a picture of him on Facebook. But did you know goldfish don’t really have 3-second memories? How anyone knows whether they do or not is beyond my area of expertise, but apparently the current consensus is that they have pretty decent memories after all. There are quite a few money myths being spread far and wide as well. Let’s dispel a few of them.

I don’t have enough money to save or invest.

This is one of the most common money myths. We all think that if we just got a pay raise, then we could afford to put money in savings, but the truth is, if you live paycheck to paycheck that habit will probably continue as your income increases. There will always be more expenses and more bills and more reasons why there is nothing left to put in savings at the end of the pay period. When I teach financial literacy classes, I always encourage students to use the principle “pay yourself first”. I've talked about this one a bit before: it’s just forming the mental habit of treating your savings account (or investing in a retirement account) as one of your bills that must be paid. Once you’ve re-trained your mind to make this a habit, you’ll find that 9 times out of 10 you can live on what’s left over after all.

Checking my own credit score will hurt my credit.

Don’t worry, it’s safe to check your own credit report, and you can do it for free once a year at www.annualcreditreport.com. It can harm your credit score if multiple lenders make inquiries about your credit, but even then it’s not always as dangerous as it seems. For example: If you’re applying for credit at a car dealership, the dealer may submit your application to multiple lenders to get you the best interest rate. The credit bureaus see that these inquiries all come in at once, and they understand that you’re car-shopping and treat them all as one inquiry. On the other hand if you apply for a car loan one week, a payday loan the following week, and then two credit cards and a personal loan, those are the types of inquiries that will lower your score.

You get what you pay for.

I’ll be the first to admit that there are times when going the cheap route costs more in the long run. Some products are inexpensive because they are cheaply made and quickly worn out. But it’s also true that we live in a status-driven culture, in which many people will pay more for an item just for the brand name. While higher-quality items do tend to cost more to make and therefore sell for higher prices, the true value of an item (and what drives it’s cost) is what it’s worth to the purchaser. The Living Rich Cheaply blog talks about this in more detail, but my brief advice is, make sure you do the research before you make a purchase based solely on the price tag, and get the most for your money.

Buying on sale = saving money.

Nope. Buying = spending. Stores, newspapers, and the Internet are plastered in signs encouraging us to “Save!” right above merchandise they want us to buy. They’ve convinced us that if an item is marked down, we’re “saving” money by purchasing it. Of course that’s nonsense. In many cases, we buy items we never had any intention of buying, simply because they’re on sale, and end up spending money we ought to have actually saved. Investopedia points out that even when we do spend less than we intended to on an item we actually wanted, it’s not “saving” unless we immediately put the cost difference in a savings account.

I don’t need to check my credit score if I pay my bills on time.

This money myth can be dangerous. Aside from the commonly known dangers of identity theft, which sometimes isn’t caught until a credit report is examined, we need to keep in mind that the whole credit reporting system is run by people – and lots of them. And where there are humans, there is human error. Your credit report is the result of a vast well of information submitted by various sources including you. It may contain discrepancies in your personal information, credit and payment history, and more. A misspelling of your name or missed digit in your social security number is enough to get your credit denied. The moral of this story is… check your credit report, even if you know your payment history is solid. Immediately take action if you find anything questionable on it.

08/29/2014