The Buyt Desk
When you start earning you will start feeling on top of the world. You start spending all your earnings on your shopping list, dream vacations, gifting and many more such things on your checklist. And saving is usually the last thing you do even if it is on top of your checklist. Along with your salary comes free advice from elders in the family and well-wishers. You will receive random pieces of advice on personal finance. If the advice comes from the people you trust, you will blindly follow it. But these are not always practical and profitable. If you are following such guidelines or beliefs and not making any effort to grow your asset then consider this as a red flag. Select the right investment option and grab the opportunity to grow your money. Note down your goals and discuss the same with your financial advisor and start investing early. Do not fall for the below myths. These are the 10 money myths that we are bursting for you.
10 Myths about money
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Money in a savings account is a good saving – Savings account is good only to keep emergency funds but has no good returns. Currently, the rate of interest on savings accounts is much less than the inflation rate. Go beyond savings accounts and invest in different sources and diversify your savings portfolio.
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Do not think about retirement plans until you are 40 – At the age of 40 if you start to save or invest for your retirement you have to keep aside a huge amount. But if you start it young as soon as you start earning then even putting aside a small amount will grow into a huge corpse by the time of retirement.
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To invest you should have lots of money – Keep investing regularly. The amount you invest is not important but consistent. You can even start with Rs.500/- a month. You do not need a huge amount in Lakhs to start investing. Procrastinating and waiting till you have lots of money to invest is a bad decision.
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Owning a house is better than renting – Owning a house is a life goal that is more emotional and not rational. Renting a house is more sensible as it is cheaper. While on rent you can focus on your job without worrying about maintaining a house and paying home loan EMIs. Analyze all the factors thoroughly before deciding to buy a house.
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An emergency fund is not needed – When your monthly earnings are steady and have a healthy savings portfolio including retirement savings and insurance, it is natural to think that you’re all set financially. You may feel no need to have emergency savings. But if you’re injured when on vacation in a country that’s not covered by health insurance, how will you manage medical expenses? During an economic recession if you lose your job, how will you pay everyday bills? Immaterial of all your insurances, you need to have liquid cash sufficient for 10 months at least.
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Physical gold is the best investment – In India, buying gold is a famous investment. But the charges you pay other than gold value are a waste of money. Gold returns are not that great compared to other avenues. Little investment is good as it can be used as liquid cash but never buy gold that is more than required.
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Real estate has good returns – As real estate’s value never goes down, it is considered second best after buying gold. But returns on real estate depend on its location. Sometimes it generates revenue that is enough to pay loan EMI and gives a return on investment too. In such cases it is good else huge EMIs will drain your pockets, instead choose another portfolio.
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The stock market is good only for gamblers – Shares and stocks are profitable when you do a good study and know all the tricks of the market. Blindly buying shares is like gambling and that is not the right way of doing it.
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A credit card can be used as an emergency fund – A credit card cannot pay rent or EMI of a person who has lost his or her job. Nor can it pay heavy medical expenses or huge car repair charges. So a credit card will not act as an emergency fund and you need to have liquid cash equivalent to 10 months salary as your emergency fund.
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Investing is risky – Your hard-earned money is precious and it should always grow. While investing, always study the portfolio well and understand the risks. Analyze it and invest only as per your capacity. Diversify your investment. There is always a risk when you invest but you know what risk you can take.
Summing up
Handling finances is stressful and needs lots of effort. Some are lazy and find excuses to make investments. You live only once so enjoy life and do not think about investments or the future. But what if you are left with no wealth to enjoy life. If you want to enjoy financial freedom all your life, you have to plan your finances well. Your financial plan will not only help you but help your kids too. Now that you know all myths and reality about money, make wise decisions. What is good for others may not be good for you. So do not copy anyone when it comes to financial planning. Hope bursting these myths about your money will help you achieve financial freedom.
