5 Financial Myths We’re Tired of Hearing
From the Loch Ness Monster to ‘tomatoes are vegetables’, popular myths persist despite how farfetched they sound.
Debating whether a legendary monster lives in the depths of Scotland’s waters is harmless fun – it makes little difference regardless of what you believe (unless you’re planning a scuba diving excursion in Scotland).
Other folk lores, like financial myths, can be more fatal than fun. Financial falsehoods lead to unwise financial investments, or money moves you assumed ‘everyone was doing’ – all the cool budgeters are doing it after all, and you just wanted to be cool too.
These are five financial myths we regularly hear that are just plain wrong.
‘Homes are great investments.’
Younger, delusional demographics still list being a homeowner as one of their biggest money goals in life.
It’s the American Dream, after all (this Dream applies to Canadians too, trust us). It’s the sense of providing your family with a roof over their head, meaning you’re ‘an adult’, that’s responsible for glorifying owning a home. Plus, putting money towards a home will pay off in the long run, when the value of your property scales upward, right?
But it’s not always a good investment.
Buying a house involves putting down wheelbarrows of cash, as well as taking on a shiny new mortgage. And those things aren’t flexible. Never mind monthly maintenance, taxes, insurance, and all the other fun stipulations that come with your home.
Owning a home is expensive. It’s illiquid. And it’s something you shouldn’t consider unless you’re 100% sure you can afford every aspect of it. Most young people are burdened by debt and student loans, so renting is a more viable, and realistic option (bonus myth debunk: there’s nothing wrong with renting!).
As a final note: home prices appreciate at a rate at, or below inflation. Historically, investing in a home has returned around 7% of what you put in.
So if you’re buying a home to settle down and plant some roots in, that’s fine – just don’t expect it to be a primary investment.
‘Investing is for the rich.’
Those five words above make us cringe more than ‘it’s not you, it’s me’. Coincidentally, they’re both myths too (no, we won’t go into detail, thank you).
Investing isn’t as complex or expensive as you were led to believe. Like anything new, sure there’s a learning curve, but that’s nothing a little research and sound advice can’t solve.
You may be investing and be unaware of it. For example, do you have a retirement plan? If that answer’s yes – surprise, you’re an investor. And it didn’t cost you thousands of dollars to start off either.
Sure, some stocks cost thousands per share, and many mutual funds carry lofty minimums, but there’s an abundance of affordable options. ETFs and Index funds could be a place to start; most have little to no minimum investments or fees. Small contributions to your retirement plan will slowly grow over time, potentially peaking at exponential rates.
Long-term investing is how you build wealth. Wealth isn’t found overnight – unless you’re the person that invented the nose hair curling iron. You’re set for life.
‘A will ensures your assets will go to whom you want.’
If the beneficiaries you’ve named in your retirement plan differ than those on your will, your assets will actually go to the names on your retirement plan. So, double check and make sure the names align on both documents.
And if that fails, you can haunt the false beneficiaries from beyond the grave until your assets go to their rightful owners.
‘Invest now? No no…I’m trying to time the market.’
Timing the market means you’re waiting for the optimal time to buy low, and sell high.
Perhaps this quote from transcendent investor Peter Lynch can shed some insight:
“I can’t recall ever once having seen the name of a market timer on Forbes’ annual list of the richest people in the world. If it were truly possible to predict corrections, you’d think somebody would’ve made billions by doing it.”
What he said.
It’s simply not possible to, you know, predict the future. Start investing immediately if you find a promising prospect, so you can lay the foundation of a solid, long-term financial plan with strong diversification.
‘I’m too young to concern myself with retirement.’
This is just silly. Preparing for retirement while you’re young is ideal – time is the best tool to generate wealth.
It’s simple math: the longer you put it off, the less money you’ll have come retirement. Even if it seems light years away, and you can’t put much into it, start anyway. Any amount helps – you’ll be surprised at the difference it makes in the end.
If there’s one money formula we stand by, it’s time combined with compound interest = pure value. We don’t want to overhype it, but some finance gurus call it the eighth wonder of the world.
…that may or may not be a myth.
You know what isn’t a myth? Magical Credit’s ability to help clients in a tight spot, or who could use a fast cash loan to quickly invest in a great opportunity – like the nose hair curling iron venture we mentioned earlier.
Magical Credit provides cash loans to anyone with a reliable source of income – either traditional or non-traditional – and a proven debt repayment history. To find out if you’re eligible for a short term loan between $2,000-$10,000, fill out our online application or call 1-877-213-2088.