Envision Financial

Seven Money Myths

There’s a lot of false information and misinformation out there when it comes to financial advice. And that’s nothing new. The internet did not create fake news. So how do you navigate the tricky waters of financial advice and sort out the good from the bad?

We found seven of the top money myths that have been making the rounds and debunked them right before your eyes.

But unlike with Mythbusters, you can definitely try this at home.

Money Myth #1: "Buying a home is better than renting."

Because you'll build equity, right? Not so fast. The truth is that many of our members find it's better to wait to own a home when...

  • Flexibility is an important part of your lifestyle right now, and the responsibilities of household upkeep or being a landlord will tie you down.
  • Your real estate investment won't grow in value by the time you need to sell.
  • You aren't financially comfortable enough to handle expected and unexpected maintenance costs.
  • A rate increase would cause financial burden.

Becoming a homeowner is an extraordinary adventure, but it can quickly become a nightmare if you bite off more than you can chew. You're not missing out if you decide to live with less until the time is right. You’re living smart.

Money Myth #2: “Carrying some debt improves my credit rating."

Does this theory sound strange to you? We think so too. The truth is that debt is the enemy of your financial well-being. We encourage our members to build and maintain good credit by having a variety of accounts that bill for services — as long as you protect your income by paying off your balance in full every month.

Money Myth #3: “I don't have enough money to build my savings."

The truth is that consistency matters more than contribution size. Some months it's easier than others to put a significant amount of money into savings. But during those expensive times—like summer vacation and winter holidays―even saving 5% of your income is the smartest choice. Our members who are successful savers always pay themselves first. If you wait, all that may be left at the end of the month is good intentions.

EXPERT TIP
Set up an auto-transfer into your savings account for every time you receive a paycheque.

Money Myth #4: "Checking my credit score will damage my rating."

Are you keeping a secret from yourself? The truth is that it doesn't hurt your credit rating at all when you check up on things. It's a smart habit, and you can easily get your score through TransUnion (known as a credit file disclosure) or Equifax (as a consumer disclosure). You can order your request by mail or fax through the forms these companies provide online or pay a small fee to fill out an application online and see your credit report right away. Where we suggest you be careful is allowing many lenders to check your credit score at one time. Significant changes or demand can impact your rating.

Money Myth #5 — "It’s always better to pay cash."

Do you think that credit cards and loans will ruin your financial security? The truth is that aside from occasionally getting a discount for using cash, you may be better off using credit because of the extra protection from extended warranties, fraud protection, and additional insurance. If your card is stolen you can cancel it with a phone call, and let your financial institution sort out the details.Just remember, it’s vital that you pay off your balance in full every month (see Money Myth #2). If you fall behind on a payment, plug that money hole until you’re fully caught up again.

Money Myth #6: "If I want higher education, I'll be stuck with a student loan."

It might not be easy, but the truth is that there are many ways to get your post-secondary education and graduate without a mountain of debt. First, seek out and take a shot at getting all the scholarships and bursaries you can find. Then, consider paying for tuition and student life out of your own pocket by accepting work-study opportunities at school, or taking a part-time or online program that gives you time to work off-campus. If you're entrepreneurial, you can use your skills to create a side business like tutoring other students, selling handmade products online or walking local dogs. Higher learning doesn't have to come with higher debt.

EXPERT TIP
If you’re a parent, grandparent or guardian, learn how you can take advantage of $8400 of free government money with RESPs.

Money Myth #7: "Tracking my spending is enough, I don’t need a monthly budget."

Until time travel is a thing, you'll need to create your own financial fate. Kudos for keeping an eye on your spending through simple online tools like MoneyView. You're learning a lot about your habits. Now, use that knowledge to improve your financial situation. Instead of just looking back, plan how you’re going to spend your money next month (or, if you’re a keener, all year). By doing this you may find you can pay off debt faster and save money on interest, keep a robust emergency fund, and have enough money for some big-ticket fun. It's like being your own fortune teller.

Financial literacy is about understanding a few key principles and applying them in different situations. Hopefully, you feel more equipped to face the onslaught that’s peppered through Facebook, Twitter, Buzzfeed, Instagram, YouTube, Snapchat, Google and sort the gems from the lumps of coal.

We are committed to helping you thrive on your financial journey. If you have any questions, contact us or visit an Envision Financial branch with any questions you have.

MORE LINKS: Shedding light on the dark side of using credit | Student tips to avoid debt | Creating a budget

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