When you’re feeling a bit skint, it’s only natural that you’d seek money advice from others, and while this can feel overwhelming, at least you’re getting help…right? Well, unfortunately, there are a whole lot of financial myths out there, so that helpful advice you think you’re receiving could actually be counterproductive. To make sure that you can avoid this kind of misinformation, we’ve prepared the following list of common money myths that could actually be making you poorer.
Rent Is Dead Money
Many Brits, especially older people, preach that paying rent is a waste of money, as you’re not building equity. However, owning a home isn’t always better financially; high maintenance costs, property taxes, and mortgage interest can all add up significantly, amongst other hidden costs, sometimes resulting in higher monthly expenses than renting. Furthermore, renting provides a lot of flexibility, so don’t just blindly follow people’s advice to get on the property ladder.
You Must Avoid Debt at All Costs
There’s no denying that the word debt sounds scary, but not all debt is bad. For example, mortgages or student loans can be useful stepping stones to building wealth or earning more in the long run. The real danger lies in mismanaging high-interest debt like credit cards, but as long as you understand the difference between strategic borrowing and reckless spending, you should be okay.
Budgeting Means Never Having Fun
The idea that budgeting equals living like a monk is far from true. In reality, a realistic budget allows for treats and hobbies as long as your essential expenses are covered. It’s not about denying yourself; it’s about deciding where your money will have the most impact, whether that’s for a night out or simply building an emergency fund.
You Need a Lot of Money to Start Investing
Many people think investing is only for the wealthy, but it’s now easier than ever to start small. Modern digital platforms often provide low-cost options, meaning that you can start investing for as little as £1. Be patient and consistent because regularly adding small amounts over time can grow into a sizable pot, especially with compound interest doing the heavy lifting.
Cash Is Always King
These days, it’s very common advice that you should carry cash for small purchases, as it feels more secure and tangible than simply tapping your contactless card. However, relying on it too much can cause problems, as you miss out on tracking spending through bank apps or earning rewards from card payments. Furthermore, digital payments also often provide better fraud protection, which isn’t the case if your cash gets stolen.
Buying in Bulk Always Saves Money
Another common money myth that might actually be making you poorer is that bulk buying saves money. Sure, it does seem that way on paper, but it’s not guaranteed. If items expire or you don’t need as much as you’ve purchased, the savings will immediately disappear. Worse still, bulk buying often makes you buy things that you otherwise wouldn’t due to the deals being irresistible, so you should put your thinking cap on before you head to Costco.
You Should Always Pay Off Your Mortgage Early
You might think that rushing to pay off your mortgage seems like a guaranteed win, but it’s not always the smartest move. Sometimes, extra payments could be better used elsewhere, like through building an emergency fund or investing in higher-yield options. Therefore, consider your broader financial goals before throwing every spare penny at your home loan because it might soon leave you penniless, with decades still to go.
Credit Cards Are the Root of All Evil
Just like with debt, credit cards often get a bad reputation, but they can be a useful tool if used responsibly. In fact, they actually build your credit score, offer purchase protection, and may even come with cashback or travel perks. Yes, problems arise when you carry a balance and let interest pile up, but not from using the cards themselves.
Saving Money Means Never Spending It
Some Brits believe that saving money requires avoiding any non-essential spending, but this approach can backfire. Ignoring quality-of-life purchases often leads to burnout, making it harder to stick to financial goals, potentially leading to you falling into excessive spending habits to compensate. Because of this, it’s best to just strike a balance between saving and enjoying your earnings to keep your finances healthy and sustainable.
Cutting Small Luxuries Is the Key to Wealth
There’s no denying that skipping daily coffees or takeaways will help you save money, but it’s not going to magically turn you into a millionaire. Sure, these small savings add up, but it would be much more impactful to focus on reducing larger costs, like housing, transport, or bills.
You Can’t Save Without a High Income
Don’t let people fool you into thinking that a modest salary means saving is impossible. Actually, you can start saving with any income at all by automating your savings, taking advantage of workplace schemes, and cutting unnecessary costs, slowly helping you to grow your financial safety net. At the end of the day, even just adding £50 a month to your savings will make a difference.
Buy, Don’t Rent
Another common piece of advice that people get misled by is that, when it comes to tools, cleaning equipment, cars, and other large purchases, you should always buy them up-front rather than borrowing them. Sure, if you plan to use these things every day, buying them is going to work out cheaper. However, if you only need that expensive power drill for a single project, you’d be mad to miss out on the savings that renting it out for the day would bring.
You Have to Be a Finance Expert to Manage Money Well
Always remember that managing money isn’t about understanding complex financial jargon. Simple steps like tracking expenses, setting goals, and avoiding impulse purchases are where the real progress is made. More still, there are so many accessible tools available these days, such as apps or free advice from charities. Therefore, you can definitely get some guidance and manage your money well without being a financial expert.
The Stock Market Is Just Gambling
There’s no denying that investing in the stock market carries significant risks, but they aren’t the same as betting it all on red. Diversification, research, and a long-term mindset reduce risk significantly, and over time, stock market growth outpaces most savings accounts. Naturally, this means that it can form a crucial part of building wealth if done wisely, but you definitely shouldn’t go into it blindly.
A Higher Salary Will Solve All Your Problems
Finally, as the old saying goes, “Money doesn’t buy happiness”, and surprisingly, this is true even when it comes to solving your financial troubles. Earning more doesn’t automatically equal financial stability because, without good money habits, higher income often leads to bigger spending and taxes–not bigger savings. Therefore, building financial discipline is essential, regardless of how much you earn.
