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5 Personal Finance Myths Debunked

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Personal Finance Myths Affinity FCU Blog
By: Marc Conover
Senior Manager HUB Support Operations

Personal finance is a topic that concerns pretty much every one – and there’s no lack of opinions on it. But not everything you hear about personal finance is correct or will be right for you. Indeed, many assumptions about the path to financial wellbeing are not entirely true. They instead depend on your own unique circumstances and where you stand on your financial journey.

To help you better make decisions, here are five popular but flawed beliefs about personal finance, either debunked or put into better context.

Myth #1: Buying a home is always better than renting.This first “myth” is more of a part-truth, as home ownership is typically a good investment in the long run. That said, believing that it is always a better option than renting – at all times and in all cases – can lead you to make the wrong financial decision.
There are pros and cons to both buying and renting, so it is important not to take this decision lightly. A major factor in anyone’s decision is always going to be their own finances at any given time. Generally, renting will be the more affordable option, considering factors such as down payment requirements or closing costs when purchasing. With home ownership, there will also be continuous expenses to factor in, from a new roof to lawn care. When faced with this major life decision, start by comparing the costs using an online calculator1. If you have found the ideal community where you want to put down roots, and you have the financial means, then a purchase may be the right decision for you, especially when looking at today’s historically low2 mortgage rates. If you’re in a good position to buy a home, Affinity offers great rates and options on mortgages.

Myth #2: You need to have a lot of money to invest in the stock market.Over the past few years, the stock market has surged and left a lot of people richer, though many of them were already rich. More than half3 of Americans own stock, but that leaves nearly half who don’t, feeding into a misconception that investing in the market and making money from it is only for the wealthy. Not so. The days of needing an expensive financial advisor or broker to “play the market” are over, thanks to app-based trading platforms charging zero trading fees. Robin Hood4 is not just the name of a famous outlaw we all know; it’s now a viable option to start investing with as little as $5. This app-based trading platform, among others, allows investors to purchase fractional shares. The use of fractional shares affords investors the opportunity to buy into stocks with a high share price, such as Amazon. But if you’re looking for greater insight and to develop a long-term investing strategy, contact Affinity Investment Services. The point is, investing in the stock market isn’t just for the rich, or even just for people who have attained a high degree of financial wellbeing.

Myth #3: It’s too early – or too late – to start saving for retirement. Nearly everyone knows saving for retirement is a good thing, so this myth is less a mistaken piece of financial advice and more of a state of mind that many people have when they are young and “too busy” to worry about retirement planning, or “too old” and decide it’s just not worth the effort. The reality is that it’s always a good time to start saving for retirement, and there are options for people who feel they either don’t have what they need to get started or have “missed the boat.” When it comes to retirement savings, obviously the earlier the start the better, but it is never too late. Even starting at age 35 means you can have more than 30 years to save and benefit from investment returns and growth. If you are getting a late start, you can play catch-up and increase contributions if your financial situation allows for it. If your company offers a 401K, you will be permitted to contribute up to $19,500 in 2020. If you’re having difficulty getting started or have questions about viable retirement plans, contact Affinity.

Myth #4: You don’t need life insurance if you’re young and healthy. It may be tempting to devote limited financial resources to other areas – like saving money or taking out a mortgage – rather than purchasing life insurance that you probably won’t “need” for many years. But there are benefits to purchasing life insurance when young and healthy, including lower premiums. Rates will always be based on the individual’s health at the time of purchase. This affords the opportunity to lock in lower premiums, and the potential of building guaranteed cash value through whole life insurance. The sooner someone buys whole life insurance, the sooner they start building that cash value, which can be utilized for both opportunities and emergencies. Even if the death benefit itself is no longer needed, the cash value could eventually be used to supplement retirement income. So, think of life insurance as an investment rather than a necessary expense!

Myth #5: You have to avoid credit card debt, even if that means never getting or using a credit card.Though skepticism of accumulating debt is healthy, it’s possible to take it too far, and suffer resulting financial consequences. Credit cards, when used responsibly, can play an important role in one’s financial plan. When applying for a credit card for the first time, there should be a game plan in place. Ideally, you would only want to charge what you can afford to pay off in a given month, avoiding finance charges (a related misconception people sometimes have is that you need to carry a balance to build credit; you don’t!). Throughout life, we see the importance of good credit, so building credit early is advantageous. Opening a credit card at an early age can establish credit history. Another benefit of using credits cards responsibly is rewards programs, such as Affinity’s Pure Rewards Visa Card. If you are committed to paying off your balance each month, then definitely focus on a rewards card offering cash back. Earning a percentage back on total purchases, credit card holders will have extra cash in their pocket. And who couldn’t use some extra cash?

There are a lot of other myths. But I hope this blog helps provide clarification on some of the most persistent ones!


This information is for informational purposes only and is intended to provide general guidance and does not constitute legal, tax, or financial advice. Each person’s circumstances are different and may not apply to the specific information provided. You should seek the advice of a financial professional, tax consultant, and/or legal counsel to discuss your specific needs before making any financial or other commitments regarding the matters related to your condition are made.  

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