Financial Mythbusting with Catriona & Jenny
On this episode of Financially Naked: Stories from The Financial Gym, our hosts are Jenny and Catriona, two Certified Financial Trainers at The Financial Gym. In this episode, they’re taking on the role of mythbusters as they tackle common financial myths. With so much personal finance advice out there, it’s hard to know what to listen to.
It's time to separate fact from fiction and debunk the misconceptions that often hold us back from achieving financial success. From the belief that one-size fits all advice works for everyone, to the notion that credit cards are always bad, we'll challenge these myths and provide you with the tools and knowledge to make informed financial decisions.
Podcast Notes
While the basic building blocks of personal finance are pretty much the same, true personal finance advice is rarely one-size-fits-all. Our Certified Financial Trainers’ favorite answer to client questions is, ‘it depends,’ and that’s because it’s true.
Is talking about money bad? Do I have to be an expert?
MYTH: Talking about money is bad and I should never discuss it with others.
Talking about money can be a sensitive topic, but it is not bad. We need it to live life. It’s often sensitive because there are feelings of fear, shame, or embarrassment associated with money. The more we talk about it, the more we can break that stigma.
One of the best ways to get better at talking about money is by practicing. Be open and honest with people Just talk about it and come from an open, empathetic place. It’s just a conversation. While it may be awkward, talking about money with others can be empowering.
MYTH: You need to be an expert to be good at personal finance.
While there are higher level aspects of personal finance, the most important part, the basics, are what you need to be financially healthy. Budgeting 101 is basically just spend less than you earn. Of course, you can dive in deep, nerd out, or become an expert, but that’s not necessary for long-term financial success. Anybody can learn how to be good with money.
MYTH: Investing is a quick way to get rich & you need a lot of money to get started
Investing should be thought of as a long-term game plan. It is not a way to get rich overnight. The magic of compounding interest is the time in the market. You can start small and invest more over time. If you have a retirement account, you’re already investing!
What’s the deal with debt and credit scores?
MYTH: Checking your credit report hurts your score.
Keeping an eye on your credit report is important and does not affect your score. Your credit report is different from your credit score. When a new account is opened under your social security number, it appears on your credit report. If something is not correct, you’re able to catch and address it if you’re regularly checking.
MYTH: All debt is bad
Debt is not morally good or bad. It is a financial tool. What is harmful about debt is high-interest rates or spending money you’re unable to pay back. When the interest is too high, debt can quickly spiral.
Debt is just borrowing money and the interest is the premium price you pay in order to borrow that money. For most people, debt is unavoidable. Whether that’s a car, home, or college tuition.
MYTH: Credit cards are bad
Credit cards are a form of debt and are just another financial tool, but you have to use them wisely. It’s important to pay the balance in full every month and not spend money you do not have yet.
Credit cards can be used to do things like travel, link some stuff here.
MYTH: You need to leave a small balance on your credit card to improve your credit score
Your credit score is a combination of factors, including your total credit utilization. You should aim to have 10% or lower credit utilization. When you have a balance, pay it off in full.
Are there things I should always be doing?
MYTH: You should always pay off your mortgage early.
It depends on your budget, interest rates, and long term goals. It can save you money in the long run, but isn’t always the best financial move.
MYTH: You have to max out your retirement contributions every year.
There is a difference between maxing out your accounts and getting a full match, if it is offered. You do not have to do either. How much you contribute to retirement accounts depends on your overall budget.
If your employer offers a match, and you can afford to contribute to take advantage of that max, it is very beneficial to do so. This is because a match means that for every dollar you contribute, your employer also contributes to that account.
There are limits set by the government that dictate how much you are allowed to contribute to certain retirement accounts each year. Maxing out your contributions means putting in as much money as those limits allow.
MYTH: A higher salary will solve all of my problems.
If you’re not able to manage $1,000, you will struggle to manage $10,000. It’s important to have an understanding of the basics of personal finance, no matter what level you’re at. Sometimes, a higher salary can cause other problems.
The way we feel about money is not directly related to the amount in the account. There are so many emotions and mindset challenges that come with managing your money that have to be addressed, or it will be difficult to feel confident in your finances.
If you want to share with us the worst piece of financial advice you’ve ever heard or have ideas for the show, send an email to trainerpodcast@fingyms.com. If you work with a Certified Financial Trainer to help bust through financial myths and navigate your finances, schedule a free warm-up call today!
Resources
Annualcreditreport.com - To check your credit report
Investopedia - Investing, retirement, savings, some more complex strategies
NerdWallet - Comparisons for smart financial decisions
BankRate - To Compare rates and crunch numbers