‘Tis the season of sharing scary tall tales. When it comes to managing your personal finances, there are all these myths that people fear or look out for. Here are some of the most popular myths about managing your personal finances and the truth behind it:
Myth 1: Financial planning is not for me
Reality: It doesn’t matter how much money you earn or is in your savings. Whether you’re a college student or a successful entrepreneur, managing your finances should be a priority. Financial planning allows you to discover how to spend, save and invest your money the best way possible.
Understanding how money works (whether cash or credit) secures your future and that of your family.
Myth 2: Save tax through an insurance policy
Reality: Typically, most working adults only do their tax planning at the end of the year. This is due to the fact that they have to save tax and show their investment proofs to their employers.
Many individuals invest in life insurance products. However, contrary to popular belief, this is the worst way to save tax. You are just wasting your money in something that you might not even require; a safety net of some sorts. Thus, it is advisable to reevaluate your financial plan to manage your finances better.
Myth 3: Investing in equity is too risky
Reality: Although guaranteed products seem less of a risk, always remember high risk equals high returns. Instead of gravitating automatically to fixed income products that guarantee returns, keep in mind that you still have to factor in inflation and tax that may result in negative returns.
Taking a chance with calculated risks such as equities can not only potentially give you higher returns but also a means to diversify your investment portfolio.
Myth 4: You don’t need a financial planner
Reality: If you are unsure how to start managing your finances, you can search online or even take courses and workshops which will give you plentiful insight.
Still, you should consider hiring a professional. If you are easily scared about numbers and money talk, investing in a financial planner to handle your finances can benefit you better.
Some advantages of having a professional overlooking your finances are that they can advise you on how to save and invest your money as well as understand the different financial products available in the market.
Myth 5: You need to be a math whiz to be good at personal finance
Being good in Mathematics and making spreadsheets, does not equate to being good at managing personal finances.
If you are barely passing Mathematics throughout your education or are in a job that does not require the calculation of numbers, this does not exempt you from managing your personal finances. It is not rocket science, personal finance is mostly making sure that you are financially healthy and not spending more than what you are capable of earning.
Yes, terms such as inflation and compound interest can scare a person away. But if you actually take a breather, and take it one market at a time, you will realise that managing your personal finances doesn’t have to be scary and can actually be enjoyable.
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