From when we are young we start learning various “truths” about money and how it works that become ingrained in our life. Usually these are habits that we pick up from our parents, although they can also be things we learn (or don’t learn) from watching TV or at school. Unfortunately a lot of these “truths” actually wrong. In this article we examine 5 of these so-called “truths”, and show how these truths are actually costing you money!
“Truth”: Creating a budget is hard, and means you have to do without.
Reality: Creating a budget doesn’t have to be hard - there are many different types of budget, and a bit of looking will find one that’s perfect for you. Best of all, with a budget in place you will find that it is the best tool available to let you take control of your money and become focused on getting you what you want in your life. Far from being an evil regime that deprives you of the things you want, a budget is a system that helps you to spend money to get those items!
“Truth”: The bank you have always been with is the best bank.
Reality: Your parents may have always kept their money at a particular bank, and when you got old enough you opened all your accounts there too - savings account, credit card, home loan, etc. However it’s a fair bet that if you looked around you could find a bank (or other financial institution) that offers much better terms, whether it’s a better interest rate on your loan, no account keeping fees, or whatever. These little extra savings can add up over the years!
“Truth”: If you buy something on special, you are saving money.
Reality: To be fair, this “truth” does have a grain of reality to it. If you buy something that you would have bought anyway when it is on special, then you are saving money. However if you only bought the item because you saw that it was on special and decided you wanted it, you haven’t saved any money at all - you’ve just spent money. Shops use this trick all the time - they know that people will just see the “sale” sign and spend more than they normally would because they feel they are getting a bargain.
“Truth”: You are stuck with whatever interest rate the credit card company gives you.
Reality: This is a curious “truth” that the credit card companies want you to believe! While it doesn’t always work, if you contact your credit card company and tell them you are looking at changing to another company because they have better rates, most companies will offer to lower the interest rate on your credit card. Because of the increased competition in the market place these days, credit card companies know that you have many more options than you used to have for getting a credit card, so they are willing to work to keep you as a customer.
“Truth”: By refinancing your house at a lower interest rate, you can save money.
Reality: Unless your new loan is for the same length of time as the time you have left on your current loan, you may be paying less each month but end up paying more in the end. For example, if you have already spent 4 years paying off your original 25 year loan, to save money your new loan should only be for 21 years. Because the highest interest is paid in the early years of your loan, if you get another 25 year loan you will primarily be paying interest again and not really reducing the amount you owe.
When it comes to money matters, sometimes it is best to sit down and relax with a nice cup of coffee made by drip coffee makers. Homemade ice cream from a Lello 4070 Gelato Junior wouldn’t go astray either!