Personal Finance Myths

If you have ever had financial troubles or issues with your credit score, you may be looking to re-examine your personal finances. You can fix any issues or imperfections that you may have from your past so that you can be financially stable. There may be several different ways for you to repair any previous damage, but you should know the facts before you do anything. Learning how to save and spend your money reasonably is very important, so you need to know the truth about some myths about personal finances.

When it comes to your savings, people say you should always put a portion of it into stocks or mutual funds. Only do this if it is something that will fit in your financial plan. Everyone has different ways of saving or investing their money, but it normally fits their financial goals in the end. You can use your savings account in whatever way that you want, and depending on where the account is, you may be able to earn interest if you stay above a certain amount.

Some people think that they will be better off buying than renting a home. Yes, there are cases when buying is better than renting, but it is different from person to person. If you have bad credit, it may be better for you to rent so you can repair and establish new credit instead of buying a house. Buying a home with bad credit may mean that your monthly interest will be higher than someone with a good score. Your credit score shows lenders how big of a risk you are, so if you hold off on buying so you can improve your score, it is possible you will pay a lower monthly rate and save money in the long run.

Closing your credit cards will help your credit score and prevent you from acquiring debt. It is true that if you have no credit card, then you won’t be able to build up credit card debt. However, closing your account can actually hurt you in the long run. Instead, pay off your debt as you are supposed to, then simply don’t use the card anymore. Doing so will keep that card and card history on your credit report, but will also show that you have paid it off. After about seven years, the information will no longer show up in your credit history. Also, by keeping your credit card accounts open you can teach yourself how to properly use and pay off your card.

Another very popular myth is that you cannot get a loan if you either have bad credit or have debt. There are loans out there that are specifically for people who have bad scores. Getting a loan like a personal loan can help you pay off your debt, and even work to rebuild your score. A lot of people who have financial troubles may opt for a personal loan so they can use it to consolidate their debts. Doing this allows for the person to pay off multiple debts they may have with the personal loan, and then only have to make one payment instead of multiple.