Gaining a good understanding of money can seem complicated. There is not always a right or wrong thing to do however it’s important to know certain things so you don’t spend more than in necessary. Between paying off debt early to seeing a sale sign, here are five money myths to reconsider.
1. Early Student Loan Repayment
In the event that you have other debts, it may be best to make them a priority. Student loan is the cheapest type of borrowing there is with interest rates at 0.9% (for those who began repayment before April 2016). The greatest advantage of a student loan is that it comes directly out of your salary and there are no financial setbacks in the event that you can’t keep up payments.
Remember that your student loan is probably going to be the longest, cheapest loan you have that won’t cost you any financial worry. In the event you have disposable income and you want to make early repayments, then the choice is yours. However, if a house or a nearby future investment is on your list, it may be worth altering your financial priorities.
2. You Need To Earn More To Save
After all your outgoings, it can be easy to look at your bank balance and ask yourself what is left for yourself. The temptation to spend all your money on your hearts desires is there however ensure that you also pay yourself. However you budget, add in paying yourself as a mandatory part of your outgoings. You can set up direct debits to make it easier for yourself. This change can seem hard when you begin but start by putting away 5% of your salary, then 7-10% and keep going up to a percentage that gives you the balance between having some money in the bank and enjoying the luxuries of now.
3. Emergency Funds Aren’t Necessary
Between having savings and a credit card, you may question what the point is in emergency funds. However, there is a key difference between using your emergency fund if you are between jobs and using savings that you have actively saved in order to get a house in the future. Credit cards can be useful for one off emergencies but resist thinking that credit cards and savings that aren’t earmarked for a rainy day can be used for on-going cash flow problems.
4. Cash Is Better
It isn’t the case that cash is always the better option. It may work in circumstances when you want to stop yourself from spending too much in certain situations; however, using a debit/credit card has its advantages. For example, credit cards offer purchase protection in the event a product over £100 is faulty. For debit cards, you can clearly dispute a charge by showing your transactions. Cash only is best when you need to control spending such as impulse purchases. Cash isn’t always king.
5. You Save Money Buying On Sale
On the basis that an Apple product costs £700 and then it goes on sale for £500, there hasn’t been £200 spared but £500 withdrawn from your income. Of course, when there is a bargain, the initial feeling is that you’ve saved so much when in reality; it’s not the case. Try to avoid looking at sales when you have no idea what you’re planning to buy. Purchase with purpose.
This post was written by Bola.