The 7 Wrong Ideas That Stunt Your Financial Growth

Financial misconceptions hold you back from financial independence and security

The 7 Wrong Ideas That Stunt Your Financial Growth
The 7 Wrong Ideas That Stunt Your Financial Growth
Titlee Sen - 26 July 2021

People frequently find themselves in financial difficulty as a result of not being honest about their financial status. Recognising the most prevalent falsehoods, on the other hand, is one of the first steps toward a more honest and prosperous future.

  1. The concept of good debt

There is sometimes a distinction made between "good debt" and "bad debt." Student loans or your home may be examples of "positive debt," which may help you develop long-term wealth. Credit cards with high-interest rates are the most prevalent source of "bad debt." However, by segregating debt in this manner, it becomes much easier to justify having debt in the first place. True, certain types of debt are worse than others, but it's best to strive to stay out of debt entirely. You'll only be able to aggressively endeavour to get rid of debt if you have a mindset that "all debt is terrible."

  1. Retirement is far away

Whether you are young or feel you will never stop working, you must face the fact that you will get old and will have to retire from employment at some point. You'll have to rely on others for your daily necessities if you haven't saved for your post-retirement years.

It's simple to think of reasons why you shouldn't save money, but only a handful of them are legitimate. Consider your retirement savings account to be the first payment you must pay each month. You won't miss the money right now, but you'll be grateful to have it when you retire.

  1. Money safest in a savings account

When we think of saving, the first thing that springs to mind is a savings bank account. They are the safest place for us to put our hard-earned cash. Savings accounts aren't inherently bad, but they don't allow your money to grow. They are, of course, more convenient and entail fewer dangers than the other choices, but the interest rates they provide are also significantly lower. Because of inflation, the value of money declines over time.

You might put some money aside in your savings account. You may invest the balance of your money in a Fixed Deposit, Equity Funds, or Debt Funds.

  1. I'll earn more in future

We frequently do a decent job of estimating costs when planning our future, but we make the mistake of assuming that our revenues will rise. I know folks who have purchased homes that are larger than they can actually afford, justifying the purchase by claiming that they would receive raises in the future. We all like to believe that our earnings will increase over time, but there are no certainties. Work to guarantee that your expenditure is less than your present income in order to attain financial independence. Any pay raises you to get will be treated as bonuses in this manner.

  1. Approval for a credit card means security

Isn't it true that if a credit card business sends you an application for a new card, they must believe you're financially responsible? Wrong. Even those with poor credit might be accepted for credit cards. And if you currently have credit card debt, the last thing you want to do is add to it with a new card. While credit card issuers would prefer that you did not go bankrupt, they are more than willing to make your payments at exorbitant interest rates.

  1. Fear of investments

People are becoming increasingly hesitant to invest their money for fear of losing their hard-earned cash. The only way to overcome this anxiety is to learn about investing. You must determine your financial objectives and risk profile. After you've completed this, you may start working on your portfolio. If you're unsure about investing, seeking advice from a financial counsellor is your best choice. A skilled financial advisor will assist you in constructing the appropriate portfolio depending on your risk tolerance and objectives.

  1. Ignoring credit score

If you have a poor credit score, getting a loan will be tough. Your credit score is strongly influenced by how you use credit cards. A credit card might be a double-edged sword when it concerns your credit score. It has the ability to either improve or degrade your score. You should pay all of your payments on time, keep track of all of your obligations, and don't use more than 30 per cent of your credit card limit.

Living paycheque to paycheque is extremely detrimental to your financial well-being. And if you've been telling yourself any of the aforementioned misconceptions, you're just increasing your financial problems, so it's high time to confront and correct these problems.

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Outlook Money
October 2021

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