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 look at 5 of these truths, and show how these truths are costing you money!
“Truth”: Making budgets is hard, and they force you to live without any comforts.
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. And once you have a budget in place, you have the best tool available to take control of your money and get it focused on delivering everything you want in your life. A budget isn’t some evil process that deprives you of the things you want – a budget is a system for helping you get the money you need for the things you want!
“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 there is a good chance that with a little looking around you would find a bank or credit union that offered much better terms – no account keeping fees, a better interest rate, etc. 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 it is something you were going to buy anyway, then it is true that you are saving money by buying it on special. But if the only reason buy the item is because it was on special (ie: you weren’t planning to buy it originally), then you haven’t saved any money at all – you’ve just spent money. Shops appeal to our sense of saving all the time with this trick – they know that because people think they are getting a bargain, they are willing to spend money that they wouldn’t normally spend.
“Truth”: You are stuck with whatever interest rate the credit card company gives you.
Reality: Credit card companies really want you to believe this “truth”! 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”: If you refinance your house at a lower rate, you are saving 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. So if you have already paid off 4 years on your original 25 year loan, your new loan should be for only 21 years. In the early years of the loan, most of each payment goes to simply paying the interest on the loan – if you get another 25 year loan you won’t be reducing the amount you owe, and will end up paying a lot more overall.
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!
