The Scariest Money Advice I’ve Ever Heard
Let’s get real - there is some scary misinformation out there!
In this article, I’m busting myths on the scariest money advice I’ve ever heard.
1. If you’re young and healthy, you don’t need health insurance
No!!
It’s great that you’re healthy now, but being young does not make you immune to illness or accidents.
Insurance is a “just in case” policy. You don’t know if anything will happen to you. But if it does, you’ll be happy you had the insurance.
The reality is that at some point you will need medical care - even if it’s only an ear infection. And until we have universal healthcare in the United States, even a simple trip to the doctor could cost you hundreds of dollars without insurance.
2. Cut up your credit cards and use cash
Again, no!!
Credit cards are one of the best financial tools available to the average person.
First, they protect your money. If someone steals $100 of cash from your pocket - you’re never getting that money back. If someone steals your credit card and buys $500 of gift cards - you report it to your credit card company and they reimburse you the cost.
Next, credit cards are one of the easiest ways to build your credit score. Simply using your credit card for normal purchases and paying it off every month will help you get a high credit score fast.
Finally - the rewards! Credit card companies incentivize you to use their credit card by offering cash back, rewards points or discounts. Just use your credit card for everyday purchases that you’re already making - like going grocery shopping and buying gas - and you’ll get rewarded! Cash doesn’t get you that.
3. Your credit score is an “I love debt” score
To all the Dave Ramsey followers out there: he lies to you. If you ever want to live the ‘American dream’ and buy a home - you need a credit score.
The reality is, the capitalist society we live in is expensive and nearly all Americans will need to borrow money at some point in their lives.
If you plan to…
Get a mortgage for a home
Finance a car (because you don’t want to drive a $2,000 piece of junk)
Open a credit card (rewards, baby!)
Rent an apartment
Begin utility services
Apply for a job (yes, some jobs check credit score!)
Get a cell phone plan
Get auto/renters/homeowner’s insurance
…then you need a credit score!
A credit score is necessary to live in our modern world. If you need help building or re-building your credit score, check out this article: How to Build (or Rebuild) Your Credit From Zero.
4. Carrying a balance on your credit card increases your score
This advice is completely false! Carrying a balance from month-to-month on your credit card does NOT show the banks you’re capable of paying. It shows them you’re capable of spending more than you can pay.
You should never carry a balance on your credit card, unless for desperate circumstances. Using a credit card, and paying it off in-full every month is the best way to increase your credit score. It shows the bank that you can spend and pay using your card responsibly.
5. If the bank approves your loan, you can afford it
A bank or mortgage lender will approve you for the highest amount possible, so that it takes you longer to pay off the loan and you owe them more in interest.
Basically, they’re saying: if you do nothing except sit in your house and go to work to pay for this house - you can afford it.
But you have a life! So don’t accept the largest loan you can find. Accept one that allows you to buy a house you want, without having to dramatically reduce your lifestyle.
Not all money advice is good money advice—and some of it can actually set you back financially, if you follow it blindly. The best thing you can do is to educate yourself, question what you hear, and choose the strategies that actually support your financial goals and your life.
Your life may not be perfect, but it is imperfectly yours. The only way to live it is your way.
Katherine, founder of Imperfect Budget
Imperfect Budget is an educational platform built to help women align financial goals and free themselves from limiting money mindsets.
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