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”: Creating a budget is hard, and means you have to do without.
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. Far from being an evil regime that deprives you of the things you want, a budget is a system that helps you to spend money to get those items!
“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 you buy something that you would have bought anyway when it is on special, then you are saving money. 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 use this trick all the time – they know that people will just see the “sale” sign and spend more than they normally would because they feel they are getting a bargain.
“Truth”: You are stuck with whatever interest rate the credit card company gives you.
Reality: This is a curious “truth” that the credit card companies want you to believe! 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”: By refinancing your house at a lower interest rate, you can save 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 Gelato Junior wouldn’t go astray either!