We all know that people will say the darndest things. But did you know that people will also believe the darndest things? It’s true, and we’re here to help blow up some of those myths about your money.
Retailers and others will indeed say almost anything — true, half-true or a smidgen of true — to get your money. But here are five more things that just aren’t true.
You can’t predict how much money you’ll need in retirement. Of course, you can. Not sure where this one comes from, but it’s actually fairly easy to know. You can account for inflation and other factors. Here is one tool that will help you determine this number. You need a goal to shoot for. As Yogi says: “If you don’t know where you’re going, you will likely end up somewhere else.”
It’s on sale, so I got a deal! Hold on a doggone minute. Sure, you can get a good deal on things you need, have been shopping for and can afford. However, if it strikes an emotional chord and you’re buying something that you won’t often use and haven’t planned for in your budget, it may not be the deal you think it is. “Lowest price of the season”, “Prices will never be this low again”, or “Only 3 left at this price” will always entice you to be impulsive. Here’s an excellent question to ask yourself: If I say “Yes” to this item on sale, what will I have to say “No” to?
It’s normal to have a car note, and you’ll always have a car note. Friends, this is one of the primary bills that keep you from saving for the future. Think about it. Americans owe more than $1 trillion on auto loans and the average car note is nearly $500 a month. What would happen if you could invest that $500 each month over 20 years? Find out for yourself using this investment calculator. Meanwhile, stay away from new cars, save up for at least a big down payment or even pay for the car in cash. (More on this next week).
I can always borrow from my 401k or my HELOC if I have an emergency. Why would you want to rob from your future to pay for your present? Your 401k is actively working for your golden years, and a HELOC or credit card is just digging a hole for your present. Establishing an emergency fund — and staying away from your 401k and HELOC — is the smartest thing you’ll do in your financial journey.
I’m still young; I have plenty of time to build retirement. This one is responsible for a lot of heartaches as you get older. Wherever you are, start now. While it’s never too late, if you want to retire in your 60s, investing in your 20s is essential. Here’s a quick example: Invest $750/month and get a 7% return. If you begin using that formula at age 25, you will have $1.85 million when you turn 65. If you wait to jump in at 35, you’ll have less than half that amount – $877,000 – by the time you retire.