Money Myths Debunked by a Financial Advisor

There's a lot of misinformation circulating about finances and falling for it can end up costing you money. Whether the wrong advice comes from others or from your own beliefs, these common financial myths can harm your finances. Here's the truth behind some of the most widespread misconceptions.

Myth #1: Saving small amounts isn't worth it.

Reality: Even if you can only save a little, starting early—around age 25—can make a big difference. Saving 15% of your paycheck, including what your employer adds to your 401(k), can help you keep your lifestyle in retirement. If that seems like too much, don’t worry. The key is to start now, no matter your age, and gradually increase what you save.

Focus on saving what you can while covering essential expenses. A simple budgeting rule could be:

●      Limit essentials (housing, debt, bills) to 50% of your take-home pay.

●      Save 15% of pre-tax income, including employer contributions, for retirement.

●      Set aside 5% of take-home pay for emergency expenses.

Myth #2: The stock market is too risky for retirement savings.

Reality: While keeping your money in a savings account might feel safe, it doesn’t offer much growth, especially when considering inflation. On the other hand, the stock market has a long-term track record of growth. A diversified investment strategy can help manage risk and provide the returns you need for retirement.

You can create a diversified portfolio with mutual funds, ETFs, or individual stocks. Many 401(k) plans offer model portfolios to help guide you in building a balanced investment strategy. If managing your own investments feels overwhelming, consider options like a managed account or a target-date fund. Or you can always consult with a financial advisor.

Myth #3: I'm too young to worry about retirement savings.

Reality: Retirement might seem far off when you're young, but time is one of the most powerful tools for building wealth. Starting early helps you take advantage of compounding. This means the earnings on your investments are reinvested. Over time, this creates a snowball effect of growth.

Even small contributions to your 401(k) or an IRA can add up. If your employer offers a matching contribution, take advantage of it—otherwise, you're leaving free money on the table.

Myth #4: It’s impossible to know how much money I’ll need in retirement.

Reality: While everyone’s situation is different, guidelines can help estimate your retirement needs. Fidelity suggests saving at least 15% of your pre-tax income annually, including employer contributions. By the time you're 30, aim to have saved at least 1x your salary, 3x by age 40, 7x by 55, and 10x by 67. While these are just general targets, they can help you gauge if you're on track.

Myth #5: All debt is bad.

Reality: Not all debt is harmful. While high-interest debt like credit card balances can be costly, some types of debt, like mortgages or student loans, can be beneficial. These often come with lower interest rates and can help you reach important milestones in life. Just be sure to borrow responsibly and avoid taking on more than you can repay comfortably.

Myth #6: Credit cards should be avoided.

Reality: Credit cards can actually be useful if used wisely. Paying off your balance in full each month avoids interest charges, and many cards offer rewards like cash back or points for travel. Plus, responsible credit use can boost your credit score, which can help you secure loans with lower interest rates in the future. The key is to control spending and pay off your balance regularly to avoid falling into debt.

By separating fact from fiction, you can make smarter financial choices that help secure your future.

Sources:

https://www.fidelity.com/viewpoints/personal-finance/6-money-myths

Disclosures:

This information is an overview and should not be considered as specific guidance or recommendations for any individual or business.

This material is provided as a courtesy and for educational purposes only.

These are the views of the author, not the named Representative or Advisory Services Network, LLC, and should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information