Top 5 Financial Myths

In a world where we are constantly bombarded by advertisements, it can sometimes become difficult not to see certain things as normal. The lending agencies have marketed their products to the point that we assume that debt is a normal way of life. And with so many people falling for this every day, debt has indeed become a normal part of life for many. But it doesn't have to be that way. By falling for their ploys, you and millions of other Americans are actually sabotaging your future. These banks will have you believe that they are there to help you. In reality, they are just trying to help themselves. Here are the top five most common financial myths fed to us by this industry and how we can avoid them.

Myth #1: You have to get a credit card to establish a credit record and get a credit score. The truth is you don't need a credit card at all. Ever. You can establish credit simply by paying your utilities or your rent on time. By opening a credit card you are setting yourself up for a lifetime of debt. Studies have shown that people spend twelve to eighteen percent more when they use a credit card than if they pay with cash. Add to that the fact that most people do not pay off their cards each month and carry a balance with an average rate of 12% interest. For us, this can spell financial disaster. For the credit card company, it spells profits. Why take the risk?

Myth #2: You need a credit card in case of emergency. Fact is, most "emergencies" cost under $1000. If you don't owe money to anyone, it is easy to save up the thousand, but just in case catastrophe does strike, save up even more. Most experts agree that 3-6 months of living expenses will cover just about anything life throws your way.