A recent study into so called money rules has shown that while some of the things we accept as fact are true, many of them should be avoided.
Green Path Deb solutions have offered advice about the five rules that should be broken.
We accept so many financial rules as fact, but a recent study shows that abiding by these so called rules could actually be damaging us financially. While some of these money rules can make sense, many others should not be given a second thought according to Bill Druliner, financial counselor and group manager for GreenPath Debt Solutions. Druliner said:
A lot of times there is that kernel of truth in there, or it’s true in some situations and not at all in others,
There are five financial rules which consumers should definitely consider breaking:
1. Pay off Your Mortgage as Soon as You Can
Sometimes paying off your mortgage early may well be true but at other times it is not such a good idea. The interest rate you are paying can have a huge impact. If you have a fairly low interest rate on your mortgage then it probably isn’t worth paying it off earlier than necessary. It is also important to remember that paying extra to your mortgage is not going to reduce monthly payments.
2. Don’t Charge If You Can Pay Cash
This is not necessarily true if you stand to benefit from using a credit card. If you have a rewards or cash back card, charge as much as you can, then pay off the bill in full at the end of the month to avoid interest.
3. College Kids Need to Build Credit to Get A Job
Building credit can be important for a variety of reasons, but employment is not one of them. In reality, employers are more concerned with your ability to perform the job well than they are about your credit score.
4. There’s A Set Percentage You Should Spend On Items (Home, Card, Food, Entertainment)
This so called rule assumes that everyone has the same needs. How much you spend on various areas of your life will depend on what your goals are and what is important to you.
5. To Build Credit You Have to Carry a Balance
This one is totally wrong, but it’s the one heard most frequently. Getting a secured credit card can help to establish or rebuild credit by allowing you to build a record of good payment behaviors. Carrying a balance every month is actually bad for your credit score. It is much better to pay the balance off in full each month.