Do you think you know everything about personal finance? If yes, then check out this following article to know whether or not you are aware of these 3 personal financial myths and make yourself a more knowledgeable person.
- A higher degree means you will earn a lot - It is true that you're sure to get a higher salary if you have a 4-year bachelor's degree in comparison to someone who has a high school degree. Researches reveal that a college graduate usually earns about $1 million in his/her lifetime as compared to a high school graduate. Likewise, a doctoral degree will help you earn about $2 million in a lifetime than a high school graduate. However, this phenomenon is not always true in each and every profession. For example, an electrician with a bachelor degree not necessarily can earn more than an electrician with a high school degree.
- You are always financially prepared for the future - If you think that you have a stable earning and have good investments, so you are financially prepared for the future, you are not always right. You never know when a financial emergency may shake your financial footing. So, always assess your income and your lifestyle, and then calculate whether or not you'll be able to live without a job for about 3-6 months. Always try to save some amount for the rainy days and have insurance policies so that you can afford the right medical treatment in need or you won't land into a financial emergency situation if your car is involved in an accident. Always try to save at least 10% of your monthly income and have some funds ready so that you can use them in terms of need without having to liquidate your investments.
- Your credit score is one as it is determined by one formula - First of all, you can get 3 different scores from 3 major credit bureaus, for which often the lenders use the concept of vantage score; it is an average of 3 major credit scores. Moreover, although FICO credit-scoring model is the most widely used, yet some credit bureaus use their own scoring model. However, all the credit bureaus have one common factor; that is, all of them use the information in your credit report to compute your credit score. So, you should always try to have a clean credit report.
The most shocking myth may be that you can save money by budgeting. Although one cannot deny the fact but the truth is it helps you more when you do budget for a single item. That is, when you allocate a definite amount for an item. It has been observed that when a person allocates $ 500 for buying a specific item, he/she often looks for items around $490 instead of choosing the item as per its qualities. By doing so, they often exceed the price allocated for an item. Every time, when you make a budget and have to buy several items, then if you spend more on one then try to spend less on other items so that you can purchase all your items within the budget you have allocated yourself.