Money Myths

One of the most frustrating aspects of operation The Simple Dollar reader comments, where readers who intend to do the right thing, actually spreading the lies and misconceptions based on false myths of money circulating around there. I thought to make six of these misconceptions, here and now - and I'm sure some of this will awaken some real discussion.

1. Investing in stocks is expensive, with rates ranging up to more than 2% of eating raw.

That was true in the 1970's, but with the online discount brokerage and direct connections to investment firms, do not drown in brokerage commissions. There are many great options out there, but the two I use (the best).

For individual stocks, use Zecco. Zecco offers a handful of transactions per month free - no broker fees at all. They are able to pay through the advertising of other products on your site. There are also high-end features available, but for the individual investor who just wants to sell and buy a little stock in hand, is the best deal out there.

For mutual funds, I use Vanguard. Vanguard allows you to invest directly with them without charge. They offer a very large number of index funds, most of which take a very low cost, typically less than 0.2%. You can manage everything online, easy as pie, and start investing very quickly.

The idea that you have to pay huge commissions to invest in the stock market is a myth that the first day of the liberalization of brokerage. In today's world is a lot of investment options, and as you can see some clear objective of investor scarce.

2. Debit cards are less secure than credit cards.

If you look at federal laws that describe the basics of consumer protection authorities and debit cards and credit cards, debit cards, then offer a little 'less legal protection for credit cards. They are really the same (you are responsible for only $ 50) within two days of implementation of the fraud, but after that, credit cards offer less protection.

However, almost all credit cards and debit cards offer much more protection than that. If you see a Visa or MasterCard logo debit or credit card, you do not have any liability for fraudulent purchases.

As long as your credit card has a Visa or MasterCard logo and tell you all firms to use your card as a credit card rather than a debit card if they ask (which means you do not enter your PIN), your credit card provides the same protection as a credit card. This is because although they have often been criticized for encouraging people into debt credit card, Visa and MasterCard both give people a large part of consumer protection.

3. Things are set up so the rich get richer and the poor poorer.

I used to believe this myth as well, but it is simply not true. Things are set up to reward people who work hard and offers great value to others and to believe in the myth that "the rich get richer and the poor poorer" simply ignore people who come regularly from anything for success for (often by working hard and using their talents in an intelligent way) and people who have much and not waste it.

The truth is that if you work hard, work smart and work constantly to create value for themselves, you can only do well in life. If you make the decision to put only 9-5 hours of work and then play hard on weekends, you are also choosing to remain in the same socioeconomic class. If you make a qualified choice for the job and then spend at least part of the hours of starting off half of the business and / or to improve yourself, you get to move the site.

It is not "the man keep you down," it is the choices you make every day. The next time you sit with your friends talking about how the system is set up against you, ask yourself if you could not do something now to improve your situation - or perfect.

4. I can save a large sum of money to hit big sales.

Many people are very enthusiastic about Black Friday (and other big sales), and why not? They offer incredibly low prices for consumers of all varieties - you can save lots of money, right?

In fact, sales to promote excessive and hasty purchases. They show that these low prices on some items to get you into the store and get you to buy liquor. I want to see an ad and think, 'Wow, this game is on sale for only $ 40? "I'll take it!" So I'll go into the store, spend $ 40 on the game (which I should not use) and see something else while I "need" as a large package of AA batteries. Before I know, I spent $ 100 on things I would not buy and could well live without.

Even better, some retailers feel that things like being the "sale", but in reality is characterized according to their initial base price. My uncle had it personally while working at a large retail chain in the years 1980 and 1990 - when they operate a "sale" sticker on an item, we would first put a sticker on the plug with a price really exaggerated, then affix a "sale" sticker on it with a reduction of the inflated prices, return it for a price which is even higher than it was before.

Sale prices are great if they fit with something you already planned to buy, but if you see something in an ad and the price is to convince you to buy it, if this sale does not save money - it costs you much time.

5. Refinancing your home when interest rates fall always save money.

A couple I know well the refinancing of his house, apparently when interest rates drop a little. They have become almost hysterical with me when it was discovered that the refinancing of the recent drop in interest rates. "You're pulling the money!" They shouted at me.

The truth is that refinancing is not always the best choice - in fact, unless the difference between the rate you have now, and the rate you'd have more than 1%, it is probably not worth . There are several reasons why.

Only when you refinance, you must pay significant fees up front. Do you have $ 3,000 or more to get ahead on this refinance? Of course, it will reduce your monthly payments, but for many families, there are a lot of money just to file a whim.

Secondly, the house is moving along in an average time before the end of their mortgage. If you pay for the refinancing and then move on to a period of three years, is almost always possible to take a nice loss on the refinancing. Refinancing can be a good thing if you plan to stay in place for some time, but if you're even remotely consider switching in the future, it may not be the best option.

Thirdly, the best time to hunt for the refinancing rate of investment can be very high, too. In order to find a really good rhythm, you'll probably need to hit the pavement a bit 'to find it. What is time worth to you in this hunt? If you spend forty hours to monitor the best prices, get all the paperwork done and get all the signatories, who is also a significant cost.

If you are considering refinancing even use a refinance calculator and see how long it will take for your refinancing worthwhile. For us, in our situation, I think so, but I also think there will be another rate cut in a month or two, so I'll wait for now. Remember, refinancing is never automatic "yes!"

6. If I have money is important at all, I better financial planner.

With the huge amount of information online and in books, you're better off investing in yourself, for several reasons:

Financial planners often charge significant fees. Even if an investment advisor were able to find more favorable investment for you, send him yet about it. If you can put a few steps, make reading and finding the right investment for you, you keep the costs in the pocket.

Financial planners are often paid directly for certain investments, often mediocre. When you pay someone to manage your money, you expect that will guide you towards the best investment for you - and most financial planners. However, there are some out there (I have interacted with one, myself) that you direct investments are not necessarily in the top of the line. Why? Because there are going to bounce back. It's weird, but it happens - every time you entrust someone else with your money, you take some level of additional risk.

So why would anyone ever use a financial planner? Financial planners are useful if you lack confidence (or time) to manage your own money. If the thought of managing a large sum of money worries you (or thought of doing research on investments overwhelms you), then hire a planner - the ability to sleep at night is probably worth the fee and the low risk associated with it.

Remember: you can do yourself. It is not difficult, and the relatively little extra time you spend to learn and it will be well compensated by not having to pay