Mississippi Money: Money Myths
It has never been easier to find excellent financial tips online, from friends or in the news. Unfortunately, most of that information wasn’t designed with exactly you in mind. Financial tips easily turn into money myths when they aren’t applied correctly.
If it worked for him it will work for me, right? You’ve probably spent enough time around friends and family to talk about some of the most exciting topics we share – finance! Maybe you heard a hot stock tip, an investment product recommendation or a rule of thumb from a cousin who seemed like he was living the food life on Facebook. Maybe it worked for them! Maybe they’re not telling the whole truth. Yesterday’s investment fad is not where you will find tomorrows returns. Develop a plan that works for you and stick with it.
I need a Roth IRA, a Joint Account or a 529 College Savings plan. Maybe. These are all great places to put money… for different goals! While the Roth IRA is my favorite investment account structure, it is not the right one for everyone. Each type of account has different tax consequences, legal ownership, and limitations. A comprehensive plan for your situation will include the appropriate accounts for your life now and in the future.
I can’t lose money at the bank! Bank accounts are very important. They are the backbone of any personal finance plan. But if your bank charges high fees and pays you no interest, the purchasing power of your money there will decline over time as your life gets more expensive. Cash in bank accounts is best for short term and emergency needs.
If the stock market has high returns, that’s where all my money should be, right? Historically, the stock market has generated returns that enable people to grow their money for distant, expensive goals. Along the way to high returns, the stock market has fluctuated wildly. This risk means that stocks play a specific role in your portfolio and are unlikely to be 100% of your entire net worth.
This advice is free! Isn’t that nice? A stranger has come to town and is buying you a nice dinner and giving you very valuable and urgent advice, they say. Do they have a fiduciary duty to put your best interests above their own? The best advice comes from someone who understands your situation deeply and has no conflicts of interest. Who is paying for that advice you received – not a lot of people work for free!
What isn’t a myth? Work with someone who has your best interest at heart to develop a plan, update that plan as your life evolves, and stick with it! Getting started and being consistent are probably the most important features of any financial success story. Remember – just because you read it in my column doesn’t mean that it is advice tailored to you!