5 Myths About Personal Finance Debunked Here

Finance is considered to be an alien concept by a vast majority of people. They either find it too complicated and overwhelming to understand, or simply accept certain misinformed notions as the truth. This misunderstanding of concepts often refrains them from taking advantage of some of the most lucrative investment options out there.

Unfortunately, even in today’s day and age, there are certain television advertisements and even promotional video doing rounds on social media which offer misleading information. However, if you have the eye for credible sources, it wouldn’t take you more than a few minutes of time to learn some valuable lessons regarding personal loans and finance at large.

To begin with, here are some myths regarding personal finance that you may have been lead to believe till now, and the relevant facts that will debunk them:

Myth #1

Hefty capital is a prerequisite for investment.

Fact

You can start investing from as little as Rs. 500 per month.

Yes, neither do you need a sizeable amount of money, nor do you need to have the knack for trading to start investing. When you opt for investing in mutual funds, the alternative of SIP (Systematic Investment Plan) will allow you to start with a modest amount of Rs. 500 a month. Not only does this help you keep the better part of your monthly income for your living expenses, but the rupee-cost averaging feature of SIPs also reduces the risk pertaining to investments in the equity market.

Myth #2

Loans are Bad.

Fact

Loans can help you create wealth and enjoy tax benefits.

Some people are lead to believe that applying for Personal Loans or any other credit undermines their financial prowess, or that paying EMIs (Equated Monthly Instalments) can prove to be an unnecessary burden. However, this is utterly baseless.

More often than not, loans such as Home Loans, Business Loans and Personal Loans are obtained with the objective of building or purchasing assets such as property, machinery, and so on, which can be used as means of generating revenues.

If the revenue generated is equal to or higher than the interest paid towards the loan, then it wouldn’t be wrong to say, that loans offer the much-needed financial readiness to generate wealth even when one has limited means to do so.

That being said, it is highly advisable to have a streamlined repayment plan in place before procuring any loan. This will help you maintain good financial health, and in turn, keep your credit score high.

Yet another advantage of taking loans is tax benefits. In a bid to encourage people to take loans to enjoy an enhanced quality of life, and to expand businesses, the government offers various tax rebates and exemptions. These benefits can help save your hard earned money.

Myth #3

Multiple Credit Cards are a strict No-No.

Fact

Multiple cards can help build a stronger credit score.

While some people think of multiple cards as a financial liability, the fact of the matter is, having two or more Credit Cards can help you achieve a higher credit score (if used judiciously), thanks to the better Credit Utilisation Ratio (CUR) that you can maintain. CUR refers to the percentage of your credit limit that you spend on an average. Ideally, your CUR must be 30% or less.

Hence, if you have a single Credit Card, with a credit limit of Rs. 40,000 on spending, you will be able to spend only Rs. 12,000, per month.

On the other hand, if you have a credit limit of Rs. 10,000 on 1 card, Rs. 20,000 on another and Rs. 40,000 on the third, you can conveniently spend 30% of Rs. 70,000 i.e. Rs. 21,000, without inflicting any harm on your CUR.

Moreover, spreading your expenses over multiple cards will help you look more financially disciplined, which will again work in favour of your credit score.

Of course, you will only be able to reap these benefits, if you clear your outstanding balances on all the cards well within the due date.

Myth #4

Spend first. Save later.

Fact

Saving should be your priority.

Many people tend to believe that they should spend their money as and when required, and if at the end of the month anything remains, they can put it aside as their savings. While this may not be classified as a myth, this surely is a misconception.

After all, we all tend to spend a little extra when we have sufficient money in our hands. The trick here is to set the savings aside right at the start of the month so that you do not end up spending the better part of your income. Simply put, ‘savings first’ practice helps bring in the additional financial discipline.

If need be, you can even get in touch with your bank, and it will help you divert a stipulated amount of money towards your savings, right at the start of each month.

Myth #5

Personal finance is for the rich.

Fact

Personal finance benefits one and all.

No one is rich until they start saving. Hence, no matter how much you earn, you must save at least 20% of your monthly income. As your income increases, so should your savings. If you keep doing so, over a period, you will be richer than most people around you. You can either invest your monthly savings in equities or bonds or merely set it aside to be used at a later stage for achieving various financial goals such as buying a home, sponsoring your child’s higher studies or meeting unforeseen expenses, such as those pertaining medical emergencies.

Regardless of the fact that you currently have a financial goal in mind or not, you must save. For all you know, your savings can help you earn a respectable amount of interest from the bank or a potential borrower.

We hope that we have been able to bunk some of the most common myths regarding personal finance. Hence, the next time you find yourself thinking, ‘I Need a Personal Loan’, instead of shunning the though, you might want to look up a trusted online lender and meet your goals sooner rather than later.

To apply online for Credit Cards, Secured Loans and Unsecured Loans, visit www.mymoneymantra.com, the leading online lending marketplace that offers financial products from 60+ Banks and NBFCs. We have served 2 million+ happy customers since 1989.

Also Read:What is GST and How Does It Impact a Personal Loan?

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