Money is a feminist issue — and yet, women are still reluctant to talk about it. According to a recent Bustle survey of more than 1,000 Millennial women, more than 50 percent of people said they never discuss personal finances with friends, even though 28 percent reported feeling stressed out about money every single day. Bustle's Get Money series gets real about what Millennial women are doing with their money, and why — because managing your finances should feel empowering, not intimidating. Today's topic: money misconceptions.
I've always been low-key afraid of money. Growing up, I was told to be weary about how I spend it, who I loan it to, and how I earn it, so naturally I started believing that money is this terrifying entity that can easily ruin my life. But I've realized that my fear comes mostly from a lack of understanding about how to use money effectively. And, unfortunately, there are many misconceptions about those green bills to throw us off our path to spending, saving, and investing them wisely.
When one of my friends told me she wants to learn how to invest I thought she was joking. The concept of investing seemed so ridiculous to me because I figured that I'm too young to even consider expending large amounts of my hard-earned cash into anything other than something off my Amazon wish list. But I've learned that I have investing all wrong. "'I don't know how to invest isn't the right response'," Cady North, a certified financial planner tells Bustle. "There are tons of online tools and even online-only robo advisors that provide inexpensive and automated investing advice."
From investing to credit cards, there are tons of things we've been told about our own currency that simply aren't true. Here's a list of 17 things you've probably heard about money that are total BS.
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1. Having Lots Of Cash Is Safe
"Savings accounts are an asset to have in case of an emergency, but due to low interest rates and inflation, they shouldn't be the only place you put your money. Lots of women build up their cash reserves far beyond what they would need if an emergency arose," North says. "There comes a point when thinking through long-term goals and coming up with an investing plan makes sense."
Investing doesn't have to be scary, either. Talking to an advisor who specializes in working with young professionals can be a good way to become more educated on the topic and get advice tailored to your specific financial situation.
2. You Need To Carry A Balance On Your Credit Card
If I had a dollar for every time I've had to ask my mom how credit cards work, I'd have enough money to pay off my entire balance — which, contrary to popular belief, is definitely a good thing.
"Carrying debt on your card does nothing to help your credit; it just costs you money," Adam Jusko, founder and CEO of Credit Card Catalog, tells Bustle. "Paying your bills on time each month is the most important factor in improving your credit, and paying them in full is just fine. In fact, it's the smartest thing you can do."
3. Debit Is Better Than Credit
Because of my aforementioned credit card balance, I'm definitely a believer that my debit card reigns supreme in my wallet. While sticking to debit cards is an understandable approach to curbing spending and avoiding debt, credit cards have more benefits in the long run. "Using your credit card wisely can help you build a stronger credit history, which will help you get better rates on auto loans or a mortgage," Jusko says.
Debit cards also offer less protection from fraud than credit cards. Since your debit card is linked directly to your bank account, your cash isn't safe if someone gets ahold of your card. "You can usually get the bank to reimburse you for this fraud, but until it has been investigated, you will be out that money," Jusko says. "With a credit card, those fraudulent charges can be taken care of without your money ever being touched, because you can protest the charges before you would have to pay your bill."
4. Maxing Out Your Card Gets You A Higher Credit Limit
If you have a low credit limit, you might be tempted to max your card out to show the bank that you need a higher one — but don't. "Maxing out your credit cards can significantly drop your credit scores," John Ganotis, founder of CreditCardInsider.com, tells Bustle. "Credit scoring models like to see low balances compared to your credit limits."
Basically, keep your balance low to keep your score high.
5. You Should Be Paying The Minimum Payment
Too many people believe that the minimum payment is the exact amount you should be paying off each month, but that's some serious BS. "First, this misunderstanding results in high interest fees, which can lead to a belief that using a credit card means paying interest," Ganotis says.
"Second, by only paying the minimum and not paying down balances, people can easily end up with high credit utilization." As much as it hurts to choose to pay more than the minimum, it's the smartest way to use a credit card.
6. A New Credit Card Will Hurt Your Score
There's a myth that opening a new credit card will significantly impact credit in a negative way, but that actually tends to be the complete opposite of the truth.
"While there is a hard inquiry involved — and having a few of those can start to bring credit scores down a bit — opening a new line of credit can have longer term benefits, like additional available credit and an additional revolving account, both of which are seen favorably by most credit scoring models," Ganotis says.
7. Closing A Credit Card Will Hurt Your Score
Alternatively, people also believe closing a credit card will hurt their score, which also isn't necessarily true. How it will affect your score actually depends on what your utilization rate is once the account is closed.
"Closing an account means your total credit limit will be lower, which may hurt your score," Liran Amrany, the founder and CEO of personal finance app Debitize, tells Bustle. You want to keep the ratio of balance to credit limit to about 30 percent, so just make sure closing your card won't throw that off.
How closing your account affects your score is also largely up to the age of the card itself. "If you close an old account, that could indeed hurt your score," Amrany says. "We recommend you always leave your oldest account open, and make sure your first credit card has no annual fee so there is no incentive to close it if the rewards program changes."
8. Cosigning Is NBD
Cosigning should never be taken lightly, even if it's for someone you trust. If you cosign, you're agreeing to pay 100 percent of the loan if the person you're signing for can't make the payments. And if someone needs a cosigner, it likely means the lender thinks the person has a high chance of failing to pay off the loan, which won't be good for you if that ends up being the case.
"The lender may have determined their employment history was too spotty," Ian Atkins, an analyst and staff writer for Fit Small Business, tells Bustle. "Or maybe their income was deemed insufficient to cover this new loan and all their other expenses. Or maybe the lender simply saw the person has distressed credit." If the lender is weary about giving this person the loan, you should be too.
Still think cosigning is NBD? Well, if the person you're backing up starts falling behind on payments, it's going to come down hard on your own credit score. "If the loan goes into collections, that will be on your credit report," Atkins says. "If you can't pay off the loan, you're on the hook 100 percent. If the loan falls too delinquent, you can even be sued." So if you know you won't be able to pay off the loan, you probably shouldn't cosign.
9. Cutting Down On Small Purchases Makes A Huge Impact
We've all heard that you should swap your morning coffee shop for your Keurig in order to save money. But here's the thing: worrying about small purchases isn't nearly as important as downsizing large expenses. "That means don't focus on small expenses while letting go of large amounts of money elsewhere," Benjamin Glaser, features editor with DealNews, tells Bustle. "Don't obsess over saving $2 on new bed sheets while buying a brand new model car with bad financing."
10. Credit Cards Are Evil
A lot of people have different opinions about credit cards, but the fact of the matter is that they can be beneficial tools if used wisely. Obviously they aren't free money, so if you know you are prone to overspending, it might be in your best interest to avoid them. But if you budget properly and know you won't spend more than you have, using a credit card can help you build a credit score and some even get you cashback or travel points.
"Find a rewards card that benefits you the most, whether it's double points on gas and groceries, or an airline miles program," Glaser says.
11. You Should Be Saving 10 Percent Of Your Salary
While you should be saving your money, putting away exactly 10 percent of your salary isn't the right fit for everyone. "Save as much as you possibly can, be it 10 percent or 40 percent," Nicole White, editor of Millennial-centric personal finance site, Sapling, tells Bustle. "There's no magic percentage. The right number is the most you can."
12. You Need To Be Rich To Invest
13. Credit Cards Come With Tons Of Hidden Fees
"While this was commonplace 8-10 years ago, federal regulations, as part of the Dodd-Frank Act, has done wonders in forcing credit card issuers to put forth clear and easy-to-understand disclosures," Robert Harrow, a credit card analyst for ValuePenguin tells Bustle. So don't worry, your credit card having hidden fees is a thing of the past.
14. Having A Clean Driving Record Keeps Insurance Rates Low
I was always told that as long as I kept a clean driving record, my insurance wouldn't go up, but here's some terrible news: that's not necessarily true.
"If insurance companies experience widespread increase in accidents as well as other insurance claims they have to pay for, they will usually raise rates across the board to compensate for the loss in revenue," Craig Casazza, an insurance analyst for ValuePenguin, tells Bustle. Being aware of how your insurance rates can fluctuate is something to keep in mind when making financial plans and decisions.
15. You Don't Need To Save For Retirement Yet
I'm 21 and still in college, so thinking about saving money for retirement is even more ridiculous to me than investing. And once again, I've given into a very bad mindset. "For every 10 years you delay saving, you’ll need to save three times as much to catch up," Karen Filler, a New York-based financial advisor with financial services firm TIAA, tells Bustle. "If money is tight, setting aside even small amounts now will likely reap large rewards over time."
16. Your Parents Know Best When It Comes To Money
While you might welcome your mom's advice on just about anything, your financial situation could be incredibly different from hers, which means her sage wisdom may not work for you.
"Seek the advice of an unbiased, objective advisor who can get to know your particular circumstances and craft customized advice that is right for you," Filler says.
17. You Need A Lot Of Money To Meet With A Financial Advisor
In a recent survey, TIAA found that 49 percent of Americans believe they need more than $50,000 in savings to justify meeting with a financial advisor. "But there is no minimum amount of savings required for individuals seeking personal support with their financial plan," Filler says. "Finding a financial advisor early in your adult years — perhaps through your parents or employer — can help put you on a path for financial success."
Money isn't all that scary once you know how to spend, save, and invest it properly. If you're intimidated by your credit cards or potential investments, speaking to a financial advisor or educating yourself on different online services can help ease your worries.
Check out the “Get Money” stream in the Bustle App for more tips and tricks on how to save and spend your money.