Discover the common misconceptions when dealing with money that you should know about, from believing that a higher pay means smaller paycheck and more. See what's helping people avoid these common misconceptions when dealing with money. Read on and find out how you can benefit from those same advantages.
Are you being prevented from becoming financially prosperous? A false belief system about money can seriously affect both short- and long-term fiscal worth. But there's a way out! Throw away these six money myths, and you'll be on the path to prosperity. Here are 6 common misconceptions about money.
1Higher Pay, Smaller Paycheck
Most people think that if they get a raise that will move them into a higher tax bracket and take home a smaller paycheck. Thankfully, this isn't true! Being moved into a higher tax bracket, only increases the tax rate on the income you earned, in that tax bracket.
For example, if you are filing singly in 2011, you get 10% on taxable income, from $0 to $8,500, 15% on taxable income over $8,500 to $34,500, 25% on taxable income over $34,500 to $83,600, 28% on taxable income over $83,600 to $174,400, 33% on taxable income over $174,400 to $379,150, 35% on taxable income over $379,150. So, if you earn $25,000, the first $8,500 is taxed at 10%. Your income earned between $8,500 and $25,000 is taxed at 15%.
2Renting Is Just Throwing Money Away
Most people think, renting is analogous to throwing money in the garbage. When trying to compare rent to other necessities of modern living, do you regard the money you pay out on gasoline to be the same as throwing it away? How about what you spend on electricity? These expenses are both examples of consumables without lasting value that you consistently purchase. However, daily living in our society require these things.
Rent falls under the same heading. Even homeowners have to "throw away" money on items like property taxes and mortgage interest, quite possibly more than you're using to pay your rent. In fact, for the first several years of most mortgages, you're essentially paying primarily interest with your payments. For example, on a 30-year, $150,000 mortgage at 7% interest, your first 5 years of payments would total approximately $60,000. Of that $60,000, you "throw away" approximately $51,000 on interest payments.
3Higher Price, Means Higher Quality
More expensive items are not always of higher quality. For example, generic drugs are generally regarded to be just as beneficial as their name-brand alternatives. When determining an item's value, look beyond the price and examine the true value to you. Does that generic brand pain reliever help your aching back? Don't be so sure that paying extra is getting you something extra; spend your money wisely.
4A Lot Of Money Is Needed When Investing
It's true that some brokerage companies require a minimum amount of money to open an account. However, there are also many online brokers now, that have no investment requirements to open an account. Immediately, you can get started if you want to.
5Credit Card Balance Helps Credit Rating
One of the factors that go into a credit score is the percentage of available credit that's being utilized. So, you're better off without carrying a balance. That's not to say you shouldn't use it; pay it off monthly. There's no benefit for you to pay interest to the credit card companies.
6Home Ownership Is A Guaranteed Investment
One only needs to look at what's been going on in the housing market the last couple of years, to see that's not necessarily true. As with other investments, home ownership carries a risk that your investment may decrease in value. Although commonly reported data say, that housing appreciates somewhere between the rate of inflation and 5% per year, this is not always true. In reality, your home can certainly lose value over time.
Did you believe any of these financial myths before you read this article? What's most important is that you're on the right track now. Continue educating yourself and always be open to learning more about money. It's never too late to get on the path, to real wealth.
Jackie Wing is an Alaska native who enjoys snowboarding more than is probably socially acceptable. She lives in Anchorage with her two dogs Reese and Peanut or as she likes to call them Thing 1 and Thing 2.