There are several myths about saving money that can end up costing you a lot of money if you believe them.
Below are few of the myths associated with saving money and why they end up causing you to lose money in
the process of trying to save it.
Myth: Having a saving account means I’m saving money
Reality: Having money in a savings account doesn’t necessarily mean you are saving. For most people, it just means you have money that is quickly accessible in case of an emergency. If you have debts such as credit cards or student loans, the interest rate is probably much higher than the rate you are receiving from your saving account. What this means is you’re losing money. Also with interest rates being as low as they are now, the inflation rate is likely much higher than the amount of interest you are earning which also means you are losing money.
Myth: Buying something on sale means I’m saving
Reality: How many times have you bought something just because the 50% off sticker drew you in? In order for you to truly save money on a sale item you would have had to be willing to purchase the item even if it wasn’t on sale. However, this is rarely the case. Most people buy sale items simply because they are on sale and had no preconceived desire to own the item before the sale. Try setting up a savings account where the savings from sale items goes into.
Myth: Refinancing my home at a lower rate means I’m saving money.
Reality: When you refinance your house at a lower interest rate, you will likely pay smaller monthly payments, but this does not mean you will be saving money. The problem that arises here is that most people that refinance do so for a 30 year term again. That means that if you had previously paid 5 years toward your mortgage before the refinance, you have extended the previous 30 year loan to 35 years. Since the first years of the loan are when you are paying almost all interest, even with the lower interest rate and lower monthly payments, you’ll likely pay more over the long term.
Myth: Making more money means I have more money to save
Reality: Making more money than you do now does not equate to more savings. If you make more money and don’t increase your spending then yes you will be saving more. However, few people actually do this. Majority of people spend more as they make more instead of save more. In order to build wealth and your savings, there has to be more money staying in then going out.