It Can Lead To a Big Financial Loss
Are you of the belief that you are financially stable? As a fact, in case of managing personal finances, people act on the basis of individual beliefs that may or may not be right. For instance, one of the common beliefs is that budgeting can help save a lot of money. Therefore, while budgeting, many people dump their paychecks in their accounts and then use ATM for expenses such that nothing gets leftover. While this method is able to avoid credit card debt, it can be dangerous enough as not enough savings are being accumulated and that there may be no thought as to where all the money is going. Undoubtedly, budgeting is an indispensable tool for managing your hard-earned money, but it proves to be problematic due to the process via which it is handled. So, here is money myth that actually helps prevent savings!
Budgeting Is Ideal for Saving Money Drastically
According to a study at Emory University and Brigham Young University, those who shop with a limit on money to be spent usually end up paying more on a single item than those who are not on a budget. Researchers found that when a budget is set for an item, it usually restricts the research scope of the customers up to a price that is near the set maximum limit. For example, if the budget is $200 for a smartphone, the buyer will only look for those pieces that are between $100 and $200 without looking at the features that he or she requires. So, what is required is the focus on the needs, not on the upper price limit. Although, the adverse effect is only for particular items, the effect can be reversed by limiting the choice as per the features and qualities and then looking for the price range.
I Am Always Prepared
It’s correct if it is so! Here is a short test for you to check that out – How much money is required to pay off your debts, how much is required for funding for a child’s education in the future; do you have extra savings to cover contingencies? Well, if the answer to any of these questions is not known, you have gotten to prepare financially. Studies show that over 35% of American adults have no planning to save for paying credit card debt or meeting other needs, except for the retirement ones. Further, in case of financial knowledge, 40% of adults classify themselves as 3, 4, and 5 on a scale from 1 to 5 (Excellent to Poor). These facts clearly indicate that most people do not plan for their finance due to which they tend to incur substantial losses. What happens when you are not prepared for your school exam? The same happens when you do not act proactively to meet future uncertainties! So, it is better not to think that you are always prepared; rather, do everything for preparing yourself financially and get rid of this money myth!
My Job is Permanent
This is a compelling reason to convince yourself that you are on a secure financial position. However, there is no telling when you will be thrown out due to the crisis. In reality, no charge promises permanent protection. If you are working with a large organization or institution, keep in mind that the possibility of downsizing never vanishes. In case of small-scale firms, downsizing may not be the looming risk, but incidents such as lack of funds, death of the owner, and acquisition can increase the risk at a job.Therefore, be ready to experience a loss of job by having savings of at least three months.