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Five 'money myths' that could be keeping you broke

Separating fact from fiction can be difficult when it comes to money. Five common money myths could be keeping you broke.

SAN ANTONIO — Following bad money advice can cost you! Here are five common "money myths" that could be keeping you broke:

MONEY MYTH #1:Checking your credit report hurts your credit score.

“This is something that really permeates our culture,” said Andrea Ferrero, co-found and executive director of Pockets Change, an organization that teaches financial literacy to all ages.

Ferrero said you need to know your credit score to improve it.

“It’s what’s called a soft inquiry or soft hit, which means that you’re not trying to borrow money and it’s not hurting your score at all,” she said. “It’s just giving you information. It lets you make sure the accounts on there are accurate, that your address and information about your cell phone there is accurate, and it lets you dispute information if it’s not correct.”

You can check your credit score for free weekly at AnnualCreditReport.com through April 2021.

“So go ahead and figure out what your report looks like because that’s an important part of staying on top of your credit game,” said J.J. Montanaro, a financial planner with USAA.

MONEY MYTH #2: Carrying a balance on your credit card is necessary to build credit.

“I kind of cringe every time I hear it,” said Montanaro.

He said paying interest on credit card payments is never in your best interest. You only need to take one action to build credit:

“You have to be in the game and you have to have accounts, but you don’t have to carry a balance,” said Montanaro. “You definitely don’t have to carry a balance from month to month to have the best credit scores.”

Build your credit by putting a reoccurring expense on your credit card and pay if off monthly.

“When you carry a balance from one month into another month, you’re paying interest and then you’re paying to use that money,” said Ferrero. “If you just put your Hulu subscription, your streaming subscription, on your credit card, you pay that off every month. You’re still showing that you’re using the credit and you’re not paying interest.

MONEY MYTH #3: Buying a home is better than renting. 

The truth is it just depends on how long you plan to live in one place.

“We hit a certain age and we feel like buying a home is the signifier of success or the accomplishment that we need to reach,” Ferrero said. “If you’re not planning on living in that home for five to seven years, it might actually not be financially beneficial to buy.”

Make sure you factor in all the costs you will need to pay to buy and own a home.

“When you’re buying a home, you have those upfront costs of taking care of the closing fees and potentially renovations to be in the space, your taxes,” said Ferrero. “All of those things can be larger upfront costs than just renting. If you’re not going to be in it for a certain amount of time, you might not build enough equity in the home to actually come out financially head versus renting.”

“When you buy a house, you have a lot of commitment in terms of the different things that are going to be your responsibility,” said Montanaro. “If something breaks down, you’re responsible for it. If you have a replace a roof, that’s going to be something you’re responsible for. So, there’s more commitment when you buy. The other thing is, there are costs to acquire a home. So there’s the cost for buying or selling that could be 10 to 15 percent of the value of the home. If you’re just going to be somewhere for a short period of time, it certainly may make more sense to look at renting.”

MONEY MYTH #4: I do not need to save for retirement because I love working. 

It is great to love your job but you want flexibility.

“You don’t have to plan on stopping what you love, but give yourself the opportunities to do more of what you love in the future and to not feel obligated to show up to a nine to five,” said Ferrero.

“Take advantage of that 401K, the matching contributions fund, the IRA. Do those sorts of things so that you can decide to do what you want to do as opposed to being forced to do something,” said Montanaro.

Flexibility might be a better plan for retirement.

“Relying heavily on working after your retire probably won’t make sense for most people,” Montanaro said. “The more nest egg you’ve accumulated, the more options you have to live the life you want to live.”

MONEY MYTH #5: I do not need a will because I do not have much stuff

A will is not just about who gets items or money. It provides direction for your loved ones.

“When we think about not being around, we want to make sure that the people that matter most to us are taken care of and that doesn’t just mean giving them stuff,” Ferrero said. “It means giving them peace of mind.”

That peace of mind is creating a plan, which for many people involves creating a will.

“It’s about making sure you have a plan in place to take care of things after you’re gone in a way that matters to you,” said Ferrero. “So if you have sentimental items, who do you want them to go to? If you have a pet, who do you want that pet to go to? If you have children, who do you want the guardian to be? If you have a $150 savings account, you don’t want to just leave it sitting there. Where do you want it to go?”

The state will decide what happens to your money and property if you do not have a will.

“Even if you have just a little bit of assets, the question is, do you want those assets to go according to your wishes, or do you want them to go according to the laws of the state,” Montanaro said. “Because if you don’t leave behind a plan, the state has one for you. It may not coincide with your wishes.”

Money myths can stop us from taking the actions we need to grow our wealth. Knowing the truth can help you reach your financial goals.