twelve fiNaNCial Myths
we are five months into 2012, so let’s dispel 12 common per- sonal finance myths. Myth #1: I do not have much income so do
not need a budget. Truth: Everyone needs a budget, particularly if you
have lower income. Even if you have a low income, you still have expenses that need to be
paid and a budget helps you to ensure you can pay the bills when they come due.
Myth #2: I do not need to write down
my goals—they are all in my “head.”
Truth: As one of the students in my
personal finance course so eloquently noted, “goals that are not written
down are just wishful thinking.” It
is very important that written goals
be specific, measurable and executable. They should include a verb, a
cost estimate and a timeline so you
can measure your progress.
Myth #3: Checking my credit report or
score will hurt my score. Truth: You can
check your own credit report or obtain your credit score (known as the
FICO score) without impacting your
credit score. Your score is impacted
when you apply for credit (i.e. obtain
a loan or a credit card).
Myth #4: Keeping a balance on my
credit card will improve my credit score. Truth: Your credit score
is based on several criteria. One of the criteria is your available credit, which is the difference between the approved
credit line and the amount you have already charged on the
account. If you leave a balance on your credit card, you have
less available credit, thereby lowering your score.
fordable and provides the highest death benefit. Whole life
insurance does not provide a high death benefit and typically
provides limited investment options. Investing outside of an
insurance product most likely will yield better results and
provide you with more investment options.
Myth #5: I can file bankruptcy and get rid of education debt.
Truth: There are several types of debt that are not extinguished in bankruptcy and education debt is one of them.
Other obligations that are not forgiven in bankruptcy include
taxes, alimony and child support.
Myth #7: I am healthy so I do not need health insurance. Truth:
Any of us could get sick at any time or have an accident requiring medical attention. Without health insurance, you are
limiting your access to medical care. An emergency room is
only required by law to treat an emergency and can refuse
care for non-life threatening situations.
Myth #6: Whole life insurance is better than term life insurance
because it has an investment option. Truth: For most of us, the
life insurance need is to provide insurance for our loved ones
who rely on us for our income or care in the event that we die
prematurely. For this need, term life insurance is the most af-
Myth #8: I do not have a high-risk job, so I do not need disability insurance. Truth: Your chances of being disabled during
your earning years are much greater than the odds of dying
young. You can be disabled for many reasons, including broken bones, pregnancy, etc. Workers compensation insurance