4 Financial Myths and Misconceptions in Canada
We grow up listening to myths and legends.
While stories and tales can captivate our imagination, financial myths and misconceptions are a very different proposition.
Money myths can cause confusion and they may also result in making poor decisions.
Here are some common financial myths and misconceptions and some tips to help you avoid making mistakes.
You only need to pay the minimum payment on your credit card
In theory, you only need to cover the minimum payment on your credit card, but in practice, this is a dangerous line to tread.
If you’re only paying a small amount off your total balance every month, you’ll end up spending a lot more in the long-term due to interest fees.
In some cases, you may be paying hundreds of dollars in interest alone, which makes it incredibly difficult to tackle mounting bills.
If you can pay more off each month, you’ll clear the debt faster and the total spend will be lower.
A study conducted by TransUnion found that almost 40% of Canadians are unaware of the benefits of paying off more than the monthly minimum payment.
If you do have a credit card, try and set spending limits, clear debts as quickly as you can and look for cards that have low interest rates.
If you can’t cover the minimum monthly payment, seek expert help, as your debts could start to increase rapidly.
You need to purchase insurance for all financial products
If you’ve ever taken out a loan or applied for a credit card, you might have been offered insurance.
Banks and financial organisations tend to push these insurance policies to make money, but they’re not always essential.
Do your research before you agree to take out additional insurance, and ask a financial adviser for guidance if you’re unsure whether or not it’s worth having cover.
Fear is often a driving factor with insurance products, but the reality is that not everyone will benefit from paying for them.
A good salary ensures financial stability
There’s a misconception that if you have a good salary, you won’t have to worry about money.
The truth is that anyone can get into debt, and even with a steady wage, it can be challenging to balance the books and pay bills.
Budgeting is an excellent way to take control of spending, to set limits and to identify areas where it may be possible to make cutbacks.
It is also hugely beneficial to research and to plan ahead when borrowing money or making purchases, for example, a new house.
Before you submit applications or commit to a monthly repayment, make sure you can afford it.
You don’t want to overstretch yourself to a point where you’re anxious about money all the time and it’s impacting your wellbeing.
According to a poll conducted in 2018, over 40% of Canadians ranked money the most significant cause of stress.
There’s no way out of debt
If you’re surrounded by bills, your credit card balance is increasing by the day, and you’ve got creditors or debt collection agencies calling you, you might think that there is no way out.
Debt is extremely common, but there are different levels of debt.
If you have a mortgage, you’re paying back a loan, or you have credit cards and you’re keeping up with repayments, you might not be worried about being in debt.
If, on the other hand, you can’t see how you’re going to pay bills or cover your mortgage or rent next month, it’s understandable to be anxious.
It may seem like you’re destined to be in debt forever, but that is not the case.
There are ways to get out of debt and there are several avenues you can pursue with the help of an experienced financial adviser.
It may be possible to come to arrangements with creditors, you could spread or delay payments, or you could look into options like consolidating your debt.
If these measures are not suitable, filing a consumer proposal or pursuing bankruptcy may help you improve your financial situation.
You can elevate your credit score, and there are people out there ready and willing to get you back on track.
There are many financial myths and misconceptions out there.
Busting myths and learning about managing money can help you save, get out of debt and look forward to a more prosperous future.
If you need advice about debt relief, or you feel like there’s no way of ever getting rid of debts, don’t hesitate to get in touch.