Want To Keep Your Personal Finance On Track? Ignore These 5 Myths

By Adhil Shetty | September 21, 2017

All that you see in advertisements and hear from people are not real. If the space of personal finance, you might find it difficult to distinguish between facts and fiction. And, often misleading information leads to wrong decision making and even fear of exploring lucrative options. It’s important to bust these myths before it gets too late.

Let us look at five big myths that must be done away with to keep your personal finances on track.

Holding Multiple Credit Cards Could Increase Financial Burden

Many people think that increase in the number of Credit Cards also increases the financial liability of a person. This is not true in every scenario. If the Credit Card bills are paid before the due date, they don’t just save you from dealing with a pile of debt, but also reduce the credit utilisation ratio for you. As a good practice, you should keep your credit utilisation ratio between 25% to 30%. Maintaining this level becomes easy with a distribution of spending across different cards.

You can hold different cards offering reward points and cashbacks on different purchases to meet various purposes such as booking tickets and hotels, shopping, purchasing fuel etc. If used in a disciplined manner, holding multiple Credit Cards can prove to be beneficial for your finances.

Investing In Mutual Funds Requires Huge Capital

A lot of youngsters who have just landed a job hesitate from saving as they feel they cannot set aside enough to make an investment. Well, Mutual Funds allow you to start investing with an amount as small as Rs. 500 every month. You can either invest a lump sum amount or go for instalments through the SIP method. Mutual funds also give you the flexibility of withdrawing money partially or completely as per your requirements.

Loans Are Always Bad

Contrary to the popular perception of loans being the bad guy in personal finance, they are often an effective borrowing instrument when it comes to purchasing assets such as property. If the profit generated from a property is higher than the interest outgo for the loan, it can help you create wealth with limited financial potential. If you wait to buy an asset until you build a suitable corpus for it, prices may increase, thus making it more difficult for you to attain it. However, you must make sure that you do not take a loan for an amount higher than what you can afford to pay back. Have a repayment plan in place, as any delay or default could impact your finances badly.

Personal Finance Is Meant For The Rich

Personal finance is meant for everyone. It’s about setting financial goals with what you have and working towards them by investing in the right assets and cutting costs. As they say, it’s not about how much you earn but about how much you save. You can build a sizeable corpus if you start early, irrespective of the amount you save, and stick to your budget.

Spend First And Save The Rest

The practice of spending first and saving later is often met by various challenges which lead to compromising on the amount saved. Even people with a sizeable income sometimes end up with little to save due to prioritising of expenditure over savings. In order to build a wholesome corpus, it’s important to prioritise savings overspending by setting aside an amount at the beginning of the month. You can set a standing instruction with the bank to divert a certain amount at the beginning of the month from your salary account to your savings account.

If you have been taking your personal finance decisions based on any of these myths, it’s time you took corrective measures to put back your finances on track.

BankBazaar is a leading online marketplace in India that helps consumers compare and apply for Credit Cards, Personal Loans, Home Loans, Car Loans and insurance.

 

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About Adhil Shetty

Adhil Shetty is the Founder and serves as the Chief Executive Officer of BankBazaar.com. Adhil has a Master’s degree in International Relations with a specialization in International Finance and Business from Columbia University in the City of New York, and a Bachelor’s degree in Engineering from the College of Engineering Guindy, Anna University. Adhil is an expert in Personal Finance (Car loan/Home loan and personal loan) and he majorly consults on investment and spends rationalization for the Indian loan borrowers. His guidance is number based with real time interest rate calculations and hence useful for consumer’s real time query.

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