When it comes to your finances, it’s much easier to lie to yourself than admit your shortcomings. But whether you have a bad habit of putting off retirement savings or ignoring your debts, little everyday lies can have long-term consequences. If you want to climb out of debt and save for the future, you’ll need to stop lying to yourself and start honestly assessing your financial situation. Start today by owning up to these five financial lies.
‘I’LL PAY BACK THE MONEY I’VE TAKEN OUT OF SAVINGS.’
If you have to tap into your savings because you don’t have the money to buy something outright, whether it’s a new TV or a pair of shoes, then you can’t afford it. Moreover, if you can’t afford it now, then chances are you won’t be able to replace the cash that you’ve taken out of savings.
‘I HAVE TIME TO SAVE FOR RETIREMENT.’
You’re young and have many years to save and plan for retirement, right? Waiting to get started on your retirement savings can make a big difference in how much you’re able to accumulate once you hit your golden years.
If you’re 30, for example, and save 10 percent of your $50,000 salary in a tax-deferred account, you’ll have $1.1 million by age 67, assuming a 6 percent rate of return and salary growth of 1.5 percent. That includes your Social Security payout as well. Start at age 25 and your retirement savings jump to $1.5 million. If you get a late start at age 35, however, you’ll only have $717,021 to tap by age 67.
‘I DON’T NEED TO WORRY ABOUT MY CREDIT SCORE.’
You might not pay attention to your credit score until it’s time to purchase a new vehicle or house. But by then, it could be too late to get the loan rates you need to afford your purchase. While you don’t need to check your credit score or credit report every week, you should at least review them annually.
Look for suspicious accounts and inaccurate reports of late payments. Resolving errors in your report can boost your credit score in a short period of time and make a big difference in the interest rate you’re offered.
‘THE BANK IS THE BEST PLACE TO KEEP MY MONEY.’
Using a savings account for an emergency fund is a sound choice. Unfortunately, many people put far too much money into low interest savings accounts.
If you’re earning next to nothing in a return, then when you take into consideration inflation, you’re pretty much losing money. Instead of using a savings account, consider alternatives like money market accounts that pay higher rates.
‘I WON’T BE ABLE TO PAY OFF MY DEBT.’
As you mull over your budget, try to put additional money toward paying down your loans and debts. Take pride in small victories. If you bring down a $3,000 debt to $2,500, you’re moving in the right direction. Also consider alternatives like transferring your current credit card debt to a card with a 0 percent introductory interest rate. But watch out for the transfer fee — some charge 3 percent of the card balance.