When it comes to personal finance, most of us don’t come up short because we are lazy with money.
We often struggle because we were told the wrong things. Common money myths get passed around like they are facts, and before you know it, you are making financial decisions that slow you down rather than move you forward. Let’s clear a few of them up.
There is nothing wrong with having savings accounts – an emergency fund in an instant access savings account is one of the best things you can do for financial security. It protects you from unplanned expenses, such as car repairs or a sudden job loss. But leaving all your hard-earned cash sitting there long-term is a bad thing.
Why? Interest rates in the UK rarely keep up with the cost of living. Your money loses value over time. Compound interest works in your favour when you are investing, but it works against you if inflation eats into your cash. If you want financial success, you need to start thinking about investments – whether that is the stock market, a mutual fund or boosting your pension with employer contributions. Small savings are always worth having, but constantly adding to your savings account should not be the end goal.
Debt has a reputation. People hear the word and instantly worry. And yes, high-interest debt – like payday loans or recurring credit debt you can’t pay off – is dangerous. It drains your income and risks wrecking your credit score. But not all debt is the same. A mortgage, for example, can help you build wealth over your financial life. Even personal loans with a lower interest rate can be helpful if they replace costly credit cards.
The truth is, credit is not always the enemy. What matters is how you manage it. Use credit cards for everyday purchases only if you can pay them off in full and take advantage of the rewards. Use credit responsibly today and you will build the ability to borrow at better rates in the future.
This one holds so many people back. Investing is often portrayed as something only wealthy individuals can afford to do, when in reality, you can start investing with a modest amount. Even £25 a month is worth saving in investments, because it is about forming a habit and building momentum.
Your financial goals do not need to be world-changing. Perhaps you simply want enough money for an earlier retirement or to cover everyday expenses without worry. The point is to start building a financial future early. The longer your money is invested, the more compound interest can work its magic.
Yes, investing carries risk, but so does doing nothing. The cost of not investing is often greater than the short-term worry of putting your money to work.
This is another common misconception. People often believe that having more credit cards will improve their credit score. Wrong. Not only does having multiple credit cards do nothing for your score on its own, but it also risks damaging your finances if you get confused by your different accounts and don’t manage them well. What lenders want to see is that you can afford your bills and make at least your minimum payments in full and on time.
Your credit score improves through consistent, steady behaviour, not by playing games with banks. A single card used wisely is always more valuable than five you cannot control. Credit is about trust and trust is built over time.
When you strip back the noise, personal finance is about making better decisions with the income you already have:
Your financial situation will not change overnight, but small steps – small savings, regular contributions, smarter choices – will add up. The ability to achieve your financial goals does not come from doing everything perfectly. It comes from ignoring bad advice and starting where you are, with what you have.
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Learn more about personal finances and creating healthy money habits on the Polar Credit Info Hub.