It Can Lead To a Big Financial Loss
Are
you of the belief that you are financially stable? As a fact, in case of
managing personal finances, people act on the basis of individual beliefs that
may or may not be right. For instance, one of the common beliefs is that
budgeting can help save a lot of money. Therefore, while budgeting, many people
dump their paychecks in their accounts and then use ATM for expenses such that
nothing gets leftover. While this method is able to avoid credit card debt, it
can be dangerous enough as not enough savings are being accumulated and that
there may be no thought as to where all the money is going. Undoubtedly,
budgeting is an indispensable tool for managing your hard-earned money, but it
proves to be problematic due to the process via which it is handled. So, here is
money myth that actually helps prevent savings!
Budgeting
Is Ideal for Saving Money Drastically
According to a study at Emory University and Brigham Young University, those who shop with a limit on money to be spent usually end up paying more on a single item than those who are not on a budget. Researchers found that when a budget is set for an item, it usually restricts the research scope of the customers up to a price that is near the set maximum limit. For example, if the budget is $200 for a smartphone, the buyer will only look for those pieces that are between $100 and $200 without looking at the features that he or she requires. So, what is required is the focus on the needs, not on the upper price limit. Although, the adverse effect is only for particular items, the effect can be reversed by limiting the choice as per the features and qualities and then looking for the price range.
I Am Always Prepared
It’s
correct if it is so! Here is a short test for you to check that out – How much
money is required to pay off your debts, how much is required for funding for a
child’s education in the future; do you have extra savings to cover
contingencies? Well, if the answer to any of these questions is not known, you
have gotten to prepare financially. Studies show that over 35% of American
adults have no planning to save for paying credit card debt or meeting other
needs, except for the retirement ones. Further, in case of financial knowledge,
40% of adults classify themselves as 3, 4, and 5 on a scale from 1 to 5
(Excellent to Poor). These facts clearly indicate that most people do not plan
for their finance due to which they tend to incur substantial losses. What happens
when you are not prepared for your school exam? The same happens when you do
not act proactively to meet future uncertainties! So, it is better not to think
that you are always prepared; rather, do everything for preparing yourself
financially and get rid of this money myth!
My
Job is Permanent
This
is a compelling reason to convince yourself that you are on a secure financial position.
However, there is no telling when you will be thrown out due to the crisis. In
reality, no charge promises permanent protection. If you are working with a large
organization or institution, keep in mind that the possibility of downsizing
never vanishes. In case of small-scale firms, downsizing may not be the looming
risk, but incidents such as lack of funds, death of the owner, and acquisition
can increase the risk at a job.Therefore, be ready to experience a loss of
job by having savings of at least three months.
Author Bio-
Clarence Evans develops support systems for a variety of
firms. He likes to talk about money myth and analyze finance trends, and
Twitter feeds of experienced finance people such as Reza Bundy. Follow him on Twitter @ClarenceMEvans or https://twitter.com/ClarenceMEvans.
No comments:
Post a Comment