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Personal Finance Myths You Should Stop Believing

Published July 13, 2021

10 minute read

David Ning

By David Ning

Unfortunately, finances are not a subject in which most people get a thorough, practical education. We’re often left to our own devices. As a result, we often make some ill-informed decisions or come to faulty conclusions. Why can’t they just teach us about credit card debt or how to do our taxes in high school? Anyway, there is plenty of financial misinformation floating around that we all tend to believe. These misconceptions can cost us big time, and lead us down a rocky financial path that is difficult to recover from. Let’s tackle a few common finance myths you’ve probably heard (and maybe still believe). Then, we’ll discover the truth and some fiscal wisdom along the way.

“Buy A House So You Can Deduct Mortgage Interest And Real Estate Taxes.”

There are many reasons why it’s better to buy your residence rather than renting it. Ignoring the finances for a second, it’s just nice to have a home to call your own and be able to customize it however you please. However, it’s not a wise financial strategy to lay out money for mortgage interest and real estate or property taxes solely to be use them as hefty deductions on your tax return. At best, the tax “break” you’ll get will merely offset your expenditures.

Instead, think of the tax break as a discount on the mortgage interests you have to pay each month. You still need to pay interest, but just a bit less. Some people wrongly think that the deductions are the same as saving extra money. It’s not true. While buying a house is definitely one of the key ways that people can build wealth over their lifetime, you shouldn’t do it just for the tax breaks you might receive. Make sure you can actually afford it.

“All Debt Is Bad.”

While overextending yourself with too much debt is irresponsible, borrowed money can be a good thing. When used correctly, debt can actually help you create wealth. For example, you might take out a small business loan to get your start-up off the ground. Or perhaps you will get a student loan to upgrade your education, increasing your earning power. As previously mentioned, going into debt to buy a house is often (but not always) a smart financial move.

In addition, repaying these loans on time demonstrates your financial responsibility. Your credit score will go up and future lenders will be happy to give you the best rates — whether it’s financing a new car or applying for a generous rewards credit card. Don’t get tricked into thinking that it’s always terrible to owe money or that you have to save up enough cash for every single thing you buy, including big-ticket items. A little bit of manageable debt is perfectly fine, and will probably actually help you out in the long run. Just make sure you keep paying it down.

“You Can Get A Guaranteed Rate of Return On An Investment.”

Sorry, but all investments entail at least some degree of risk. The closest risk-free investment is money in a FDIC insured savings account. However, those feature a rate of return that can’t even keep up with inflation. You’d almost (but not quite) be better off hiding the cash under your mattress. If you want your investment money to grow, you need to understand that there is risk involved.

Investigate any investment opportunity carefully. Take all the time you need to determine if it’s right for you. If the rate of return is higher than other safer investments, then that means there’s some type of risk somewhere. Find out before you plow your money in. If it sounds too good to be true, it probably is.

“You Can’t Skip Big Discounts.”

There’s something about those 80% off deals that we just can’t get enough of. This is especially true if the items on sale are essentials, like home goods. I mean, why not get another set of towels if the discount is enormous? You’ll eventually use them anyway, right? This type of thinking sounds reasonable, but actually has some important flaws.

When you stock up on essentials, you inevitably end up replacing them prematurely. For example, those heavily discounted towels that you just couldn’t pass up? Suddenly, your previous towel set — which are doing their job perfectly fine — start to look a little old. You start to think that it’s probably time to throw them out. After all, you can a brand new set just waiting in the linen closet. You’ll end up spending more money in the long run this way, by replacing items that aren’t really past their expiration date.

You’re better off taking steps to prolong the lifespan of your belongings and then replacing them as necessary when needed. Buying replacements early just because something is on sale is exactly what retailers want you to do. Don’t fall for their tricks.

“Cooking At Home Is Just As Expensive As Eating Out.”

Think of cooking at home as an investment. Yes, there’s an initial outlay for ingredients and cookware. Many of these items won’t be used up when cooking a single meal. But think about it this way: those unused ingredients go into your “bank” of ingredients. They will be available at no additional cost for subsequent meal preparation. You can also reuse all your cookware for years (and even decades) to come, as long as you take good care of it.

When planning future home cooked meals, keep your bank of available ingredients in mind. That way, you can utilize whatever you already have at home. Soon, you’ll realize that you don’t have to buy everything for a new recipe every time you cook. You can also assemble a “go-to” list of dishes that makes use of what’s already in your kitchen. Dining out is a great treat, but it can do a serious number on your budget if you’re not careful.

“Financial Advice Is One-Size-Fits-All.”

Every individual, family, situation, and circumstance are unique. Most blanket financial advice, while well-intentioned and generally sound, won’t fit everyone in every scenario. And yes, we realize that includes the financial advice we try to pass on here at WalletGenius. We try to cover as many bases as we can, but ultimately you need to make money decisions based on your own unique circumstances. It’s actually probably a good idea to NOT follow any general financial advice to the letter. Instead, analyze your own situation alongside any financial tips you discover. Then adjust things as necessary, in order to get the most personal benefit from them.

There’s a reason why personal finance starts with the word “personal.” Sure, there are some general themes that will help everybody (save for retirement, avoid carrying credit card balances, etc.) However, it’s important to dig into the details of your own personal circumstances to tailor the advice to your specific needs. Don’t assume that just because something worked for your friend or family member, it will work exactly the same for you too.

Couple balancing their budget


“You Can Always Borrow More Money.”

Oh man, this one is so dangerous. I have friends who have student loan debt, a mortgage, plus credit card debt. Yet, they still think they can continue living above their means since they can always charge just a little bit more on their credit card. Thinking that available credit is the same as additional savings or an emergency fund is a stupid financial game to play.

I recently urged one of my other friends to think more carefully how he spends his money. His response was that he wasn’t worried at all, since he could just sign up for another credit card if he ran out of room on his current cards. What?! Surely he realizes that his spending is out-of-control and can’t carry on indefinitely, right?

Look. The music stops eventually. One day, credit card companies will stop approving you for a new card. They’ll also demand that you repay what you owe. You can’t continue to accumulate debt and hope that it all just magically goes away. Reality eventually sets in. Don’t let ignorance ruin your life.

“College Is The Only Way To Success.”

By now, most people already know that not every degree is created equal. You can’t just go to a no-name college, get a liberal arts degree, and hope that it will instantly guarantee a satisfying career and financial success. You need to rethink your strategy if you plan to take on massive amounts of debt to fund a four-year quest to obtain a piece of paper that lands you at the entrance of your career with cloudy financial prospects at best.

College degrees are useful, yes. However, they aren’t the be-all and end-all either. There are examples of billionaires who didn’t finish college, sure. However, those are extremely rare success stories. We can basically call them miracles. The truth is, though, that we are all wired differently. If you were never the academic type, a four-year degree might not be the thing for you. You might want to consider a trade school instead. There are plenty of skilled trades that make good money. Some even make six figures. You just have to look for them and figure out what intersects with your interest and skill set.

“I’m Too Young To Save For Retirement.”

When I was younger, I actually made a speech on retirement savings. I still remember how one of the judges mentioned that he was just too young to be thinking about saving for retirement. He was only in his 20s, but he couldn’t have been more wrong. You are never too young to start saving for retirement.

The earlier you start saving, the easier it will be to hit your financial goals. That’s the beauty of compound interest. I’ve actually been saving for retirement since I was a teenager. Sure, it was just a little bit at a time. But that money has been working for me for a couple of decades already. It will continue to grow until the day comes that I truly need it. It could even end up benefitting my children, if I pass away earlier than expected or end up not needing it.

Do you want to work forever? Or do you want your money to work for you instead? Start saving as early as possible — even if you’re only putting away 1% of your meager entry level job as a teenage or fresh college grad. You will reap the rewards of money growing on top of money.

“Credit Card Debt Is Fine, Because Everyone Has Debt.”

Group-think is so dangerous when it comes to debt. Modern society is so comfortable with being drowned in it. It’s actually really scary if you think about it. Who cares if your friends, siblings or even your parents are in massive debt? Don’t join them. It’s definitely not okay to be paying most of your paycheck just to service your past reckless spending. Yes, there are some kinds of acceptable debt, like we mentioned above. But don’t get in over your head.

As Dave Ramsey, a well-known financial guru with a nationally syndicated radio show, would say, “Debt is normal. Be weird.” Once you aren’t in the debt crowd, you can even start helping those around you to see the light. It’s really better to be in the green. I promise!

Woman online shopping with credit card


“Everyone Is Getting Rich Trading Stocks.”

A friend-of-a-friend of mine made a million dollars trading meme stocks like AMC. Another made hundreds of thousands of dollars on Tesla stock. I know of another person who bought into Coinbase a few years before it IPO’d. He miraculously turned $20,000 into $8 million.

I haven’t even gotten to my friends who were into cryptocurrency. One friend made more than $10 million dollars being an early bitcoin speculator. Another is well on his way to financial independence just dabbling in the digital coins starting about two years ago. I could go on and on.

I would be lying if I said that I wasn’t jealous of their sudden financial success. It can feel like everyone is hitting the stock market or crypto lottery by betting big on GameStop or Dogecoin. The truth is, though, that it would be dumb for me to jump in now, without really knowing anything about these investments. Getting rich quick is incredibly attractive, but it’s hardly guaranteed. For every person who made a killing on these fast-moving stocks or digital coins, there are thousands (if not millions) more who bought at the wrong time and lost their life savings. Trying to chase all these hot new investments is usually a losing bet. By the time you’ve heard about them on Reddit or the news, the prime time to buy is likely long since passed.

“Keeping Up With The Jones’ Is Only About Material Goods.”

I know what you’re thinking. You don’t buy a car or remodel your home just because your friends did. And you shouldn’t rush out to buy new clothes just because everyone at the office seems to dress like a million bucks. After all, you’ve heard all about the “keeping up with the Jones” phenomenon and you think you’re above all that. But are you really?

I write about personal finance for a living. Obviously, I’m quite tuned into my own finances. Even still, I often find myself living up with the Joneses in different ways. How? Through my kids. I reluctantly admit that a part of the reason my kids go to all kinds of summer camps isn’t because they need to develop hobbies. After all, there are plenty of ways to learn something new without spending money paying someone to teach them a free activity like soccer or chess. The real reason we sign our kids up to countless expensive camps is, well… because everyone else in our neighborhood is doing it. It’s that group-think again.

Are you keeping up in ways you didn’t even know? Look more carefully. It goes beyond having the biggest swimming pool or newest car on the block.

The Bottom Line

Every financial myth we just debunked will increase your knowledge and decrease the likelihood you’ll fall victim to misinformation. And the less times you fall victim, the closer you will be toward financial independence. Which financial myth did you believe? Which ones can you teach your friends and family about? Are there any other ones you want to add in here?

David Ning

Experienced Finance Writer

David is a published author, entrepreneur and a proud dad. He firmly believes that anyone can build a solid financial foundation as long as they are willing to learn. He runs, where he discusses every day money issues to encourage the masses to think about their finances more often.

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