In continuing the series on debunking these most popular and 12+ pages being too much for one post – here is part 2 of 4 on the series Debunking The 25 Most Outrageous Money Myths. Part 1 can be read HERE.
7. Closing Your Old Accounts Will Help Your Credit Score
Nope. Closing accounts can never help your credit score, but can possibly hurt it. My mortgage lender actually told me to “trim down to 3 or 4 accounts” when I was in the market for my first house. Although it is a true statement that too many open accounts hurts your score, but that, in itself, is what hurts it. The damage has been done when you opened it.The credit score looks at the difference between your available credit and what you’re using. Shut down accounts, and your total available credit shrinks, making your balances larger than what your limit is set to, which hurts your score.The score also tracks the length of your credit history. Shutting older accounts can also make your credit history look younger than it actually is, which can hurt your score.But if your goal is to improve your credit score, you generally shouldn’t close accounts in advance of such a request. Instead, pay down your credit card debt. That’s something that actually can improve your score.
8. I Bought My Mortgage With Zero Down So I Could Write Off The Interest, Which Is Advantageous
I don’t know if “advantageous” is the word I’d look for. I don’ see the advantage in paying thousands of dollars in interest each year. Interest tax deductions should always be considered when filing your taxes and calculating whether you can afford the mortgage payments, but they should not be considered a reason to buy a home.I can see the advantage if you’re selling a previous home and pocketing that cash or putting it towards other debts (car, credit cards, loans, etc) that carry a higher interest rate than what you’d get a house for, but again, there are always loopholes in everything.
9. I Don’t Have Enough Money To Start Investing
I don’t buy this one. I find this one comes in a lot when people are looking for excuses that they don’t have a good paying salary. They want you to feel sorry for them that they have a low-paying gig and further proof in their lack of ability to put anything to savings.This can be argued semantically as well. How much is “enough”? Well, if you cut it to the most basic, it’s $0.02 since the smallest currency is a penny. So if you’re making $0.02, you can invest half of it. Whether you want to is another thing.The second part of the semantics is the word “investing”. You don’t have to put your money in a stock to have it be considered “investing”. Put it in a high yield savings or MMA account. That’s investing as well.Thirdly is that people just don’t think small amounts matter in investing. So that extra $40 at the end of the month left won’t be worth putting into an investment. WRONG! It is. Think of that $40 for 12 months. Then think of that 12 months for 30 years.Just putting that away is giving you $14,000. Now put that to work with a very modest 5% growth and you’ve made yourself a pretty penny turning in over 100% more than you put into it (click the chart to enlarge).So yes, you DO have enough money to start investing. Even if it is just a few cents, seeing that amount grow will get you in a mindset of saving. That money will eventually add up – maybe not in the near term, but program yourself to thinking to the future, which leads to the next myth…
10. I’m Too Old To Worry About Saving Now – It Is Too Late.
So you’re old, get over it. That doesn’t mean you should just throw in the towel! You’ll still be able to build SOME nest egg if you start now. Granted, it won’t be the same as someone firing it up right out of school, but you may live to be 100 – you never know! Starting at 55 gives you another 45 years of investing ahead of you if you’re going to push the triple digits in age.Furthermore, age can be an advantage in the ROTH IRA game. The 2008 limit for IRAs is $5,000. If you’re 50 or older on 2008, it’s $6,000. So every year after 50 gives you a $1,000 bonus. I highly recommend it.Don’t look at it as a hindrance, look at it as a challenge to kick it up in just 1 year, then 2, 3, etc. Get in the mindset of saving it and it’ll be much easier to overcome the idea.
11. Checking Your FICO Score Hurts Your Credit
Nope. The actual act of inquiring doesn’t hurt it if you’re doing it once a year from annualcreditreport.com. Applying for new credit is what hurts your score. The credit card folks that send you 50 snailmails per day trying to get you to sign up with their card hits your score. Shredding them will help your score more than filling them out and applying for them.Your score fluctuates between 300 and 850 – when your credit is run by a credit card agency or lender it usually knocks off about 5 points, which won’t end the world, but if you’re on the brink of one echelon or the next for their offer, it’s best to keep the inquiries down and only use them when you plan on buying something.When you’re searching for a mortgage remember that FICO treats multiple inquiries in a 45-day period as just one inquiry and ignores all inquiries made within 30 days prior to the day the score is computed. So if you’re gonna hit it, hit it in that timeframe.
12. The Rich Are Getting Richer, And The Poor Are Getting Poorer
TheDigeratiLife sums it up very well in 3 statements why the rich get richer:The rich have started successful businesses.The rich get tax breaks.The rich are paid higher and higher salaries while regular people don’t.While I agree with the statements, I think a big point is that the rich know how to make MORE money because money begets money. If you have it and know how to use it, it can really pay off for you. So there is no lie to the statement of the “rich get richer” – they should if nothing more than evolution. They’re getting richer because they’re learning how and teaching their kids how to do it also.But that doesn’t cover the 2nd half of the statement “the poor are getting poorer”. Professor Sala-i-Martin wrote a p
aper titled “The Disturbing `Rise’ of Global Income Inequality.” In it he estimates the worldwide distribution of income by individuals rather than countries. The results are striking.In 1970, global income distribution peaked at about $1,000 in today’s dollars, a common measure of poverty ($2 a day in 1985 dollars). In 1998, by contrast, the largest number of people earned about $8,000 — a standard of living equivalent to Portugal’s.”That’s what I call a new world middle class,” says Professor Sala-i-Martin. It is mostly made up of the top 40 percent of Chinese and Indians, and the effect of their economic rise is big.What about the argument that income gaps are widening within these rapidly advancing countries? With a few exceptions, it is true, but still misleading.The rich did get richer faster than the poor did. But for the most part the poor did not get poorer. They got richer, too. In exchange for significantly rising living standards, a little more internal inequality is not such a bad thing.”One would like to think that it is unambiguously good that more than a third of the poorest citizens see their incomes grow and converge to the levels enjoyed by the richest people in the world,” writes Professor Sala-i-Martin. “And if our indexes say that inequality rises, then rising inequality must be good, and we should not worry about it!”
Stay tuned tomorrow for the remainder of the Debunking The 25 Most Outrageous Money Myths series! Part 1 can be found HERE. Part 2 can be found HERE.photos by: digidreamgrafix.com, ??103, Per Ola Wiberg (former ponanwi and Powi), Elfboy, mckaysavage, Ravenelle, saschapohflepp,