Updated: Jul 16, 2019
I found this article on TOUGHMONEYLOVE and some of the myths really rang true from comments I hear from clients or seminar attendees. I took a few of his myths and added my comments.
1. You spend more time monitoring your credit score than you do evaluating the performance of your investments.
In every seminar I give and almost every client I meet with I get asked about their credit score. Whether they want to know how to raise it or monitor it or if they should spend a monthly fee for insurance and monitoring. That energy should definitely be put towards monitoring your investments and understanding how they work instead. I am not a fan of paying a monthly fee to the credit agencies. Instead, open your bills and go online every week to check your bank balance.
2. You think re-paying a 401(k) loan is an investment.
My cardinal rule is you do not touch your 401(k). You will need that money when you get older. I have heard that it is ok to touch your 401(k) money if you want to buy a home. I disagree. Find that down-payment money elsewhere.
3. Instead of asking the price of the new car on the lot, you ask “how large will my payments be?”
This is directly from TOUGHMONEYLOVE. If a new car salesman can get you involved in this conversation, you are finished as a smart consumer. I’ve never asked this question because I pay cash for cars. Car dealers don’t like this because of all the money they make on financing. With all of the focus on payment size, it makes me wonder if car buyers can even do the math necessary to total their payments up.
4. You believe a cash-out refi is a debt reduction strategy.
Who hasn’t heard someone say that they were going to re-finance their mortgage so that they can pull cash out to “pay off debt”? Uh…what part of “debt” don’t they understand?
5. You are afraid to open your mail when the bills arrive.
Whenever I ask this question in a seminar, more hands are raised than not. One way to get around this is to deal with your money every week. If you open your mail as soon as it comes in, you will feel more on top of your bills and money issues. Try it.
6. Mr. FICO is your friend. Mr. Net Worth is a stranger.
How hard have you worked to save money into your 401(k), save for your down payment and put money in the bank? Probably really hard. Yet you don’t know how much it is worth or how much your investments are today? Treat your money (and yourself) with more respect. Make it a priority. Know your net worth.