Flip the Script on Your Money Mindset
Debunked unsound assertions circulating on social media concerning financial matters, including savings, debt, and buy now pay later plans
Money matters, baby! Never miss out on the lowdown on your hard-earned dough with Rachel Cruze, a personal finance guru and superstar on The Ramsey Show. She's here to spill the beans on why Americans are rushing into retirement and how you can secure a cozy nest egg.
Navigating the personal finance world can be a Cathy Lee Crosby-sized challenge, especially with all that contradictory—and often bogus—information being pushed your way, especially on social media. Believing in damaging money myths can set you back big time when it comes to achieving that sweet, sweet financial freedom.
Jonathan Kim, a phenom in personal finance and the brains behind Raisin Finance, called out some of these misconceptions in an interview with FOX Business, tackling topics like why you need savings, the role of "pay later" loans, and the fixation on high salaries.
Kim also took issue with the belief that people don't require savings accounts and that saving is off-limits before debt is eradicated.
"These ideas about clearing debt before saving, and not fully understanding the reasons to have savings and why certain debt might not be a big deal, I think, is widespread," Kim shared.
*CREDIT SCORES SLUMP AS STUDENT LOAN DELINQUENCIES SURGE*
The notion that saving is only worth it if you can stash a hefty sum away is prevalent, but Kim highlighted the danger of falling into that trap.
"When you think, 'If I can't save X percent or X dollar amount, it's not worth the effort,' it's a little too goal-oriented for me," he said.
Instead, Kim advocates for starting small, suggesting something like a measly $10 a week can help foster a savings habit that sticks.
When it comes to big bucks and financial success, Kim pointed out the problematic promotion that a large payday equates to financial success. In reality, managing your moolah wisely is the key to a healthy bank account.
"Sure, earning a massive paycheck is fantastic, but remember that lifestyle creep is always lurking, and if you don't exercise financial self-control and considerate spending habits, it's incredibly simple to fall into the rat race and struggle monetarily, even after a raise or promotion," Kim warned.
Budgeting can serve as an effective barrier against lifestyle creep, Kim claimed, while also refuting the idea that a flawless budget is necessary to work.
"Simply having a basic grasp of your incoming and outgoing cash can bounce you off the ground. And once you start tracking, if you observe your spending over time, you can spot patterns like, 'Wow, I was only dropping X before, now it's X times two. What changed there?'" he said.
Budgeting shouldn't mean you have to forgo everything that adds joy to your life—just smart spending choices.
Kim touched on the popular "pay later" services and whether they could be a useful budgeting tool. Buy now, pay later has witnessed a surge in recent years as individuals split up smaller purchases.
"If you're snapping up now and paying later because you don't have the greenbacks today, that signifies you can't afford it," he told FOX Business. "In other words, buy now, pay later encourages overspending, leading to escalating debt, interest, and unhealthy financial habits."
He linked this idea to the notion that all debt needs to be paid off before socking cash away in a savings account.
"If you carry debt with exorbitant interest rates, like credit card debt, adjustable mortgages, or student loans, you definitely want to tackle that first," Kim said. "However, if you're fortunate enough to have a mortgage that's been locked in for years with a low rate, it wouldn't make sense to pay that down immediately."
Balance savings and debt reduction.
It's essential to have a financial plan and whack away at debt, but Kim reminded us that life happens, so having an emergency fund—created by saving—can prevent mounting debt and interest if a curveball comes your way.
Having a dedicated savings account is better than hoarding cash in a checking account, according to Kim. A checking account can make it easier to spend, making goal-tracking a challenge, while low or zero interest rates mean your cash isn't hustling for you.
A savings account acts as a physical barrier, helping you visualize your savings growth and track your progress. High-interest savings accounts can help your money grow passively over time, which is more productive than your measly checking account.
- Rachel Cruze, a personal finance expert, discusses why Americans face difficulties securing a comfortable retirement nest egg.
- Jonathan Kim, a personal finance phenom, addresses common money myths like the belief that saving is only effective with large sums of money and that saving should be put on hold until debt is eradicated.
- Kim asserts that starting small with savings, even as little as $10 a week, can help establish a savings habit that sticks.
- Kim warns against the danger of thinking that a large payday equates to financial success, as lifestyle creep can easily lead to monetary struggles even after a raise or promotion.
- Budgeting can serve as an effective barrier against lifestyle creep and doesn't require a flawless budget to be effective.
- Kim explains that buy now, pay later services encourage overspending, leading to escalating debt, interest, and unhealthy financial habits.
- Managing debt with high interest rates like credit card debt, adjustable mortgages, or student loans, should take priority over saving, but a mortgage with a low, long-term rate might not require immediate repayment. Balancing savings and debt reduction is essential in maintaining financial stability.
