Money myths can have a significant impact on financial decisions and well-being, especially during a time when inflation and interest rates are at a historical high.
While it’s challenging to pinpoint the top five money myths impacting millennials universally, as beliefs can vary, let’s examine five common misconceptions that many millennials are encountering today.
1. “Credit cards are always bad.”
Some millennials may believe that all credit cards are harmful and should be avoided at all costs. In reality, responsible credit card use can help build a positive credit history, which is beneficial for future financial endeavors like purchasing a home or obtaining favorable interest rates from creditors.
2. “Applying for a loan or credit card doesn’t hurt my credit.”
Anytime you apply to borrow money, your credit score is pulled. This is called a hard inquiry. Hard inquiries on your credit can cause your score to drop. On the other hand, soft inquiries don’t affect your score.
The good news? if you apply for a loan and you’re shopping around, the credit bureaus understand you’re trying to get the best deal. They count all inquiries in that timeframe as one single inquiry, as long as you do your shopping within a 45-day period.
3. “I don’t need to save for retirement yet.”
Many millennials may think they have plenty of time before they need to start saving for retirement. The truth is, the earlier you start saving, the more time your money has to grow through compounding. Waiting too long can make it challenging to catch up later.
Consider automating a small percentage of your paycheck towards a retirement fund every month…starting small is better than not starting at all. If your situation changes, you can always increase your monthly contribution.
4. “Paying off my debts will instantly repair my credit report.”
Most negative information will remain on your credit report for up to seven years. Negative items located under the “Public Record” section of your credit report, such as judgments or bankruptcies, typically stay with you for up to 10 years. Paying off debts will improve your credit report and credit score, but it won’t erase all past problems. That requires time.
5. “Debt management is for people who can’t handle their finances.”
Often, life throws expensive curveballs such as home repairs, medical bills, and career changes. Many people take advantage of the curveballs and work to use that time to restructure their debt and take advantage of lower interest rates. Regardless of why you choose debt management, it is a chance to get your finances in order and assist you in reevaluating your financial goals.
GreenPath Financial Service
GreenPath, A Financial Resource
If you’re interested in building healthy financial habits, paying down debt, or saving for what matters most, take a look at these free financial tools.
Get Back to Budget Basics
Getting back to budget basics can help you gain financial footing.
Take inventory of your full financial picture. Has your household income changed? What’s your current balance of credit card debt, student loans and other debt? Check your existing budget to see where you stand and where your money is going.
If you don’t have a budget, a good place to start is a budgeting worksheetbudgeting worksheet that tracks your monthly income against current expenses.
And remember that you don’t have to figure it out alone. GreenPath will meet you wherever you are. Our empathetic NFCC-certified counselors help you begin a conversation about where you are today, and what you need to accomplish your goals.
