Managing money can be complicated, and myths are often born from people’s struggles to make it simpler. But simplistic solutions can cost you instead of saving you money.
If you believe any of these five money myths, it’s time to take a closer look at the financial realities.
MYTH: EVERYONE NEEDS A FAT EMERGENCY FUND
Certified financial planners typically recommend clients have enough savings to cover expenses for three to six months. If you’re living paycheck to paycheck, though, it can take you years to amass that much.
A better course: Shoot for a starter emergency fund of $500, which would cover small car repairs or an insurance deductible. Once you’re on track with retirement and debt repayment, you can focus on building up your savings.
Meanwhile, identify other sources of emergency money: items you can sell, nonretirement investments you can tap or low-cost ways to borrow, such as a home equity line of credit.