Don’t Be Fooled By These 9 Common Money Myths, Say Finance Gurus


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It can be difficult to separate financial fact from fiction.

CNBC interviewed eight personal finance experts to help answer one question: What are the biggest money myths for consumers?

Here are 9 of the top mistakes that finance gurus have debunked.

Myth #1: Giving up a daily coffee purchase is a financial game-changer

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Myth #2: Car dealerships give you the best rate on a loan

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Car buyers often believe that when they finance a purchase through the dealership, the dealership gets the best rate available to them, said Erin Witte, director of consumer protection at the Consumer Federation of America, a group defense. This may be true sometimes, but it is not always the case.

“What consumers may not know, and what dealerships will almost never tell them, is that the dealership is paid by the lender to give them their business, and that’s often structured around the interest rate. ‘high interest,’ Witte said.

Dealerships may therefore have an incentive to charge a higher rate because they will also make more money, she said.

“Consumers would be much better off going to their own local credit union or bank and shopping around for their own financing,” Witte said. “It can save hundreds or thousands of dollars over the life of the loan.”

Myth #3: Financial “advice” always has your best interests at heart

Myth #4: You have to pay to access the credit report frequently

That used to be true, but that’s changed in the age of Covid, said credit expert John Ulzheimer.

“The Fair Credit Reporting Act entitles us to a free credit report every 12 months. That’s where comes from,” said Ulzheimer, who previously worked at FICO and Equifax, two major players in the credit ecosystem.

“Since Covid started, however, the credit bureaus have basically unlocked this website and we can now get free copies of our credit reports every week for free,” he said. “Obviously, there’s no need to buy it from anywhere if you can get that much for free from the credit bureaus.”

Myth #5: Hiring an advisor only benefits the wealthy

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Myth #6: Paying off your mortgage early isn’t worth it

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In some ways, this is a mathematical problem, said Brian Portnoy, expert in the psychology of money and author of “The Geometry of Wealth.”

Conventional thinking holds, where can you get the most return with your extra cash? If your mortgage interest rate exceeds your likely market return, it usually makes sense to pay off the mortgage sooner.

“There’s also a legitimate emotional component to it,” said Portnoy, who is also the founder of Shaping Wealth. “Sometimes people enjoy the feeling of complete ownership of their home. It’s a valuable psychological asset that shouldn’t be sniffed at.”

Conventional wisdom — comparing mortgage rates to investment returns — is also misleading, said Christine Benz, director of personal finance and retirement planning at Morningstar. Paying off a mortgage faster “almost never sounds like a good idea” compared to the stock market, she said.

But a mortgage payment is akin to a guaranteed “return”, she said. The only fair comparison is the return on an account that’s also guaranteed, like FDIC-insured investments, said Benz, author of “30-Minute Money Solutions: A Step-by-Step Guide to Managing Your Finances.”

Myth #7: You don’t need emergency savings

Myth #8: You need to monitor the stock market daily

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Myth #9: Money can make you happier

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