Personal Finance Myths Debunked

Personal finance myths

Estimated reading time: 3 minutes

What are the top personal finance myths of the 2020s? In addition to incorrect beliefs about the frequency of mortgage payments, there are some whoppers floating around in cyberspace that don’t seem to want to go away. The ones you’re likely to hear of include myths related to having gold in an IRA, the legality of tax shelters, and how long it takes to raise your credit scores. Here are pertinent details about personal finance myths, along with the truth about each one.

Real Estate Owners Must Make Monthly Mortgage Payments

There are multiple options for payment frequency. For anyone who invests in real estate as a speculator, house flipper, or traditional homeowner, it’s possible to save money by opting for alternate payment methods. By paying your mortgage biweekly, it is perhaps the simplest tactic to potentially save thousands of dollars over the life of the loan. Real estate investors have been using this strategy for decades, with some choosing monthly and others biweekly or bimonthly payment options. 

Explore the alternatives before going the traditional route and making monthly mortgage payments. Review a plain language guide that walks through biweekly payments to see if the approach makes sense for your personal budget. Note that all the payment structures come with their own set of pros and cons, so it’s imperative to get the facts before making a final decision when investing in real estate or buying a house as your primary residence.

Tax Shelters are Illegal

Protecting money from taxation is legal and smart. The term tax shelter got a bad reputation back in the 1970s when many corporations and individuals used illegal ones to shield their income from tax authorities. Most shelters are fully legal, with IRAs (individual retirement accounts) being the most common examples. Keep in mind that there are nefarious characters online and elsewhere who claim they can nullify a person’s entire tax obligation via questionable methods. Avoid those obvious frauds and stick with legit tax shelters vouched for by reputable accountants and lawyers.

SEE ALSO: How to Take Advantage of Rising Interest Rates

It Takes Years to Fix a Poor Credit Score

Generally, people can clear up negative ratings in about six months. In the absence of personal bankruptcy, it’s usually possible to clean up credit in a matter of several months. The most effective tactics are to pay bills on time, reduce credit card balances, avoid opening new credit accounts, and correct any mistakes on your reports with the three major reporting bureaus. You can use budgeting apps to help you set goals and identify ways to move your existing money around to reach them. 

IRAs Can’t Hold Physical Assets Like Gold & Silver

Self-directed IRAs can include precious metals and are popular choices for working adults who wish to place precious metals into their retirement accounts. The arrangements are becoming more popular today as the stock market continues to exhibit volatility and inflation is unchecked. Setting up a self-directed IRA is more complex than contributing to a traditional IRA. Account holders need to find a custodian and an IRS-approved vaulting service to hold the bullion. You can’t keep physical gold or silver at home if it’s part of a self-directed IRA.