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Five money myths to ignore

When it comes to personal finance, what works for one person doesn’t necessarily work for another. That’s why money misconceptions can be so dangerous. Here are four common money myths you may have heard — and perhaps even believe — that need to be put to rest.

Myth #1: All debt is bad

Reality: Few people could afford to buy a home, if they didn’t have a mortgage. You might not have gone to college without taking out a student loan. Instead of avoiding all debt, make sure you have a plan to pay it off by addressing high-interest loans first.

Myth #2: Avoid all credit cards

Reality: Credit cards offer flexibility that cash and debit cards can’t. Most card companies offer zero liability for any fraudulent transactions, while most debit cards have little protections if you find the fraud after a certain date.

Plus, you can earn extras through your credit card rewards, like airline miles for your retirement travel plans. Instead of nixing credit cards, plan to pay back the balance in full each month, avoiding the high interest charges.

Myth #3: You cantime the market

Reality: There are many factors that influence day-to-day stock moves — the unpredictable news cycle, the economy, business decisions, rates and regulation — just to name a few. This why timing the market is so challenging, even for professional traders. While someone might get it right once, in order to end up ahead, studies have found one would need to guess correctly more than 65% of the time1.

If only a handful of professional investors manage outperformance each year, the average investor’s chances are nearly microscopic. Meanwhile, you lose out on gains if your money sits on the sidelines while you seek the perfect moment to play. Stock markets are notoriously unpredictable in the short term and they should not drive investment strategy for most investors.

Myth #4: Pay off your debt before saving for retirement

Reality: If the interest on your student loans is 3.5%, but the expected returns in the market are 5%, then consider adding funds to your retirement account, since you’re making more than the loan costs. You could lose out on opportunities, like the benefits of compound interest, if you’re only focused on debt repayment.

Myth #5: You don’t need a financial adviser

Reality: Many believe that a financial adviser’s only job is to beat the market. To believe that would be to miss the main point of why it’s helpful to have a professional in your money corner. At its core, a financial adviser’s job is to keep you on track towards your financial goals. Whether it’s retirement planning, saving for college or meeting other goals, an adviser can help you determine how to approach some of life’s biggest financial decisions. Having a trusted adviser, you can feel more confident in your financial future.

1 Morningstar Investment Workbook: “Waiting or Market Timing”

Randy Groff, ChFC, CLU, CRPC, is a financial adviser with Ameriprise Financial Services, Inc., in Marshall.

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