Financial literacy is a must, especially in today’s current socio-economic condition. One known path to financial literacy is knowing the difference between good and bad money advice. It is of utmost importance to know what advice is considered bad so that you can completely avoid them. Below are some of the common bad advice about money that not all people are aware of.
Increasing credit score by carrying a balance
One of the common notions of many people is to carry a balance in a credit card to significantly improve credit score. However, don’t you know that carrying a credit balance won’t have any effect on your credit? It will only lead you to pay a high-interest rate on your balance.
Avoid having a credit card
If you have a credit card and you don’t manage your spending, you could be in big trouble. However, avoiding credit cards completely can rob you of all the potential benefits it offers. If you use your credit card wisely, it can be a great tool to build your credit and earn rewards. The key to using credit cards wisely is to track your spending and pay every month.
You need to have a six-month emergency fund
While it would be a big help to have an emergency fund, it is not really necessary to have six months fund. How much you save will depend on every person. To many people, six months is overkill. If you don’t have that much money to save, it could surely leave you in debt.
Invest only in what you know
It makes sense to invest only in what you know, but the problem is the majority of us are not experts in the business. If you want to make your money grow, you have to diversify your portfolio – it includes many companies including the ones you haven’t heard of.