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It’s astonishing how much financial misinformation there is out there. I see it on social media, on the news and often hear it when I see clients. Some of these myths are so embedded in our psyche that one could spend hours having heated arguments about them. Lets separate fact and fiction. Here are 6 financial myths we should all be wary of.

1. Your home is an investment
The definition of “investment” is ‘using money today to generate profits tomorrow’. Your home is first and foremost a place to live. Thinking of your home as an investment can lead to disappointment, especially in a lacklustre market. Owning and maintaining a home can be a rewarding experience, but not one that will automatically make you money. Yes, people have made money through home ownership but to expect this to happen consistently would certainly be dangerous.

2. Buying is always better than renting
Not always. Buying generally makes more sense for anyone intending to live in the same place for a long period of time. But renting can be a better option for anyone needing to relocate often; through their job for instance. Lots of us assume that property prices will continue rising however in a stagnant or falling market, property ownership can be an expensive burden, especially for those who need to relocate quickly.

3. The more credit cards you have, the better your credit score
What a load of nonsense! I recently arranged a mortgage for a first-time buyer who had only one debit card and no other credit arrangements, yet they had a credit score of 999. This was because they had lived in the same place for several years and had simple finances that were easy to understand. Bills were paid on time and they were on the electoral roll register. Taking on debt you don’t need is a definite credit score no-no. Living within your means and long-term financial stability are the best ways to maintain a good credit score.

4. Stocks and shares are for sophisticated investors
Back in the 70s and 80s maybe, but definitely not today where every adult and even children can access stocks and shares through their pension or through a stocks and shares ISA. Yes, there is a little more to them than having your money sitting in a bank account. But with interest rates at such low levels, most people realise that the only way to get a return that has any hope of beating inflation is via stocks and shares. Just remember that the value rises and falls and most investments should be kept for the long term. There are also management charges to be aware of.

5. Pensions are rubbish
I hear this from mainly young people, who may have heard negative press on pensions or listened to parents or grandparents who have had a bad experience. What many don’t understand is that building a pot of money large enough to sustain you through old age takes major investment. In terms of scale, viewing your pension contributions along the same level of commitment as mortgage or rent payments is a good place to start. Investing the right amount is paramount, as is starting early and managing your expectations. Aside from that, long-term tax-free growth potential and tax-relief on contributions are all good things and worth having.

6. Writing a Will is for old people
This would be true if the only people who ever died were old people. Unfortunately, people die at all ages and a Will is a simple and easy way to ensure that your wishes are carried out when you die. A Will kit can be bought online for as little as £20 and most are questionnaire style and very easy to complete. Just ensure that your Will is signed and witnessed o make it a valid legal document.

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