For nearly four years, I kept every dollar I saved in a traditional savings account earning 0.3% annual interest. Meanwhile, inflation averaged around 3% annually, and the stock market delivered double-digit returns.
Why? Because I genuinely believed investing was something only wealthy people with tens of thousands of dollars could do.
Financial myths are everywhere. Your parents repeat them. Your friends believe them. They’re all over social media. And they’re quietly sabotaging your financial future.
After years of making expensive mistakes and finally learning what’s actually true, I’m breaking down the nine most damaging financial myths I’ve encountered.
Myth 1: You Need a Lot of Money to Start Investing
This was my myth. The one that cost me five years of compounding growth.
I thought investing was for people with tens of thousands of dollars to throw around. Rich people stuff. I’d heard about minimum investment requirements of $3,000 or $5,000 and figured I’d wait until I had “enough money.”
But the truth is, you can start investing with literally $5.
Modern investing apps like Robinhood allow fractional share purchases. Want to own Amazon stock that trades at $3,500 per share? You can buy $5 worth of it. Want a piece of the S&P 500? Same thing, just a few dollars.
The average S&P 500 return is about 10% annually over the long term. That means even small amounts grow significantly over time thanks to compound interest.
Myth 2: Buying a Home Is Always Better Than Renting
Between the down payment, closing costs, property taxes, insurance, maintenance, and HOA fees, buying would have cost you $800 more per month than renting a comparable place. Plus, you would have tied up $60,000 in a down payment that couldn’t be invested elsewhere.
Homeownership can be a great investment in the long run. But it’s not always better than renting in all situations at all times.
When you rent, you have flexibility. No surprise $15,000 roof replacement. No property tax increases. If your job situation changes, you can move without the hassle and expense of selling.
Myth 3: Credit Card Debt Means You’re Bad With Money
About 46% of Americans carry a credit card balance from month to month, according to a recent Bankrate survey.
If you’re one of them, you might feel ashamed. Like you’ve failed at adulting. Like you’re irresponsible or have a spending problem.
Most people get into credit card debt not because they’re bad with money, but because they don’t have enough money.
The medical bill you couldn’t afford. The car repair that couldn’t wait. The roof that started leaking. Many people turn to credit cards for emergencies when they don’t have sufficient emergency savings.
Also, our economy is structured in a way that requires many people to take on debt just to cover basic living expenses. Rising costs of housing, food, and healthcare while wages stay relatively flat means more people are putting necessities on credit cards.
Having credit card debt doesn’t make you a bad person or financially incompetent. It often means you experienced a financial emergency or are struggling to keep up with the cost of living.
Myth 4: You Should Pay Off All Debt Before Saving Anything
This myth sounds logical. Why save money earning 4% interest while you have debt costing 20% interest?
But the problem is, if you use every dollar to pay off debt and have zero emergency savings, what happens when your car breaks down? Or you have a medical emergency? You go right back into credit card debt.
I watched this happen to a friend. He aggressively paid off $8,000 in credit card debt over eight months, draining his savings to do it. Then his transmission failed two weeks after his final payment. Back on the credit card for $3,500.
Rita Soledad Fernandez Paulino, a financial educator, explains it perfectly: “If you take all your cash, pay off the credit card, it’s only a matter of time before you’re going to get into debt again.”
Myth 5: All Debt Is Bad Debt
My grandfather used to say, “Never borrow money for anything.” He meant well, but that advice would have prevented me from getting the education and opportunities that changed my life.
Not all debt is created equal. There’s “good debt” and “bad debt.”
Good debt is debt that helps you build wealth or increase your earning potential. A mortgage at 6% interest that lets you build equity instead of paying rent. Student loans enable you to get a degree and higher lifetime earnings. A business loan that funds a profitable venture.
Bad debt is high-interest debt for depreciating assets or unnecessary purchases. A 24% APR credit card balance for clothes and restaurants. A 12% car loan for a luxury vehicle you can’t really afford.
The key is using debt strategically and responsibly. The myth that all debt is evil keeps people from building credit, accessing opportunities, and leveraging their money strategically. What matters is the interest rate, the purpose, and whether you can manage the payments comfortably.
Myth 6: It’s Too Late to Start Saving for Retirement
I hear this from people in their 40s and 50s all the time. “I’m too old to start now. I’ve missed the boat on retirement savings.”
This is dangerous thinking that becomes a self-fulfilling prophecy.
Yes, starting early is better because of compound interest. But starting at 35, 45, or even 55 is infinitely better than never starting at all.
Let’s say you start saving at age 45. You contribute $500 per month until 65 and earn a 7% return. You’d have about $260,000 saved. Not a fortune, but combined with Social Security, it provides a foundation for retirement.
Compare that to starting at 25 and saving the same amount: you’d have around $650,000. Obviously more. But $260,000 is still substantial and definitely better than $0.
Myth 7: Checking Your Credit Score Hurts Your Credit
I avoided checking my credit score for years because I’d heard that looking at it would make it drop.
This is completely false, and it cost me opportunities because I didn’t know where I stood.
There are two types of credit inquiries: soft and hard. Checking your own credit score is a soft inquiry and has zero impact on your score. None. You can check it daily if you want.
Hard inquiries happen when you apply for new credit – a credit card, mortgage, auto loan, etc. These can temporarily drop your score by a few points, but the impact is minor and short-lived.
Regularly checking your credit report is actually one of the smartest financial moves you can make. It helps you catch errors early, spot potential fraud, and understand what’s affecting your score.
You can get your credit report free every week at annualcreditreport.com. Many credit cards and banks now offer free credit score tracking too.
Myth 8: You Need to Be Financially Comfortable to Invest in Retirement
This myth has two parts, and both are wrong.
First, many people think retirement investing is only for people who’ve already figured out their finances and have extra money lying around.
According to Saira Malik, CIO of Nuveen (which manages $1.4 trillion in assets), “It’s not about how much money you have, it’s about how you make your money work for you.”
Financial education and smart investing matter more than having a huge income. I know people earning $30,000 who save and invest consistently and are building real wealth. I also know people earning $300,000 who spend everything and have nothing saved.
Second, investing in retirement accounts shouldn’t wait until you feel “comfortable” because that day might never come. Life always has expenses. There’s always something else you could spend money on.
Fidelity’s research suggests that if you start around age 25 and save 15% of your paycheck (including any employer match), you could save enough to maintain your lifestyle in retirement.
Can’t save 15%? Start with 5%. Or even 3%. The habit matters more than the amount when you’re beginning. You can increase your savings rate as your income grows.
Myth 9: Higher Salary Equals More Wealth
This is the myth that surprises people most, but I see it play out constantly.
My colleague Jidan earns $50,000 annually. He lives within his means, saves 15% of his income, and invests consistently. his net worth has grown steadily to over $80,000 at age 35.
Another colleague, Sagar, earns $180,000. He leases a luxury car, rents an expensive apartment, eats out constantly, and carries credit card debt. His net worth is maybe $20,000 despite making triple what Jidan makes.
Wealth isn’t about how much you earn. It’s about how much you save and invest relative to what you earn.
This is why lifestyle inflation destroys wealth. You get a raise and immediately upgrade your car, apartment, wardrobe, and lifestyle. Your expenses rise with your income. You’re making more but saving the same amount – or even less – than before.
The wealthiest people I know personally aren’t the highest earners. They’re the most disciplined savers.
Why These Myths Are So Persistent
Financial myths stick around for a few reasons.
First, we lack formal financial education. Most schools don’t teach personal finance.
Second, confirmation bias reinforces false beliefs. If you believe you need lots of money to invest, you’ll notice examples that confirm that belief and ignore evidence to the contrary.
Third, financial myths spread easily through social media and word-of-mouth. Someone hears something that sounds right, shares it, and suddenly thousands of people believe it without checking if it’s actually true.
The World Economic Forum notes that these misconceptions affect people across all backgrounds and income levels. Even smart, educated people believe financial myths because they were never taught otherwise.
What Believing These Myths Actually Costs You
Myth #1 (Need lots of money to invest): Missing out on 5 years of compound growth at 8% annual returns could cost you tens of thousands by retirement.
Myth #2 (Buying is always better than renting): Buying the wrong property at the wrong time could cost you flexibility and tie up capital that could have grown elsewhere.
Myth #4 (Pay all debt before saving): This keeps you in a debt cycle where emergencies force you back into high-interest debt repeatedly. You never get ahead.
Myth #6 (Too late to save for retirement): Believing this could mean retiring with nothing and relying entirely on Social Security, which averages only $1,907 per month as of 2025.
Myth #9 (Higher salary equals wealth): Lifestyle inflation can keep you from ever building wealth regardless of income. I’ve seen people earning $200k+ living paycheck to paycheck.
How to Identify Financial Myths in the Future
After getting burned by several myths, I developed a system for evaluating financial advice.
Consider the source. Is this coming from a certified financial professional, or your uncle who declares bankruptcy every few years? Credentials and track records matter.
Look for absolutes. If someone says “always” or “never” about financial decisions, be skeptical. Personal finance is personal – what works for one person might not work for another.
Check multiple sources. Don’t believe financial advice based on a single article or social media post. See if reputable financial institutions and experts agree.
Do the math yourself. Use calculators to verify claims. Don’t just trust that buying is better than renting – run the actual numbers for your situation.
Question your assumptions. If you believe something about money, ask yourself why. Where did that belief come from? Is it based on evidence or just something you heard?
Recognize emotional reasoning. A lot of financial myths feel true emotionally even when they’re factually false. “You need lots of money to invest” feels true because investing seems scary and complicated. But feelings aren’t facts.
The Bottom Line on Financial Myths
The truth is usually more nuanced than the myth. Personal finance is personal.
What matters is learning the truth, making informed decisions, and taking action despite uncertainty. Perfect knowledge isn’t required. Perfect action isn’t possible. Progress beats perfection.
Thank you for being with me.
Mehrab Musa From Asset Stories.
