#1 MYTH: "I should Build my credit by carrying a balance on my credit card or by taking out a small loan and repaying it"

You do NOT need to take out a loan , or carry a balance, to "build your credit". If you have ANY credit cards, you ARE building your credit. If you have credit cards and pay them on time and in full each month, that will build your credit. There's no need to pay interest on money you dont need!

#2 MYTH: "I need to cancel some of my unused credit cards because I have too many"

This is a pervasive myth that has been addressed in several threads (found in the Credit Card FAQ). Once a card is opened, closing it will NOT help you. If a home/auto lender is concerned about you having so many unusued cards that they dont want to lend to you, they will simply ask you to close some accounts in order to get the loan. Dont take such action UNLESS you are asked to do so by a lender. Here is a good recent article

#3 MYTH: "I can only list my personal salary on a credit card application"

Read the application carefully. Most credit card applications ask for "household income", which can include much more than your salary, and can also include other members of the household. Presenting the highest legitimate # to the cc issuer should get the best cc terms.

#4 MYTH: "I can't afford a $50,000 car because payments would be nearly $1000/month, but if I put it on a HELOC, the payments are less than $200/month - I can afford that!"

Payments are higher on the auto loan not only bc of the interest rate, but also because you are paying off the principal as well as interest. If you make minimum payments on a HELOC, you are likely paying interest only, which means that after 5 years, you STILL owe the $50,000. And by that time, the car is likely worth less than $20,000. Putting any depreciating asset on a HELOC is not a good financial move unless you pay principal as agressively as you would with a regular loan.

#5 MYTH: "If I move all my credit card debt to a HELOC or consolidate it into my refi, I'll save a ton of money and the payments will be lower".

This makes sense ONLY if you stop charging and living beyond your means. If you "zero out" the credit card debt by taking out a HELOC or Refi, and then charge them up again, you will be in a much WORSE financial position. If you cannot be financially responsible, do not add any debt to your house and develop a budgeting plan to pay down your CCS, starting with the highest interest rate card on down...


#6 MYTH: "I bought a house/car/boat/etc but I cant make the payments. I'll just send the lender the keys and let them take it"

That will cost you more than any other option. The lender will take the item, charge you a ton of fees, sell the item at auction, then come after YOU for the difference! It is likely much better to sell the item on your own, even at a small loss, to avoid the bad credit marks, repo fees, and possible lawsuit.

#7 MYTH: "I bought my car in 2002 with 0 down and now I want a new one. The dealer says they will take my old car, payoff the loan for me, and get me into this new car - Sounds great!".

Nope. This will cost you a ton of money and likely lead to a default. Chances are you owe a lot more on your current car than the dealer will give for it. If you owe $20,000 on the old car and the dealer will only give $15000 for it, they will tack that $5000 onto the new car. So you now startoff owing a ton more on the new car...when it comes time to trade that one in, you'll likely be $10,000 "upside down" on the loan compared to the car's value, and this vicious cycle repeats a few times, until you default.

#8 MYTH: "I just got a collections letter, but its only for $100 and I dont think theyll sue me for that so Ill just ignore it. Plus, they dont have my SSN".

Bad idea. If you dont dispute it or pay it, it can hurt your credit and end up costing you a LOT more than the collections amount. Even if they dont sue you, they can still put it on your credit report. EVEN if they dont have your SSN. See the debt collection FAQ and related websites.

#9MYTH (courtesy of Waterman myths #9&10) - "I will save big, big money on my taxes when I buy a house. The interest payments are deductible!"

With the increase in the standard deduction for filing married, there is very little tax advantage for a median income family buing a median price home.

#10 MYTH - when buying a car, "I buy cars based on payments" .

Look at the total cost of ownership for that new car.

#11 MYTH (courtesy LittleHulk) "The best way to keep your job is to work hard."

When something is not yours to begin with, how can you hope to keep possession of it?

#12 (myths #12-19 courtesy UnknownShopper)
MYTH "I can lie on my insurance application in order to get a lower rate."

With insurance policies this can result in your claims not being paid.

#13 MYTH: "I put my property in somebody else's name for tax or child support reasons"

Beware of IRS and other implications.

#14 MYTH "I can save money by not getting an attorney involved in a legal document or financial transaction".

This will not save you money if the deal goes bad, and the cost of professional help after the deal has gone south is much more costly.

#15 MYTH "I dont need a Real Estate attorney since I have a "buyers' agent."

Buyers agents do not always know the laws. Think about who they really represent in a real estate transaction considering they only get paid if the deal closes.


#16 MYTH: "I think size matters when buying real estate"

50 inaccessible acres in the Rockies or in a Minnesota swamp or under Florida tides is usually not a better deal/investment than 1/5 acre in a good suburban neighborhood with good schools.


#17 MYTH "I dont need to draw up a contract for a financial transaction so long as the other party to the contract is my relative/best friend/co-worker, etc."

This is the beginning of a lost friendship or family disputes. Get it in writing.


#18 MYTH 'I rented an apartment with 2 friends who are moving out, and we are all on the lease. So I'm only obligated to pay the landlord 1/3 of the rent".

You are typically liable for 100% of the lease. Even if all three names were on the lease, chances are you are JOINTLY AND SEVERALLY liable, meaning EACH of you is obligated for the full amount. Read and undestand what you sign.

#19 MYTH" I'm business owner running low on money this month, so I will borrow from employee payroll/benefits to fund other "more urgent" cash flow needs."

Not true even on a short-term basis. Unilaterally diverting employee funds for any purpose is illegal in most states.

#20 (courtesy MyTwoSense)
MYTH "I think Quality and Price are explicitly related."

the price factor alone does NOT mean you are getting a better product.

#21 (courtesy rooster1865)
Myth: "I don't want that raise/extra job because it will move me into a higher tax bracket and I'll actually come out behind"

Nope, this isn't the way tax brackets work. If you move into a higher tax bracket, only the portion of your income that is above the threshold is taxed at that rate .

#22 (courtesy bssc)
myth: If a great deal came to me though an email or is advertised on late night TV, I will get rich.

Think again.

#23 (courtesy LoserBob)
Myth: The laws are there to protect the consumer

Often, the laws protect big business (who lobbies politicians for items favorable to them) . Even if the laws are designed to protect the consumer, big business knows how to make it difficult for the average person to be treated fairly, and they also have the resources to make it nearly impossible for an individual to force a business's compliance with consumer protections.

#24 (courtesy WalStMonkey)
Myth: "It makes more fiscal sense to be 100% debt free than to carry some debt. "

Like dietary fat, there are several kinds of debt. Too much of the bad fats will kill you dead. However you will not be as healthy taking 0 fat as taking moderated portions of 'good' fat. Good debt well applied will enhance one's bottom line.

#25 (courtesy DWJoe)
MYTH: "A multi-level marketing scheme can be a legitimate business."
FACT: Legitimate businesses don't recruit distributors with the prospect of selling to other distributors. Instead, they talk about the prospect of selling to retail customers.

#26
MYTH: "The government can't help you."

SBA loans help many small businesses. If you get disabled, you can get social security. If someone defrauds you can sue them in the government run courts. If someone steals from you can call the government police.

#27 (courtesy desi101)
Myth -"FW can save you ton of money!"

Due to FW you end up spending more money! Be CAREFUL when reading the Hot Deals forum! FW helps you to find the best value for your money. It's you who have to decide whether to spend more money or not.

#28 (and 29 courtesy FPduck).
MYTH: "It's ok to have a lot deducted from my paycheck, I love to get a big refund check from the IRS!"

FACT: You probably just gave the government a few thousand dollar interest free loan for a year.

#29. MYTH: "I'll never get audited! (and the sequelae of this logic) there's nothing i can do to prevent from getting audited!"

FACT: The book by Amir Aczel (How to beat the IRS at its own game) has great tips on how to make yourself statistically less likely to get audited, such as:
- avoid round numbers
- make sure there are no obvious math errors
- file late (use both extenstions if possible)
- be careful with large deductions (make sure you are not a statistical oddity when it comes to the percentage you are deducting)
- make sure all of your federal and state data agree

#30 MYTH: "Making present financial decisions based on past financial data."

Example #1: "$30 per share is a good price and this is the time to sell. Too bad I bought mine at $35. If only I had bought it at less than $25, I would be selling right away."

Example #2: "The offer of $5,000 for my car is an excellent offer. Too bad I owe more than that on the car to the bank, otherwise..."

In other words, ignore sunk costs.

#31 MYTH: "By buying a house further away from the city where I work, I can afford a bigger house and my family and I will be happier".
FACT: Studies have shown that one can rather quickly adjust upward or downward in size of home. But one never adjusts to commuting, and in fact people grow increasingly frustrated as they realize long commutes rob them of time with family or other leisure persuits. Buying a smaller house closer in to the city will result in more overall satisfaction for you and your family and lower car usage.

#32 MYTH: "What a great invention...credit card bonuses and points".
FACT: ONLY if you can pay the balance off right away without incurring any interest. Otherwise that interest may negate your bonus cash!

#33 MYTH: It is always better to buy a home rather then rent.
FACT: Unless you are staying put at least 5 years and have the cash flow to deal with emergencies buying a home can be a money disaster. Also sometimes you do better by saving the difference and renting for a few more years. Not to mention real estate can lose value.

#34 MYTH: Credit card companies don't make any money from people who pay their balances off monthly, and won't waive charges or extend special offers to those "deadbeats".
FACT: Merchants pay a processing fee to the card companies for every transaction, so you're still making money for the company if you're not paying interest, and you can still get fees waived and nice special offers. Two scenarios are most likely to result in offers: A large annual spend, whether you carry the balance or not, and conversely, neglecting a card can lead the issuer to entice you back.

#35 MYTH: I should sell my stocks because they went down, and they might go down some more!
FACT: Buying stocks high and selling them when they're low is the exact opposite of what you should be doing. Unless the stock is Enron, and will never come back up, you should hold on to them and wait for the economy to recover. If you find yourself having to sell your stocks to stay liquid, then you shouldn't have been investing in stocks to begin with. The only thing that should be affecting your investment decisions is whether it makes good financial sense, not whether you need cash now.

#36 MYTH: The Rule of 72: Divide 72 by the number of years you aim to double your money and the remainder is the number of years required to reach your goal. Not quite that simple.

#37 MYTH: Every portfolio should have at least 10% foreign stocks & funds.

FACT: Because many US-based companies are multi-national, you may already have a significant exposure to foreign investment without knowing it. For example, Exxon and Merck derive about half their profit and sales from non-US businesses, meaning their shareholders have a roughly 50% exposure to foreign markets. Before investing in foreign stocks, take a look at how how much foreign revenue, profit, and presence are derived from domestic equities in your existing portfolio. You may have a much larger foreign investment than you know.