Too many Americans believe debt is a fact of life, but owing your financial future to banks and credit card companies robs you of financial freedom. Money gurus like Dave Ramsey earn a living counseling people who are desperate to ditch their debt, and if you owe, you can do it, too. Start by leaving these four common myths about living debt-free behind.
Myth: You Can’t Get a Good Job Without a Credit Score
The percentage of employers who look at credit scores as a measure of trustworthiness is growing, but it’s only a small part of a big picture. Your numerical credit score isn’t the best measure of your financial health — it only reflects your borrowing and payment history without taking your income or employment record into account.
Credit reports aren’t free, so most employers use them only to screen applicants for jobs with significant financial responsibility. And because they must obtain your written permission first, you have the opportunity to explain irregularities in advance.
Myth: You Can’t Go to School Without a Student Loan
Anyone can graduate from college debt-free with the right strategy. Start by choosing a school with reasonable rates and stick with your major. Chip away at the total bill with gifts, grants and scholarships, and when you’re not in class or studying, forget the parties and work a part-time job.
Myth: You Can’t Rent a Car Without a Credit Card
It’s a common misconception that you can’t rent a car unless you have a credit card in your name, but the majority of rental agencies permit the use of a debit card. In most cases, you’ll need to be at least 25 years old and have sufficient funds in your account to cover the deposit.
Myth: You Should Borrow Money to Invest More
Since its inception, the S&P 500’s average annual return is approximately 11%. In 2018, the average credit card interest rate was just over 16%, and the rates for personal loans averaged roughly 14%. With those numbers, it’s more likely that fees, interest and taxes will exceed your investment profits under normal circumstances. Save your money instead, and when a can’t-miss opportunity arises, invest with less risk.
Every dollar of interest paid on debt today is money subtracted from your future, so kick these four myths to the curb today. Life without debt is not only possible, it’s the key to maximum financial freedom.
When you’re in financial need, let Kelley Financial Planning be there for you!
