Don’t be fooled by these 9 common money myths, finance gurus say
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It can be hard to separate financial fact from fiction.
CNBC polled eight personal finance experts to help answer one question: What are the biggest money myths out there for consumers?
Here are 9 of the top fallacies the financial gurus debunked.
Myth #1: Giving up a daily coffee purchase is a financial game-changer
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You’ve likely heard this refrain: Buying that daily cup of coffee is killing your chances at burgeoning retirement wealth.
But savers don’t need to be so extreme or austere with their money decisions to be financially successful, said Douglas Boneparth, a certified financial planner and member of CNBC’s Advisor Council.
Sacrificing small expenses that bring us joy isn’t nearly as critical as big decisions like choosing where to live or what car to drive, for example, said Boneparth, president and founder of Bone Fide Wealth.
“Of course, every penny counts,” Boneparth said. “But [housing and transportation] have the ability to change outcomes a lot more than skipping your cup of coffee.”
“Going through our entire existence without some level of joy seems like a little bit of a waste,” he added. “At the same time, there does need to be some discipline and consistency in giving yourself a shot at your financial goals.”
So, consider your budget for discretionary expenses and think about which purchases you want to prioritize.
Myth #2: Auto dealers give you the best rate on a loan
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Car buyers often believe that when they finance a purchase through the dealership, the dealer is getting the best rate available for them, said Erin Witte, director of consumer protection at the Consumer Federation of America, an advocacy group. That may be true sometimes, but it isn’t always.
“What consumers may not know, and what dealers will almost never tell them, is that the dealer is getting paid by the lender to give them their business, and it’s often structured around how high the interest rate is,” Witte said.
Dealers therefore can have an incentive to charge a higher rate because they will also make more money, she said.
“Consumers are much better off going to their own local credit union or bank and shopping that quote around to get their own financing,” Witte said. “This can save hundreds or thousands of dollars over the life of the loan.”
Myth #3: Financial ‘advice’ always has your best interests at heart
There’s a misconception that every financial advisor is a “fiduciary,” said George Kinder, who pioneered the “life planning” branch of financial advice.
“That’s just not true,” he said.
A fiduciary advisor has a legal duty to put your economic and financial interests ahead of their own. Lawyers also have separate fiduciary duties to their clients, and doctors to their patients, for example. But not all financial intermediaries are obligated to serve as a fiduciary with their clients.
“There are many financial advisors that are fiduciaries,…
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