7 Money Myths and Truths

Posted on April 17th, 2012

**Today’s guest post is contributed by Andrea Woroch.**

When it comes to money matters, do you have trouble separating fact from fiction? Popular misconceptions abound quite frequently, leading many consumers astray. It was so much easier to manage financial issues when saving cash meant stuffing a mattress. Those days, however, are long gone and today we’re fed tips on how to maximize 401ks or reap benefits from credit card rewards. With so much fiscal information to swallow, how can you decipher monetary myth from truth?

Take a look at the following top seven examples for a few wise tips.

1. Cancel credit card once paid off to rebuild credit & less temptation to swipe.

MYTH: Canceling a credit card will actually lower your credit score temporarily, which will have a negative impact if you’re seeking a loan. That’s because part of your credit score is determined by your credit to debt ratio. The more credit you have available compared to outstanding debt, the higher your score will be. This is especially important for anyone seeking a major loan. To avoid the temptation of swiping the plastic, cut up the card instead.

2. Book airfare at 3 p.m. on Tuesday to get the best rate.

TRUTH: Surprisingly, this is a fact! According to the FareCompare.com, airlines usually begin sales late on Monday which means price matching is typically complete by early Tuesday afternoons. Newly discounted airfares hit reservation systems by 3 p.m., making it the best time to buy bargain airfare.

3. Open a store card for the extra 15-percent savings.

MYTH: Store cards carry high interest rates, expensive late payment fees and usually tempt people into buying more than they would with cash or debit. What’s more, each time you request a new line of credit, your credit score will get a negative hit, and again, result in future car or mortgage loans more difficult to negotiate and more expensive. If you don’t shop at the retailer very often, look for other discounts to help you save. You can do this easily by downloading the Coupon Sherpa mobile app to your smartphone and searching for coupons while in store.

4. The best day to shop for groceries is on Wednesdays.

TRUTH: According to the Grocery Game, supermarkets release new store circulars on Wednesdays but still honor the previous week’s sales. That means there are more deals to be had and better chances to get your hands on those big bargains before the other bargain hunters clear the shelves. Review circulars online to plan out your shopping trip strategically and look for coupons before heading to the store for extra savings.

5. Recent grads and other young professionals don’t make enough money to start investing for retirement.

MYTH: Though retirement may seem a long way off, the money put away in your early 20s or even in your early 30s will make a huge difference. That’s because the savings will more compound interest over the years. Thus, the earlier you start investing, the less you’ll ultimately have to set aside to end up with the same total, if not more, as those who waited until their 40s. If your budget is tight, trim a few excess expenses by brown bagging your lunch and skipping out on a few happy hour dates so you can put that added cash to your future savings and retire rich.

6. Supermarket layouts are designed to make consumers spend more.

TRUTH: Ever notice how all the basic groceries — like milk and eggs — are found at the back of supermarket? That’s intentional. By organizing primary purchases this way, patrons are forced to walk through aisles of tempting food items and are more likely to add unnecessary items to their cart in pursuit of what’s on their list. To avoid impulse purchases, consider using a basket instead of a cart. The smaller basket fill up much quicker and get heavier which will alert you to all the unnecessary items you just added to it.

7. Extended warranties are a wise investment to protect big-ticket purchases.

MYTH: Many consumers are tempted to protect a recent investment in a major appliance or expensive electronic. However, extended warranties are just another way for retailers to make more money and aren’t actually worth the added cost. Consumer Reports found that most major appliances won’t need a repair within the extended coverage period and in the instant it does, the average cost of repair is similar to what you may shell out for the warranty in the first place–making it worthless. TVs and other gadgets on the other hand have a rapid depreciation value, so it’s wiser to replace down the road than to repair. To protect your big ticket purchase, use a major credit card that doubles the manufacturers warranty for free.

Andrea Woroch is a consumer- and money-saving expert who is passionate about helping people learn how to live on less without drastically changing their lifestyle. She travels across the country sharing smart shopping tips and personal finance advise with media and has worked with top news outlets such as NBC’s Today, New York Times, Dr. Oz, Kiplinger Personal Finance, CNN and many more.