Myths and Facts About Financial Hard Times: Pitfalls to Avoid

Myth: Live it up while you can, you can always declare bankruptcy later. There's no need to send more than the minimum payment for your credit cards. You can always keep getting new ones to transfer balances and keep your interest rate low. Fact: Low introductory rates turn into regular rates eventually, and may disappear altogether in the near future. Bankruptcy law in the United States considers most credit card debt fully dischargeable, which means you will have to pay it eventually.

Myth: Making a budget is boring and tedious. It's more trouble than it's worth. You can scrape the money together to make all the payments somehow. Fact: If you don't know where your money is going, you don't control it. Making a budget may be tedious, but it is important to know where you stand financially.

Myth: You can afford a house or car if you can afford the payments. Fact: If your fixed expenses for housing and transportation exceed half of your take-home pay, you will have a hard time making ends meet.

Myth: You can't budget for emergencies. Fact: Even though you can't predict what emergencies you will have, you will certainly have them. Building some money into your budget to cover things like car and appliance repairs will keep such things off your credit card bills.

Myth: If you live on a budget, you can't have fun. Fact: Entertainment is a necessary part of life. You should budget for it the same way you budget for anything else. Everyone needs a little luxury.

Myth: You can't maintain a professional image on a budget. Fact: The peace of mind that comes from living within your means will show. You can make careful decisions about the car you drive and the clothes you wear and still project a prosperous, attractive and professional image.

Myth: Carrying your lunch is embarrassing and you don't save any money anyway. Fact: The richest people in the world brown-bag their lunches. They save time and money by not going out every day.

Myth: Buying the cheapest item available saves money. Fact: Nothing costs more than a cheap pair of shoes. They have to be replaced often and may lead to foot problems later. It's often better to buy a mid-priced product that lasts longer.

Myth: Credit cards are great for Christmas Shopping. Fact: Christmas is not an emergency. Budgeting for holiday gift-giving saves interest and January sticker-shock.