Being a financial guru one is likely to come across a number of personal finance concepts and strategies that are said to be critical for success. But, some other insights into finance could be overrated or misconstrued and made people commit to issues that may not be as important as perceived.
Being frugal is one of the least effective strategies in the game of individual finance. Frugality and saving are vital trade; however, extreme frugality and unnecessary tight budgeting may jeopardize one’s life and do not necessarily contribute to wealth accumulation. Rather than concentrating on just raising incomes or changing the way they expend or invest their income, encouraging them to make sound investment decisions will prove more effective in improving their financial status in the long run.
Likewise it could be concluded that some people may consider the quest for achieving a high credit score undesirable. Although a credit score is still very important for every person to possess a best credit limit and an opportunities for other financial benefits it will be very helpful not to overestimate the value of every one point for the credit score. Nonetheless, it is vital to understand more how spending money and handling financial obligations determine overall health and well-being more than an ideal credit score.
The next factor in personal finance that I see as being overrated is investing in the stock market in individual stocks. Stock selection is a risky strategy as it only provides a high return rate if the investor spends a lot of time and has detailed information about stocks. Most investors should therefore avoid high-fee mutual funds as they can achieve a lower-cost, more diversified portfolio through a mix of index funds or ETFs centered on particular asset classes.
Finally, the widely accepted idea that renting is not beneficial for the homeowner is not always true. In the long run owning a house could be a good investment for one and at the same it has its demerits in that it is an expensive affair where one is involved in paying for maintenance, paying rate and insurance for the house. Benefits of renting may include the ability to choose from more locations at lower cost especially if the person is in a very expensive location or does not want to remain in one place for long.
To conclude this piece, it is important to note that being well-versed in a few basic aspects of finance is useful but over-emphasizing their importance can have negative ramifications on a person’s financial well-being. It means that if you are smart and strategic in the decisions you make, the continuous brooding of this challenge is not very likely to occur among us.