One of my favorite shows on the tube is Myth Busters on the Discovery channel. These two guys test out urban legends. You should check it out sometime. Now that I have plugged their show, I am going to completely steal their gimmick, and bust some myths here. Below are 4 personal finance myths that need busting.

1. You should buy in bulk to save big bucks. Giant savings clubs like Sam’s and Costco appear to be great places for great deals, but be careful. If you buy more of an item than you can use in a timely manner, you may waste more money than you save. Remember, food and medicines can and often do go out of date long before you can use them. Meats can get freezer burn, fruits and veggies go brown, and even bulk meds can expire. Be sure that you will consume what you are buying. That huge vat of mayo or slab or steak might look like a great bargain, but think before you make such a purchase. Very often, cereal, bread, milk, cheese, and fruits go bad before we can eat them. Sometimes, paying a few cents more per ounce is worth it, if it saves you from having to throw out worthless, spoiled foods.
2. A home equity loan is a great thing, because it is tax deductible. Listen, I am no tax expert, but the idea that I should consolidate my credit cards and auto loans into a loan backed by my home is ridiculous. This is your home, your place or rest, your place to have a family and rear your children. Do you really want to risk your home by taking out additional loans against its principle? Dave Ramsey calls these CONsolidation loans. If you take out a H.E.L. to “pay-off” your credit cards, and your charging habits do not change, in a few months or years, you will still owe on the H.E.L. AND you will have new credit card debt. CONsolidation loans don’t “pay-off” ANYTHING. They simple MOVE the debt around.
3. Going into business with a family member will be a great thing. Listen, I love my family. I have great relationships with my family, my wife’s family, and with our extended families. The last thing I want to do is to burden down my family relationships with the pressures of a family business. If you must go into business with a family member, PLEASE, have documentation stating the exact financial and personnel roles that each family member will have. This is absolutely necessary. Nothing will ruin Christmas dinner faster than arguing over family business problems. (Don’t get me started with how crazy you would have to be to loan a family member money…Talk about uncomfortable.)
4. There is “bad” debt, and there is “good” debt. Let’s face it, debt is debt. You owe somebody money for something that you are already using. Now, I will admit that certain items that you borrow money to buy can go up in value, while you are still paying for them. (A house, for example.) But the reality is, it would STILL be going up in value had you paid cash. Just because something is appreciating in value does not mean that borrowing money to purchase it makes since. If I had to categorize debt, I would do so like this. There is really, really stupid debt, like these pay-day, check-cashing scammers. There is really stupid debt, like credit card debt. There is stupid debt, like automobile debt. And there is just plain old debt, like a home loan. But please consider this…all of it is debt…You OWE all of it. Like the Word says… The borrower is slave to the lender. Now, you might be slave to the check-cashing guy, mastercard, visa, or countrywide, but, if you owe somebody money, you are enslaved. FIGHT FIGHT FIGHT. Pay that debt off NOW. Comments welcome.

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Ahh…The Emergency Fund. So glad we have one. My little boy got sick this week, very, very sick, and was in the hospital for about 5 days. He is home now, and is doing much better. However, while staying with him in the hospital, my wife missed an entire week of work. I was at home with our daughter. Thank God for the Emergency Fund. Without it, we would have had to worry about our finances this month. With it, we can concentrate on our son’s health. This little blip might slow our debt payment for a month or so, but that will be fine. It is far better to have an emergency fund, and spend a little time rebuilding it, than it is to go further into debt each time some extra expense hits us. If you don’t have an emergency fund, even a small one of 1000 dollars, then GET ONE TODAY. Sell something, eBay something, get a second job, do something to give yourself a much needed financial “cushion.” Trust me, when you or your child gets sick, the LAST thing you want to worry about is whether you will be able to pay your bills. GO, GO, GO! Build up that emergency fund, NOW!

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Check out the link on the right for phat investor. Click on their personal finance section, and scan to the bottom. They have linked to little old me…Yay, so excited. This blogging stuff is fun. Now, for the rest of you readers with blogs, get to linkin. I shall, of course, return the favor.

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I am a relatively young guy, early 30’s. I know that in order to have a good nest egg, I need to invest now. But, I am using all of my extra monies to pay-off my debts. Is this wise? I think so. I think that if I can be out of debt in less than a year, then I will have plenty of time to invest my money in the market, and plan for my future. I notice that there is a popular move afoot, to borrow against zero percent credit cards, and then invest that money in cd’s, savings accounts, or even the stock market. To me, this is ludicrous. I would never, never, never, never borrow to invest. While the risks may seem low, the temptation to remove the initial monies from the investment and use it for other things is to high. You say, “I would never touch that money.” Oh yeah? And the alcoholic says, “I would never, ever touch that sentimental bottle of wine we keep in the cellar.” Seriously, most of us are in debt because we have an addiction to spending. Having zero percent money lying around is a recipe for financial disaster. THINK. Is 3, 4, 6, or even 12 percent growth really worth the added “weight” of borrowing money? I think not. Your comments are greatly appreciated.

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The three main reasons that I use cash and not debit/credit cards for daily purchases are…

1. I spend less when I use cash. Handing someone a fifty is much, much harder and more real than signing a credit receipt for fifty dollars.

2. Simplicity. I use an envelope system, and when I use cash I know exactly how much money I have in each account. Plus, less debit purchases mean less check-book entries to deal with and remember.

3. I want my kids to see me use cash. I want to teach them that real things cost real money. Checks, debit cards, and credit cards represent “fantasy” money to children. Cash is real!!!

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