Managing one\u2019s finances can be challenging, especially when faced with conflicting \u2014 and often wrong \u2014 information fed to people, especially on social media.\u00a0<\/p>\n
Buying into common misconceptions surrounding money can be harmful, putting someone on their back foot when it comes to financial health.<\/a>\u00a0<\/p>\n Jonathan Kim, a personal finance expert and the head of finance at online savings platform Raisin<\/a>, took aim at in an interview with FOX Business, including the idea that “it\u2019s not worth saving unless you can put away a lot,” buy now, pay later being a good budgeting tool, and a high salary being synonymous with financial success.<\/p>\n He also pushed back against the suggestion that people do not need savings accounts and that saving money should not occur before someone is debt-free.<\/p>\n “Some of these thoughts about paying off debt before saving, and not having a full understanding of why you might need savings and why certain debt actually might not be terrible, I think, is a widespread thing,” Kim said.<\/p>\n STUDENT LOAN DELIQUINCIES SURGE, SENDING CREDIT SCORES PLUNGING FOR BORROWERS<\/strong><\/a><\/p>\n The misconception that “it\u2019s just not worth saving right now unless you can put away a lot” is a common one that he said he has seen on social media.\u00a0<\/p>\n Kim said it\u2019s “pretty easy to fall into this trap where you\u2019re thinking, \u2018If I can\u2019t save X percent or X dollar amount, it\u2019s just not worth the effort,\u2019 and that\u2019s a little too outcome-oriented for me.”\u00a0<\/p>\n He said consistency with saving was important, noting that even “starting with something like $10 a week can help build that financial resilience and can build a habit that sticks with you as you progress.”\u00a0<\/p>\n When it comes to high salaries and financial success, Kim said, there is “this myth and this propaganda” that a high salary equates to financial success when, in reality, financial health is more about managing money wisely.\u00a0<\/p>\n Taking home a big paycheck is “obviously a wonderful thing, but I think it\u2019s also very true that lifestyle creep is a very, very real thing, and if you don\u2019t have the financial discipline and conscious saving and spending habits, it\u2019s actually quite easy to just let lifestyle creep happen to you, and you find yourself struggling financially even after you\u2019ve gotten that raise or that promotion or that new job,” Kim said.\u00a0<\/p>\n Budgeting can be a helpful tool to prevent lifestyle creep, Kim said, while also pushing back on the idea that it has “to be perfect” to work.\u00a0<\/p>\n “You can have just a general understanding of what\u2019s going in and what\u2019s going out to get you started,” he said. “And once you have that tracked, if you look at it over time, you can see \u2018oh, I was only spending X amount, now I\u2019m spending X times two. What happened there?\u2019”<\/p>\n He also said that budgeting helps people “spend intentionally” and does not mean someone has to forgo “everything that brings you joy” to solely focus on necessities.\u00a0<\/p>\n Kim touched on buy now, pay later services and whether it can be a good budgeting tool.<\/p>\n Buy now, pay later has become increasingly common in recent years as people look to split up and finance smaller purchases.\u00a0<\/p>\n “If you are buying now and paying later because you don\u2019t have the money now, that means you can\u2019t afford it,” Kim told FOX Business<\/a>. “So if you can\u2019t afford it today, you can\u2019t afford it and so by that context, buy now, pay later encourages overspending, and that can lead to you accumulating debt, which then earns interest, and then you find yourself going down that rabbit hole of bad financial habits.”\u00a0<\/p>\n FINANCIAL EXPERT WARNS AGAINST THE HIDDEN TRAPS OF \u2018BUY NOW, PAY LATER\u2019 SERVICES<\/strong><\/a><\/p>\n He said that was “kind of intertwined” with another misconception of people having to pay off all their debt<\/a> before socking away money as savings.\u00a0<\/p>\n “If you have high interest debt, like credit card debt, a variable mortgage, student loan debt, anything that could really hurt you or an interest rate can just go up, you certainly want to pay that off,” Kim said. “But at the same time, the other side is that you may be lucky enough to be a person where you got a mortgage five years ago and your mortgage rate is very, very low. In that sense, it wouldn\u2019t make sense to pay that off immediately.”<\/p>\n Building savings while simultaneously making a dent in debt can be very beneficial.<\/p>\n Kim said it was important to have a financial plan and pay off debt but noted “things can happen in your life,” so setting up an emergency fund by saving can prevent the snowballing of debt and interest should something happen.\u00a0<\/p>\n He also said having a savings account was better than just using a checking account.<\/p>\n When someone keeps all their money in a checking account, it can be “actually easier to spend and harder to track your goals,” according to Kim.\u00a0<\/p>\n He noted balances in checking accounts can rise and fall with expenditures and income, making savings difficult to monitor. Many also offer very low or no interest on funds “so your money is actually not working for you,” according to Kim.\u00a0<\/p>\n