The 5 Biggest Money Myths -- Busted!

By MaryAnn Barone

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Could you unknowingly be cheating yourself out of money?

Photo: Thinkstock / The Nest

Myth #1: Bulk is always better
Sure, warehouse stores like Sam's Club or Costco, or big-box places like Target, can be home to massive deals, but that doesn't mean you should purchase everything there. Buy in bulk only the items that you routinely use, such as toilet paper and 90-day prescription medicines, says Manisha Thakor, personal finance expert and author of Get Financially Naked: How to Talk Money with Your Honey. If you entertain a lot, bulk wine might also be worth the investment. Thakor recommends sticking to supermarkets for perishable items; you could end up paying more per unit for something super-size that will expire before you even finish a quarter of a container.

Photo: Thinkstock / The Nest

Myth #2: It's better to have a debit card than a credit card
It's the age-old question at the register when you open up your wallet: Credit or debit? If you're financially responsible, there's no reason why you can't reap the many membership benefits of using a credit card.

Purchasing a big-ticket item (like a TV) in the near future? Some credit cards offer protection programs for these in the event of theft or damage.

Credit cards also help you develop credit or improve your current score -- a debit won't even show up on your credit report.

Unlike a debit card, that other piece of plastic can come with generous rewards, says Greg McBride, senior financial analyst at Whether they're points, cash back, frequent-flier miles, protection programs or other bonuses, they can add up over time, so be sure to keep track of them.

Photo: Thinkstock / The Nest

Myth #3: Online deals are the best way to save money
Think before you toss your morning paper. Sometimes, you can't beat the freestanding inserts in it for a money-saving deal. Why? You feel more conscious and aware when using a tangible paper coupon. On the other hand, Thakor describes the "itchy clicker finger" as what occurs when you're online and buy something impulsively because it's such a great deal.

The most effective way to use paper coupons is to write down a list before you go shopping. Mapping out what you need -- as opposed to what you want -- will help at places like Walmart, where there's a large range of products you might buy simply because of a bargain. Stick to the list and tailor your coupons to it -- not the other way around.

Photo: Thinkstock / The Nest

Myth #4: Saving money is more important in the short term than paying off old debt
According to Bankrate, one in four Americans has more credit card debt than emergency savings. You've got to think long haul on both fronts to save money and pay off debts. Ideally, you should be doing both simultaneously, McBride says. How? It's a two-step approach.

First, he recommends automating the savings process by having money directly deposited from your checking account or from your paycheck into a dedicated savings account. "You're doing the saving before you get the chance to spend the money," McBride says. Plus, if you try to pay off debt and then save, you won't have money to absorb a sudden problem.

Second, you need to take a good hard look at your finances and make sure you're living below your income. "When you're holding yourself accountable, you force yourself to live within your means, and that's how you identify more ways to save," McBride explains. In doing so, you can funnel the difference toward your debt in addition to the money that's direct deposited.

Photo: Thinkstock / The Nest

Myth #5: Buying a cell phone from a third-party retailer is always cheaper than buying at full value from a firsthand cell phone carrier
This can be true -- at first. Buying from a discount source like Amazon, Walmart, Target, RadioShack or Best Buy might seem like a steal, but be aware that it can get costly quickly if you're not an informed shopper. "When you're entering into any kind of electronic device with an ongoing contract, you have to be made aware of all the fine print," Thakor says. If you're a savvy shopper and understand everything about rules, penalties and potential fees, then there's better value in buying the phone at a discount. However, for those who aren't as certain on the regulations, a first-party carrier would be a better bet. The salesperson could be getting you a value in the long run because of their knowledge of what would be the most cost-effective plan for you. Otherwise, you might have saved $50 or more on the phone itself, but it could end up costing you if there's a problem with the plan down the road. 

Nestperts: Manisha Thakor, personal finance expert and author of Get Financially Naked: How to Talk Money with Your Honey, and Greg McBride, senior financial analyst at

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