As a young professional, navigating the world of work and adulthood can feel overwhelming. Personal finance is very nuanced and based on several personal factors, which gives headway to misconceptions. From budgeting to investing, there's a plethora of misinformation that can hinder our financial growth and stability. Here are some of the top financial myths I have come across:

1.     "I Don't Need to Budget"

Whether it is due to a stable income or a comfortable amount of savings, some may find a budget unnecessary. Budgeting does not have to be formal and strict; all you need is to be able to monitor your discretionary spending and adjust as needed. You should have a set total of all your fixed expenses such as rent, utilities, and loan payments. From there, a portion of the remaining income should be allocated to discretionary spending and savings. This provides clarity on where your money is going and helps you make informed decisions about your spending and saving habits.

2.     "I Don't Need an Emergency Fund"

Although the reasoning may vary, a common solution is to put emergency expenses on a credit card. I would argue that an emergency fund is the crux of financial strategy. It was the first thing my professor spoke on in my personal finance class in college. The golden rule: save three to six months income for unplanned expenses. These expenses include the unexpected car repair or medical bill.

3.     “I Don’t Need to Protect my Income Because That Won’t Happen to Me”

It is common amongst young professionals to have a belief that nothing will inhibit their ability to earn an income. Fortunately, many people opt into their employer sponsored plans without too much consideration. However, if your employer does not offer insurance benefits, you should seek them out individually.

I cannot speak personally for life or long-term care insurance, but I can speak on disability. My mother was the breadwinner in our household and would come home from work every evening. One day she did not come home from work because she was in a car accident. This left her permanently disabled at age 37. Fortunately, she had excellent long term disability benefits, so our family did not have to worry about income on top of these life changing circumstances. My recommendation is always “hope that it won’t happen but prepare as if it will.”

4.     “I Will Never be Able to Retire”

Lately, many have been saying that they will not be able to retire due to a lack of pension plans and speculation around the future of social security. With proper planning, retirement is achievable. Take advantage of your employer sponsored plans, especially if the company offers a match. However, if you change jobs, don’t forget your 401(k) or a different contributory plan. Rolling it into an individual retirement account (IRA) gives you more control over your plan and could avoid the fees that accrue from no longer being affiliated with the company. Also, a young professional may take advantage of their lower tax bracket and invest into a Roth IRA. This would help to maximize the amount of tax-free money available at retirement.

5.     "I Can't Invest Because I Don't Have Enough Money”

Investing is not something reserved for the wealthy. There are several platforms that allow you to invest only a few dollars. However, if you are not interested in managing your own investments, open accounts with financial professionals. This allows someone to help you monitor your investments and anticipate the next steps.

6.     “It is Expensive to Work with a Financial Professional”

The misconception that working with financial professionals is costly or exclusive to high-net-worth individuals is unfounded. Many individuals acting in a fiduciary capacity do not have fees associated with meetings or recommendations. If you are unsure about a financial concept, a professional can answer any questions and offer you personalized recommendations based on your goals.

Overall, overcoming these financial misconceptions is vital to young professionals creating effective financial strategies. By budgeting, investing wisely, and avoiding common misconceptions, we can make informed financial decisions and achieve our long-term goals. Financial wellness is achievable and maintainable; speak to a professional if you have any concerns.

Sydney L Shaw – Agent New York Life Insurance Company 
 Registered Representative with NYLIFE Securities LLC (member FINRA/SIPC), A Licensed Insurance Agency and a New York Life Company. 225 WEST STATION SQUARE DRIVE SUITE 300, PITTSBURGH PA 15219. 

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