5 money myths you probably believe

Managing money can be complicated, and myths are often born from people’s struggles to make it simpler. But simplistic solutions can cost you instead of saving you money.

If you believe any of these five money myths, it’s time to take a closer look at the financial realities.

In my latest for the Associated Press, it’s time for some money myth busting.

Monday’s need-to-know money news

crop380w_istock_000009258023xsmall-dbet-ball-and-chainToday’s top story: Mortgage application forms will look different next year. Also in the news: 5 times you shouldn’t use a credit card, why you should say no to 72-84 month auto loans, and why you need to stop being delusional about debt.

It’s Coming: The First Change to Mortgage Application Forms in 20 Years
An easier to understand application is on the way.

5 Times You Shouldn’t Use a Credit Card
High interest rates could leave you in a debt spiral.

5 Reasons to Say No to 72- and 84-Month Auto Loans
Long term loans set you up for years of negative equity.

Don’t be debt delusional: Quit buying stuff you can’t afford!
Time for a reality check.

Q&A: How to get rid of home-equity loan headaches

Dear Liz: We have taken several withdrawals from our home equity line of credit. Now the balance is close to $100,000. It’s the interest-only type. We don’t know how to pay off this amount systematically. Can you help?

Answer: As you’ve discovered, it’s not a good idea to pledge your home as collateral when you don’t know how you’ll pay off the debt. Home equity lines of credit can be an inexpensive way to borrow initially, but the interest-only period doesn’t last forever and eventually your payments will get a lot more expensive.

Many homeowners who tapped their equity before the financial crisis are discovering this fact — and some risk losing their homes. The initial “draw” period where you pay only interest typically lasts 10 years. After that, you can’t make further withdrawals and you’re expected to pay both interest and principal over the next 20 years. Your payments may jump 50% or more, depending on prevailing interest rates.

A better way to use HELOCs is for short-term borrowing that’s paid off well before the draw period expires. If you can increase your current payments to do that, you should.

If you can’t make pay more than your minimum, though, you’ll need to explore other alternatives. You may be able to arrange a cash-out refinance that combines the HELOC balance with your current mortgage and gives you 30 years to pay it off. If not, you can make an appointment with a housing counselor (you can get referrals at www.hud.gov) to see what options may be available to you as a distressed borrower. If you can’t restructure the debt, a short sale or a deed-in-lieu of foreclosure may be a better option than letting the lender take your home.

Q&A: Getting through to Social Security

Dear Liz: I read your article about checking your Social Security earnings record and benefits. I tried to set up an account with the Social Security Administration to track my retirement benefits (I turn 65 in December). Apparently the Social Security Administration will only text a required security code to a cellphone. I do have a cellphone but live in an area with very sketchy reception. I couldn’t get a signal the day I tried to set up the account. Do you have any suggestions about an alternate source or method for accessing my benefits?

Answer: The Social Security Administration briefly required people to use a one-time code sent to their cellphones in order to set up an online account. You weren’t the only one who was having trouble with this new hurdle, and the administration has since dropped the requirement.

People still have the option of getting and using a code if they’re comfortable doing so. This so-called two factor authentication — which uses both something you know, such as a password, and something you have, such as a code sent to your phone — is a smart idea for any sensitive online account. Banks and brokerages should offer this option to further protect customers’ security, but many of them don’t.

By the way, the Social Security Administration allows only one account per Social Security number, so you’d be smart to continue setting up your account. That will prevent someone else from doing so and making unauthorized claims or changes.

Q&A: Free credit score? Be careful

Dear Liz: As a financial planner, I am surprised you pointed someone in the direction of paying for a credit score. Your score can be accessed at several credit sites for free. Why would you want your readers to pay for something they could get free? 

Answer: As a financial planner, you should understand that “free” is a squishy concept.

Some sites do offer free credit scores in return for your private financial information, including your Social Security number. Most of these sites are committed to protecting your information — the credit bureaus they’re working with insist on that — but the sites may use your data to market financial products and services to you. As the saying goes, if something on the Internet is free, then the product being sold is you.

Many people are comfortable with that trade-off. Others aren’t. The other and perhaps more important reason to buy your credit scores from MyFico.com is that you’ll be getting numbers created from the same FICO formulas that most lenders use. The sites handing out free scores typically offer VantageScores, which is a FICO competitor. This particular reader wanted to see the auto FICO scores his lenders would use, and for that the best source is MyFico.com.

Friday’s need-to-know money news

Today’s top story: Amazon launches a car comparison site. Also in the news: HARP loans get extended through September of 2017, 4 finance apps every college student needs, and what to do if you can’t afford your kids’ school supplies.

Amazon Launches Car Comparison Site
The online giant gets in the car game.

HARP Loan Extended Through September 2017
Struggling homeowners have more time to refinance.

4 Finance Apps Every College Student Needs
Sticking to a budget while on campus.

What if You Can’t Afford Your Kids’ School Supplies?
Don’t be afraid to reach out for help.

Thursday’s need-to-know money news

dog holding a purse with money in its mouth. isolated on white bToday’s top story: How to save without using your savings account. Also in the news: Why you should have a separate bank account for your side jobs, the bad side to inactive credit, and how much it really costs to own a dog.

4 Ways to Save Without Your Savings Account
Under the mattress doesn’t count.

Why You Need a Separate Bank Account for Your Side Job
Keeping your money straight.

Inactive Credit: How Long It Takes, and How to Use a Credit Card to Prevent It
Not using credit can actually hurt your score.

This is how much it really costs to own a dog per year
Man’s best friend can get pretty pricey.

Wednesday’s need-to-know money news

22856641_SAToday’s top story: Finding your college savings “magic number.” Also in the news: What to do when your bank isn’t measuring up, what to buy (and skip) over Labor Day weekend, and how teachers are bringing financial literacy into classrooms.

Finding Your ‘Magic Number’ for College Savings
Coming up with a reasonable estimate.

Bank Not Measuring Up? How to Tell and What to Do
You don’t have to stick with a bad bank.

What to Buy (and Skip) Over Labor Day Weekend
Navigating the sales.

How Teachers Are Bringing Financial Literacy Lessons to the Classroom
Getting kids excited about saving.

Tuesday’s need-to-know money news

Life InsuranceToday’s top story: Life insurance questions you’re too embarrassed to ask. Also in the news: what to do with an IRA when you leave a job, when a debt collector calls to collect money you don’t owe, and the profitable business of lending to subprime borrowers.

5 Life Insurance Questions You’re Too Embarrassed to Ask
There are no dumb questions!

Why to Do an IRA Rollover When You Leave Your Job
Don’t leave money behind.

When a Collector Calls About a Debt You (Possibly) Don’t Owe
Get all the information you possibly can.

The profitable business of lending to subprime borrowers
Subprime borrowers bring in lots of extra money.

Monday’s need-to- know money news

mortgage2Today’s top story: What happens to your mortgage when you die? Also in the news: 3 things more important than a bank’s savings rate, 5 times when you shouldn’t use a credit card, and how to curb your impulse spending.

What Happens to Your Mortgage When You Die?
Who will continue the payments?

3 Things That Matter More Than a Bank’s Savings Rate
Properly managing your savings is more important.

5 times you shouldn’t use a credit card
There are cheaper methods of financing.

Curb Impulse Spending by Focusing on the Space Between a Stimulus and Your Response