In Part 1 of our 2 Part series we talked about conventional wisdom and when it’s better to make your own decisions rather than follow the crowd. Here in Part 2 we’re doing more of the same so if you’re ready let’s get started. Enjoy!
Conventional wisdom says; Once you agree to separate your debts after your divorce, they’re separate. The fact is, unless everything that you have agreed to is in writing and signed by you, the banks and anyone else involved nothing has actually happened to change the debt situation. Just because you’re divorced doesn’t mean that the deb you incurred while married is suddenly lifted. If your lender doesn’t have the paperwork they are still going to come after you if the debt isn’t repaid.
Conventional wisdom says; If you have a high income and a great credit score you’ll get great offers on low interest credit cards. The fact is, credit card companies are businesses and, as such, they are going to try to get you to take the card that makes them the most money. For example, a ‘reward’ card generally has an 11% interest rate while most CC companies have regular, no reward cards at about 8%. Which of the 2 do you think the CC company is going to push the hardest?
Conventional wisdom says; Once you’ve seen your credit score you know your credit score. Patently false. FICO alone has over 60 different ways to check your score and car loan lenders can actually get a tailor-made score if they want to. The Big 3 credit reporting agencies all use different criteria for reporting and may have different info. All of which means that you don’t know your score today if you checked it yesterday or checked it with only 1 agency.
Conventional wisdom says; Late CC payments will always damage your credit. Another falsehood because, in many cases, a slightly late payment 1 time will not register at all with the credit agencies, only with the bank where you have the card. Yes you’ll have to pay late fees and such but your score, if this only happens very occasionally, won’t change.
Conventional wisdom says; All interest on mortgages and home-equity is deductible. This one is again false. In many cases if you have a mortgage that is too big you won’t be able to deduct all your interest. The reason is that the fed has a cap on mortgage interest deductions of $1 million. If your home is worth more than that you’re not going to get the benefit of a tax write-off and the extra interest.
Conventional wisdom says; If you have the money buying a home with cash is your best option. While this may help you in, say, a bidding war with another buyer using cash to buy your new home isn’t always the best way to go, especially since interest payments on your mortgage (see above) can help you save at tax time. There’s also the fact that you could invest that money and earn a higher return than your home may bring in the future.
And there you have them. 12 Conventional Wisdom ‘facts’ and the facts about them. We hope this 2 Part series helped you and we hope to see you back here soon for more great financial help tips and advice.