There is a LOT of personal finance content out there. You can scroll through reels on social media, subscribe to podcasts, attend a conference… you can even sit through a presentation on annuities to get a free dinner. With the rise of artificial intelligence (AI), it is getting harder to sift through the content to determine facts from myths. At KFP, we’re here to educate and shine the light on the truth, so let’s dig into some things you might be hearing and do some financial myth bustin’!
Myth #1: It’s good to carry a balance on a credit card to build credit.
Using a credit card is a good way to build credit if you use and pay the card off on time. If you’re carrying a balance, not only are you usually paying a high rate of interest to do so, but you might actually be hurting your credit score.
To build credit, it’s good to use the card regularly, but treat it like it’s a debit card. Make it a goal to pay the balance in full each month and keep an eye on your balance to make sure it’s not creeping up to your credit limit.
There’s clearly some truth here, but carrying a balance on a credit card to build credit? BUSTED.
Myth #2: Selling during a market downturn helps me from losing money.
Sometimes it’s unavoidable, and maybe it’s a deliberate move if you’re harvesting losses for taxes.
This is mostly a myth that we hear as way to manage volatility in your portfolio. It sounds like a good defensive strategy, since you’re getting out before the losses get worse. So, what’s wrong with that? The problem is you’re often selling low and locking in that temporary loss. Usually, when you’re feeling more comfortable getting back in to the market, you’re buying higher.
The thing you might not expect? Big rebound days in the market actually tend to occur right after a really bad day in the market. So, while it might feel like you’re doing something proactive to stop the losses, it’s safe to say this myth is BUSTED.
Myth #3: If I get a raise, I’ll jump into the next tax bracket, so I’m not really getting more. I’m just paying more in taxes.
If you earn more income, you very well may be in the next marginal tax bracket. Most of us can probably personally attest to this. There are things you can do to help lower that taxable income like make pre-tax deductions to your 401k or H.S.A. to lower your taxable income, but generally, more money earned = more paid in taxes.
Is this even a myth? So far, it seems plausible, especially if you’re feeling a little bitter over those funds that might have left your bank account to pay the balance of your 2025 taxes to the IRS.
Here’s a common misunderstanding about our tax system. You may have noticed that we purposefully used the phrase “marginal tax bracket.” If you’re in the 22% tax bracket, you paid 10% on the first chunk of income, then 12% on the next chunk, with the last dollars you earned being taxed at the 22% rate. Even though you’re in the 22% marginal bracket, you might have an effective tax rate closer to 15%. This is a more accurate number for understanding what percent of your income is going toward income tax.
So, when your employer offers you a raise, just say, “yes, please” because this myth is BUSTED!
What myths have you heard?
Our team had fun putting together a list of some outrageous things we’ve seen on social media and various other platforms. However, we’d love to hear from you all about myths or half-truths that you’ve heard. Maybe it’s a question you have that you’d like us to dig into. Whatever it is, we’re happy to shed light and keep bustin’ myths.