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There are some widely held beliefs about debt, money management, and other personal finance topics that aren’t etched in stone as we’ve been lead to believe.

Could it be that these pseudo truisms have, in fact, been nothing but fiction all along?  The financial stakes are way too high to be taking these bogus notions as fact.

Let’s take a look at four of the more common beliefs.  The truth may surprise you.

Fiction:  Bankruptcy is the easiest way to just start over from debt problems.
Fact:  Nothing could be further from the truth.  For anyone facing the prospect of bankruptcy or already in the process, life can be a living nightmare.  Bankruptcy can devastate your career, destroy your marriage, and hurt your health and well-being.  Bankruptcy is a life-altering event that has long-lasting effects.  Few people who have been through the bankruptcy process would say they came out of the experience unscathed.  The bottom line is that bankruptcy is painful, humiliating, and a huge disruption to almost anyone’s life.  Your best option is to consult with a CERTIFIED FINANCIAL PLANNER professional to discuss other possible solutions to get out of debt.

Fiction:  Leasing is a good strategy to acquire a vehicle.
Fact:  A survey of top financial professionals and a calculator would tell you that leasing can end up being the most expensive way to acquire a vehicle.  Today, most new car transactions are completed by way of a lease.  Leasing is simply a “rent-to-own” strategy.  If you do the math and factor in the high capital cost, down payment, fees for acquisition, disposition, excess wear and tear, and excess mileage, plus other charges not mentioned, you’d be shocked at what it can ultimately cost.  Break free from the chains of leasing.  Find a way to save $300 a month for two years.  Then, at lease end, go and buy a used car for cash.  Downgrading from a newer to an older vehicle may hurt the ego for awhile, but that’s a small price to pay to travel the road to financial freedom.  Continue to save $300 a month for another two years.  Then sell and upgrade to a newer vehicle for cash.  A key factor in building wealth is not having a vehicle payment.

Fiction:  Counting on a large income tax refund each year makes financial sense.
Fact:  No, it doesn’t.  It’s good that you have your income tax liability covered each year but you’re letting state and federal government entities use and invest your hard-earned money for free.  A better strategy is to plan for less of a refund.  Then, take those extra paycheck dollars and put them to work for you rather than the government.  Contribute to an employer-sponsored retirement plan or set up an Individual Retirement Account (IRA) annually. Both of these accounts grow tax-deferred.  Also, if you haven’t established an initial emergency fund of $1,000, now is the time to do so. Having a reserve available for unexpected events such as car or home repairs will provide peace of mind.

Fiction:  An adjustable rate mortgage (ARM) makes it easy to buy a home
Fact:  Maybe for the first year or so.  But then the financial squeeze begins.  Make sure you brace yourself when you get the notice of an upward “adjustment” to your mortgage payment.  The loan that made it possible for you to move in may now be forcing you to move out.  It’s not unusual to see a dramatic increase in an ARM’s monthly payment.  Adjustable rate mortgages are one of the major reasons for record foreclosures and bankruptcies today.  A fixed rate mortgage where principal and interest payments remain the same over the loan term, is a much better strategy.