11 Financial Facts or Fictions, Can You Tell the Difference?

Everyone has an opinion. That’s a fact and it makes navigating the world of personal finance very tricky. It can be hard to know what the facts actually are and who to trust and believe. In fact, if you connect with an “expert”, you may actually walk away even more confused than when you started trying to debunk some of the most common financial advice/opinions out there.

Financial facts can be easy to confuse with financial opinions. Check out these 11 financial situations and decide for yourself what's fact and fiction.

It’s been my opinion for a very long time now that the best advice you can get is from someone or some entity that has had actual experience in the very situation you find yourself in and has come through it successfully. But even if they had a failed result, you can still have a positive takeaway that can help you. Learning what not to do can be just as valuable as learning what to do.

Financial Facts or Fictions?

Today, I want to talk about some of the common and yet confusing “facts” that we often hear and tend to believe are true. The common misconception is that if you see things in print or hear things on air that they must be true. Very often they aren’t truths, but just opinions. Often it’s an untested one, too. Here are just 11 of the hundreds of “financial facts” to look at right now!

Fact vs. Fiction: Always buy car rental insurance when renting a car

According to the National Association of Insurance Commissioners, 62% of consumers don’t think their personal auto insurance will automatically cover a rental car. In most cases, however, your personal policy will extend to a rental car. Just be sure to call your carrier to confirm what your policy actually covers (e.g., damage, theft, liability) before you rent. You may also get some form of rental car coverage through your credit card when you use it for the rental. If you choose to rely on insurance from your credit card, again call your company first to find out exactly what kind of coverage it provides.

Fact or Fiction: A college graduate can defer paying a student loan

Some lenders allow students to defer making loan payments after they graduate and that may be spelled out right in the original loan agreement. In my case, I didn’t have to start repaying my loan for the first 12 months after graduation. In many cases, it can be even a longer period of time. Keep in mind that they also have strict eligibility requirements when deferring. The most common reasons for deferment include unemployment, post graduate school enrollment, or military deployment.

It is important to also understand that a borrower may still be held responsible for paying interest on the loan while it is in deferment, and the lender will determine when the borrower needs to resume payments.

You may also qualify for something called “loan forbearance” which allows you to suspend or reduce payments (typically in one-year installments for up to three years). To avoid damaging your credit or becoming delinquent because you are having trouble making loan payments, contact your lender to see if you qualify for deferment or forbearance. It sounds so difficult, but just making that call may relieve a lot of financial pressures.

Fact or Fiction: When you or your parents retire, staying in the current home is always the best option

Even if living independently in a residential home is the plan, your home may prove too costly to maintain or impractical to modify as your needs change. Whether moving is because of physical issues (you may have problems with mobility as you age) or because of sheer expenses, looking for housing where upkeep is less burdensome and where the layout and amenities are more accommodating is often a better plan. Staying in a house that is inaccessible and expensive can be more problematic than moving to a new home may be.

Fact or Fiction: Your beneficiaries won’t have to pay any income tax on death benefits they get from your life insurance policy

Beneficiaries do not have to pay income tax on death benefits with one exception. If the policy was transferred from one owner to another, it can trigger the transfer-for-value rule, which could negate the policy’s tax-exempt status. This usually happens when a policy is transferred between stockholders to fund a buy-sell agreement. So it’s not an everyday occurrence for most people. But, it can happen.

Fact or Fiction: College savings can prevent a student from qualifying for financial aid

College savings will not necessarily disqualify a student for financial aid. The formula used on the Free Application for Federal Student Aid (FAFSA) is basically about income and assets, so the impact is relatively small.

In general, a family with savings has more options when it comes to paying for college. Families who haven’t saved may find themselves borrowing in order to pay. Repaying a student loan with interest makes less financial sense than using college savings to pay for college. That and the ever-rising cost of college are good reasons to start saving for college as early as possible, year and years in advance.

Fact or Fiction: When choosing a mortgage, the best option is always the one with the lowest interest rate

Mortgage loans are not all alike. Some offer fixed interest rates while others have an adjustable rate. Some have points and fees attached to them and others do not. Be sure you understand the complete cost of each mortgage, and ask prospective lenders the loan amount, loan term, and type of loan so that you can effectively compare all options.

Often, depending on the market and your current plans to stay in your home (long-term or short-term), the interest rate may not be the lowest and it still might be the best one for you.

In addition to checking with your own bank, make sure you shop around for mortgages at other banks and credit unions, mortgage companies, and online lenders. You’ll see many differences in prospective deals and costs.

Fact or Fiction: The IRS may reach out to you by phone or e-mail to request information about your taxes

The IRS never initiates contact with taxpayers by phone or e-mail to request personal or financial information about taxes. Never! It also won’t contact you via text message or social media. If you receive an e-mail or a phone call purportedly from the IRS, it is almost 100% a phishing scam and you should report it. For information on tax-related identity theft and how to report suspected phishing scams, see the IRS’s guide.

Fact or Fiction: There’s no reason for me to buy disability insurance

Disability insurance isn’t a popular subject, but it’s one everyone should consider. According to the Council for Disability Awareness, today’s 20-year-olds have a more than a one in four chance of becoming disabled before they retire! Beyond the physical challenges, disability also means lost income for the worker’s family. When you can’t work because of illness or an accident, disability insurance will replace a certain percentage of your income, depending on the policy. Self-employed professionals and small business owners are ideal candidates as well as individuals whose salary represents their family’s sole or primary source of income. If you would find it difficult to maintain your lifestyle if your income were disrupted, you should look into disability coverage.

Fact or Fiction: I’m too young to think about financial planning

It’s never too early to start forming good financial habits. Creating a budget, paying down your debt, saving for big events in your life, and balancing wants and needs are all things you should be thinking about even in your younger years. Plus, the younger you are, the more time you have to take advantage of compound interest on your investments. I recommend developing a plan for the future no matter what your age.

Fact or Fiction: Financial planning is only for the wealthy

Financial planning is for anyone who wants to take control of his or her financial goals. Plenty of wealthy individuals have reached that point because they created smart financial plans and acted on them before they were wealthy. And what does wealthy mean, anyway? The fact is, even millionaires may define themselves as middle class or upper middle class and often do. No matter what your level of assets, talking with a professional, often a complimentary first meeting, is a great first step toward improving your financial standing.

Final Thoughts

We won’t always have perfect knowledge and facts to work from when we make our financial decisions. We do sometimes have to work with opinions. Educated opinions are often the ones we hear about and the trick is to make sure we have a solid financial education of our own to allow us to adjust quickly when we do have the facts.

Your biggest asset or liability is you and that is because you are the one who has to act on both the facts and opinions. Many smart people have made horrible financial decisions by not understanding the difference between them and in the process they’ve ruined perfectly good opportunities and made a lifetime of financial liabilities for themselves.

I encourage you to examine where you are on your personal financial journey. Are you following opinions or facts when it comes to your financial decisions? Do you feel confident in your financial education right now? Do you know the differences between financial facts and financial opinions? What more do you need to learn about financial matters that will help you succeed? Do you settle for opinions and educated guesses when you can actually learn all of the facts?


  1. Prudence Debtfree

    “if you connect with an ‘expert’, you may actually walk away even more confused …” That is true. I think one of the criteria for finding a financial adviser who is a good fit is that he/she doesn’t jargon-speak too much. Almost every concept can be translated respectfully into lay-person terms. If a financial planner cannot communicate in such a way that the client understands, try someone else. And if there’s an arrogant condescension in the mix, run!

  2. That IRS fact is extremely important. I wonder if there’s a statistic about people who’ve fallen prey to the email and phone call scams. And you’re so right about disability insurance — it’s just not on people’s radar screen too often, sadly.

    1. In recent years, there’s been much more publicity about people using the IRS as a scam, and I think it has helped. Unfortunately, there are so many potential victims, and in general when people hear the term IRS, even if they’ve done nothing to be worried about, it causes an alarm bell to ring. On the subject of disability insurance, it turns out that it has been a very important part of our lives, and I’m happy to say that when we needed it, we had it at our disposal thanks to some good decision making. Thank you for commenting, Mrs. G.

  3. Mel

    I think you summed up why personal finance blogs are so popular! People from all walks of life write them, so there’s probably someone out there with a similar experience to yours who has already gone through the thing you’re looking for advice on. I know that I definitely find this community endlessly useful whenever I’m creeping into a new stage of life.

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