Top Self-Finance Myths Debunked: What You Need to Know in 2025

Meher, a 24-year-old from Lucknow, has recently joined a digital marketing company and gets paid ₹28,000 a month.  She looked forward to taking charge of her finances and had prepared a simple budget. 

In her first month, she saved ₹5,000 and planned to start a small SIP of ₹1,000.

But soon, confusion took over.

• One friend told her, “Abhi mat invest kar, pehle achhi salary aane de.”
• A YouTube video warned, “20% se kam savings? Financial disaster hai, boss!”
• And her cousin confidently declared, “SIP toh unke liye hota hai jo ₹50,000 se upar kamate hain.”

In Meher’s words, “Main toh bas paise sambhalna chah rahi thi, yeh toh ‘3 Idiots’ ka exam pressure jaisa lagne laga!”

Like Meher, many young Indians are caught between advice, opinions, and myths. And these myths tend to hold us back or mislead our financial progress.

That's why it's time to clear up the misunderstandings and deconstruct the best personal finance myths of 2025 — the right balance of practical logic and clear understanding.

Myth #1: Credit Cards Are Always Bad News

Reality Check: Not If You Know How To Use Them!

These cards tend to have a bad reputation for overspending, late payments, and the fear of spiralling debt. 

But here is the truth: credit cards can benefit you financially if you know how to use them wisely. They help build your credit score, offer rewards, and even act as a short-term emergency fund.

As stated by the Reserve Bank of India (RBI), the number of active credit cards in India doubled, from 5.53 crore in December 2019 to around 10.8 crore (1.08 billion) in December 2024. (DD News)

For example, Neha, a 26-year-old working professional from Bengaluru. She recently started using a credit card with a ₹50,000 limit. Over six months, she made sure to only spend ₹15,000 (30% of ₹50,000) each month and paid the full balance on time. Consequently, her credit score increased by 50 points in three months, and she even earned ₹2,500 in cashback and reward points.

The Trick? Use Your Credit Card Wisely.

1. Pay your bills in full—skip interest.
2. Don't max out your limit—try to only spend 30% of your credit limit.
3. Monitor your expenditures—see where your money is spent.

It’s really that simple. No dimaag ki dahi!

Myth #2: EMI Means You’re Living Beyond Your Means

Truth Bomb: Nope. It’s Called Structured Spending.

Taking an EMI isn’t a financial crime. It’s a smart way to manage big purchases like a home, a phone, or even education. As per TransUnion CIBIL, more than 40% of urban Indians are now using EMIs for everything from necessities to luxuries.

For example, Rishabh, a 30-year-old working man from Delhi. He purchased a smartphone for ₹45,000 and opted for a 6-month EMI scheme with 12% interest. His monthly EMI was ₹8,000.

Here's His Breakdown:

Rishabh's EMI-to-income ratio is only 13%, which is much less than the recommended 30%. This means that he's in the clear and can comfortably afford the EMI without straining his budget to the limit.

The Trick Here is Simple:

1. Keep your EMI-to-income ratio under 30% so that your monthly payments do not strain your overall budget.
2. Choose EMI amounts that are affordable so you can continue paying necessary costs and saving from time to time.

Myth #3: Fixed Deposits Are the Safest Bet

Old-School Soch: Not anymore, Dadaji!

FDs have long been considered the safest option, but in 2025, they barely keep up with inflation. Based on the latest statistics, the majority of banks are offering 6.5% to 7.25% on FDs, whereas the retail inflation level in India is 3.34% (as of March 2025).

Let us break the numbers with Aarti investing ₹1,00,000 in an FD for 1 year, with an interest rate of 6.5%:

• Interest earned: ₹6,500
• Tax on Interest at 20%: ₹1,300
• Net gain after tax: ₹6,500 - ₹1,300 = ₹5,200
• Effective return: 5.2%

Let’s now consider the inflation rate of 3.34%:

Real return after inflation: 5.2% - 3.34% = 1.86%

This means that after one year, Aarti’s ₹1,00,000 has grown by just 1.86%, which is barely enough to outpace inflation.

To achieve higher returns that could outperform inflation, Aarti could consider hybrid mutual funds or tax-free bonds, both of which have higher return potential.

Myth #4: Mutual Funds Are Purely for the Rich

Aaj Kal Ka Truth: “Mutual Funds Sahi Hai”—For Everyone!

Those days of mutual funds being a VIP club for the wealthy are gone. Thanks to SIPs (Systematic Investment Plans), investing has become accessible to anyone with just ₹100 every month. 

The Association of Mutual Funds in India (AMFI) reports that as of March 31, 2025, the total mutual fund folios in India were 23.45 crore.

For example, Ritika is a data analyst from Pune. She just got her first job with a monthly salary of ₹25,000. Instead of waiting until she "earns more," she began generating wealth with a small ₹500 SIP. Let's see how this turned out:

Ritika's SIP Journey

Ritika's ₹500 every month accumulates to ₹1,00,000 over ten years.

It's not about making lakhs—it's about being there every month.

Myth #5: Saving Alone Will Make You Rich

Money Talk: “Sirf bachat se amiri nahi aati, investment bhi chahiye boss!”

Priya is a 27-year-old HR executive based in Indore. She saves money and is disciplined with it, so she saves ₹5,000 each month in her savings account.

At the end of 5 years, she felt proud seeing the balance, but when her colleague brought to her notice what a plain SIP would have achieved in the same duration, she was shocked.

Here's the side-by-side:

Priya's ₹5,000/month Journey — Saving vs. Investing

Saving is necessary, but stopping there is like charging your phone only to 30%.

Need actual growth? Invest early and often.

Myth #6: You Have to be Rich to Start Investing

Plot Twist: "Rich hona result hai, shuru karna zaroori hai!"

Tara is a Delhi-based content writer. She always felt that investing was something meant only for rich people. However, after learning about SIPs and low-cost index funds, she wished to start small.

Tara began investing ₹1000 monthly in an index fund since she thought it was about consistency and not quantity.

Tara's Investment Journey

Within three years, her ₹1,000/month transformed into more than ₹45,000.

Did she have to be wealthy to start? Not at all.

The Key Takeaway

• Small is better than not starting at all.
• Zerodha, Groww, and Paytm Money have made investing accessible for everyone. You can even start investing with ₹100.

Myth #7: Insurance Is a Waste of Money If You're Young

Reality Slap: "Tu Superman nahi hai, bro!"

Many Indians do not purchase insurance because of the attitude of "Mujhe abhi kya hoga?" But this kind of attitude may cost you big time. If you purchase young, not only do you become covered, but you also save thousands of rupees on premiums!

Let's Break It Down

That's ₹9,600 saved annually, just by starting a decade earlier!

And don't forget health insurance. A single hospitalisation for dengue or a small surgery can cost you ₹40,000 to ₹1,20,000, depending on the city and hospital. Your emergency fund or savings might not be sufficient to absorb that shock.

The Takeaway:

Buying insurance when you're young is like buying concert tickets before they get sold out—cheaper and stress-free.

Myth #8: Loans Are a Financial Trap

Sahi Soch: Loan is a tool, not a trap – kaise use karte ho, woh maayne rakhta hai!

Loans tend to have a bad reputation, but not all debt is bad.

For example:

• Home loans let you create long-term assets.
• Education loans are an investment in your earning capacity.
• Business loans offer the facility to expand your business and drive innovation.

But the key is repayment discipline.

Suppose Rajat, a software developer residing in Pune, had taken a personal loan of ₹5,00,000 for renovation in early 2024. He had a credit score of 675 when he began, barely average.

He ensured that he never missed a single EMI of ₹10,800/month and paid off all dues punctually for 6 consecutive months.

Result?

By October 2024, his credit score increased from 675 to 748—a 73-point increase—based on his CIBIL report snapshot.

This increase made him eligible for a home loan at a reduced interest rate of 8.3% rather than 9.4%, which saved him more than ₹2,00,000 in interest on a 20-year loan.

Key Takeaway:

Loans are not a trap if you deal with them with clarity and consistency. As it did for Rajat, the strength of a good credit score can open greater possibilities on better terms.

Myth #9: Gold Is the Best Investment

Desi Belief: "Beta, gold kharid lo, kabhi nuksaan nahi hota!"

Although gold has long been considered a safe investment, recent statistics indicate that it might not be the best instrument for building wealth.

Performance Comparison (2024):

Gold: In 2024, gold returned 21% in INR terms, which was one of the best-performing asset classes in India during that year. ​(World Gold Council)

Equity Mutual Funds: Best-performing equity mutual funds in India recorded returns of between 40% and above 50% in 2024. (Personal FN)

Simran's Investment Decision

Simran, 27, from Jaipur, had ₹3,00,000 to invest in 2020.

Her nani encouraged her, "Sona le lo, safe rehta hai." But Simran divided the money:

• ₹1,50,000 in gold jewellery
• ₹1,50,000 in an equity mutual fund SIP

Here's where she is in 2025:

Simran's gold goes up approximately ₹53,000 in 5 years. But her mutual fund investment is close to twice as much and has had no making charges, locker cost or fear of theft.

Myth #10: Self-Finance Means Managing Everything Alone

Nayi Soch- Smart Finance Does Not Mean Solo Struggle

Gone are the days when managing money meant sitting with a diary and calculator in silos. In 2025, being self-funded does not necessarily mean doing it all yourself; it means knowing how to take advantage of the tools and resources you have available to you.

Here's how today's "money squads" assist you in winning the finance game:

For example, Isha is a freelance worker from Pune. She uses Walnut to manage her irregular income, tracks her CIBIL score every month on OneScore, and invests ₹2,000/month using Zerodha. She's not doing it alone—she's just in charge, with the right digital support team.

Bonus Myth: "Debt Consolidation is a Scam" — Think Again!

The Real Truth: It's a smart move—if you do it wisely.

Debt consolidation is when you pay off your several outstanding debts using a new loan with one easy monthly payment and a lower interest rate to keep your financial strain down.

Like, Arjun had taken three different credit lines in the last 2 years.

He was giving high interest rates and finding it difficult to cope with various EMI due dates. That is when he turned to debt consolidation by taking a personal loan at a lower rate.

Before Debt Consolidation

After Debt Consolidation

Like Arjun, if you’re paying 35% to 40% APR across multiple loans, switching to a single lower-interest personal loan (offered by major banks) can save you ₹40,000+ over the full tenure.

Final Thoughts

To conclude, the next time a person drops some finance gyaan bomb, slow down and evaluate the information. Personal finance in 2025 is not about following one financial adviser; it is about figuring out what works for you.

Whether it is EMIs, SIPs or credit cards, the game is balance, clarity, and consistency. Keep the myths away from what you are doing. Keep it simple, keep it smart, and most importantly— finance is not rocket science; it is really common sense with a mindset around money!

FAQs

• Is it bad to use a credit card every month?

Absolutely not; in fact, as long as you don't carry forward unpaid dues, using and paying off your card once a month is a great way to build a credit history.

• Are mutual funds safe for beginners?

Absolutely, especially index funds or balanced funds, as they provide a degree of diversification and therefore lower risk.

• How do I know if debt consolidation is right for me?

If you are paying multiple EMIs at high interest, debt consolidation into a lower rate single loan can help, but just compare the total cost and terms first.

• What is an acceptable EMI-to-income ratio?

Aim for a ratio below 30% of income and you will remain financially secure while maintaining an ability to save

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LoansJagat Team

We are a team of writers, editors, and proofreaders with 15+ years of experience in the finance field. We are your personal finance gurus! But, we will explain everything in simplified language. Our aim is to make personal and business finance easier for you. While we help you upgrade your financial knowledge, why don't you read some of our blogs?