10 Money Lies, You’ve Been Told
When it comes to money, there is a lot of bad advice floating around out there. Part of the problem is taking advice from friends and family who are just repeating what they’ve heard from others.
In this article we’ll take a look at 10 common money lies that you may have heard. These could be things that others have told you, and they can also be lies that you tell yourself. Either way, let’s set the record straight.
1. Everyone has debt.
Debt is so common in our society that we’ve gotten used to it. Too often this is used as an excuse to justify living above our means or not prioritizing savings.
The truth is, not everyone has debt. It is possible to live without credit card debt or car payments. Even paying off a mortgage is possible.
And even if everyone else around you does carry a lot of debt, that doesn’t mean that you have to do the same. If you want to get ahead financially you need to be willing to do what most people will not do.
2. If they can afford it, so can you.
It’s really easy to compare ourselves with others around us. You see a friend or neighbor with a new car, a boat, or an expensive vacation. It’s easy to think it that person can afford something, so can you.
But the problem is, in many cases that person can’t really afford it. If you look at the statistics on credit card debt in America you’ll know that many people buy things they can’t really afford.
Salespeople are often trained to sell you on a monthly payment, not on the total amount that you will be paying. Looking only at a monthly payment is almost certain to get you into unnecessary debt.
3. Saving a small amount isn’t going to make a difference.
If you’re living paycheck-to-paycheck and aren’t able to save a significant amount of money, it may seem like saving a small amount isn’t even worth the effort.
In reality, thanks to compound interest, even a small amount of saving can add up over time. If you consistently save even a small amount the end result can be surprising.
You’ll also find that as you start to save you’ll develop more financial discipline, and you’ll probably wind up finding more ways to save as time goes by.
When it comes to cutting costs, small changes like canceling cable TV may not seem like it will make a real difference in the big picture. But if you make an effort to save small amounts where possible, the combination of several different cost-cutting measures will add up quickly.
4. You have to work hard to make money.
While hard work is admirable, it’s not always the hardest workers who get ahead. Being smart with your money is equally important, if not more important, than hard work.
I’m not suggesting that you should be lazy or not work hard, but don’t confuse hard work with financial success. Make sure you also put in the effort to create a budget, create a financial plan, and to educate yourself on your investments.
Although hard work is certainly an option for making money, there are also other ways that you can make money without so much effort or time. There are a lot of passive income possibilities that can make a huge difference in your overall financial picture. In some cases, these passive income options will require some money to invest, but taking advantage of these opportunities as you progress is a great way to reach your retirement goals.
5. Renting is a waste of money.
I’m a homeowner and it’s been more than 10 years since I rented, but it always bothers me when people just assume that renting is always a bad idea. There are plenty of situations when renting may be the better choice.
Owning a home is expensive with costs like a mortgage payment, property taxes, and maintenance and repairs. Aside from the money, taking care of a home also takes a lot of time and effort. If you’re not interested in putting in the time and money to own a home, renting is a viable option.
Also, if you’re not likely to be in the house for at least 5 years you would probably be better off renting. It usually takes about that long to offset the costs associated with buying and selling a home.
6. Credit cards are bad.
Credit cards can be a great tool if managed properly. I pay for just about everything with a credit card, and getting at least 2% cash back on all of those purchases adds up to a big chunk of money every year. The key is, I pay the balance in full each month and I don’t pay any interest.
Many people use travel rewards credit cards to pay for vacations.
In my opinion, rewards credit cards are great if you have the discipline to only spend money that you have. Of course, credit cards can also lead to a lot of trouble if you don’t have discipline. If you know that you won’t be able to pay for a purchase at the end of the month, don’t make the purchase. If you don’t think you have the discipline to avoid credit card debt, I would recommend not having a credit card at all.
7. You deserve it!
I’m not saying you don’t deserve it, but this is an easy and convenient excuse to justify just about any expense.
If you can’t pay for it without credit card debt, don’t listen to this lie. If you do, you’ll probably regret it later when you have to pay interest on it every month.
8. You’re young. You don’t need to worry about retirement yet.
Being young is not a good excuse to ignore the need to save for retirement. In fact, when you are young is exactly when you should be saving. Your younger years are the best time to save. If you look at the numbers, it’s shocking how much of an impact you can make by simply saving when you are young.
Aside from the impact of compound interest, saving when you’re young will help you to develop good financial habits that will carry over throughout your life. If you decide to wait to start saving, getting the financial disciple to do it later will be even harder when the time comes.
9. The stock market is too risky.
While it’s true that the stock market does carry some risk, the risk levels off the longer you plan to have the money invested. Historically, the stock market has outperformed every type of low-risk investment.
If you have 10 years or more to wait, there’s no reason to avoid the stock market. Index funds are a great place to start if you want to get decent returns and you’re not interested in buying individual stocks.
10. Making more money will solve your problems.
A lot of times this is a lie that we tell ourselves. It’s easy to think that everything will be so much easier if we can just make more money. While it’s true that a higher income can help, that’s only part of the story. You’ll need good financial habits and discipline whether you make a lot or a little. If you manage your money poorly now, you’ll probably continue to manage it poorly when you make more. However, if you are able to effectively manage what you make now, increasing your income can allow you to save that much more.
Don’t fall into the trap of believing these 10 lies. Prioritize your finances and learn to manage your money now and you’ll see the results.