4 Money Myths That Might Be Holding You Back
Most of us have made a few money mistakes. Maybe you rushed to buy a home, or perhaps you failed to plan for emergencies.
While many of our financial mistakes are obvious, some result from beliefs considered “common sense” by many people.
One of the pitfalls of society is our considerable lack of financial education.
Most people don’t understand how money works because we’re fed with knowledge that’s difficult to find a day-to-day use for.
We were taught how to make potato batteries but not how to make a budget. Or what “APR” means. Or the difference between stocks and bonds.
Somehow, we’re just expected to know how money works, and it means that some people end up making the wrong financial decisions.
Here are 4 money beliefs that might be wreaking havoc on your finances:
- You Need Money to Make Money
This money myth has been going around for decades, and people continue to believe in it.
To start with, being rich offers no guarantee of staying wealthy.
It’s a fact that having more disposable income to draw from gives you more scope to invest, but creating wealth can start at any age and in any financial situation.
It’s more about having a healthy money mindset and learning the rules of good money management, and the rules do not change much whether you have $1,000 or $100,000 in the bank.
Investing isn’t exclusive to the high-powered Wall Street investors with millions of dollars at their disposal.
Anyone can invest! You can start with relatively little and work your way up. Many investment firms have rolled out apps that allow you to start investing with very little.
- Money is Complicated
The problem with your brain is that your subconscious believes every word we say.
When a saying has a lyrical flow or rhymes, our brain tends to trust its meaning.
The more you tell yourself that “money is complicated” or “I’m bad with money” (even if it is in jest), then that’s precisely what you will be.
Money will be as complicated or simple as you decide to make it.
The best way to bust this financial myth is escaping the echo chamber and reading widely.
It’s worth mentioning that there’s an overwhelming amount of conflicting financial advice out there. One of the best ways to dispel myths and unleash your true financial potential is never to believe something you hear or read or if it is not from a reliable source.
Take a skeptical approach and do your own research to verify the information.
- Investing is Risky
This myth has its roots in a truth.
While it’s true that there are risks involved in investing, everyone who has started their financial journey should understand the importance of taking calculated risks.
All investments can be categorized on a scale of risk. There are low-risk investments where the value of your investment wouldn’t typically be expected to fluctuate much.
At the end of the spectrum are volatile investments where the value of your original investment can yo-yo all over the place.
At the very least, research investment ideas, know how much risk you can stomach and create a diversified portfolio.
- Making Money is More Important Than Investing
This is the most insidious of all the myths, in my view.
The central premise of the book “The Millionaire Next Door ” is that there is an astonishing amount of quiet wealth accumulated by regular people.
The authors found that the typical millionaire were not doctors, lawyers, engineers or other professionals. Rather it was an “average joe” in average employment.
The reason is simple – lifestyle creep. It’s like a vicious cycle where the more money you earn, the more money you spend.
Income doesn’t determine wealth; investing does. Regardless of your salary, age or family size, everyone can benefit from a comprehensive investing strategy.
And remember, markets reward long-term investors. The earlier you start, the more chances you have to make a nice profit. Compounding interest over 3-4 decades can make anyone rich!
Conclusion
Financial myths hold us back from making the most of our finances and make us act in ways that go against our interests. Many people in society benefit when you stay uneducated.
Shattering the myths and learning the truths about money will empower you and accelerate your returns.
