Tips for Thought

Common Misconceptions About Money and How to Avoid Them

It is a universal truth that we all need money to survive today. However, whenever someone brings up money, it usually brings in a series of mixed reactions. Some include phrases like “Money doesn’t grow on trees” or “Money is the root of all evil.” Many of these sayings often reflect a person’s perspective, misquoted, and may be used in conjunction with advice.

Regardless of how you feel about money, we need it to sustain our lifestyles. However, if we’re constantly bombarded with misconceptions from our surroundings, we could subconsciously adopt their money habits into our own.

As such, it’s vital to tackle these misconceptions critically yet openly. Once we understand these misconceptions, we can correct them, which will help change how we approach money and how to use it.

To start, here are some of the most common misconceptions about money:

1. “The more money I have, the happier I’ll be.”

You’d be amazed to find how many wealthy individuals are depressed despite having it all. F. Scott Fitzgerald even made a literary career depicting various rich characters who have it all but are empty or hollow inside.

However, that isn’t to say money is the root of all evil either. In fact, that saying itself is a misquotation of a famous verse which reads as follows:

“For the love of money is a root of all kinds of evil. Some people, eager for money, have wandered from the faith and pierced themselves with many griefs.”1 Timothy 6:10, New International Version

In short, money is not evil, but the love and pursuit of money in replacement for relationships can lead to evil acts.

Money is also a resource that can be allocated and can grow over time if done wisely. Happiness, however, is a choice and a state of mind. A person can become a billionaire but still be miserable. In contrast, a person who makes less than ideal can still find purpose and happiness in their labor.

In short, money helps, but only to a point. If you’re living your life for money, you’ll always be miserable. On the other hand, completely disregarding money as a “source of evil” is unwise as it can leave you with little security.

2. “If I make a lot of money, I don’t need to budget and save.”

This is another myth that an unfortunate amount of people believe. If you were to buy a lottery ticket and win ten million dollars overnight, avoiding any fiscal responsibility and just going wild with purchasing anything and everything you ever wanted would be tempting.

However, that dream isn’t sustainable even if someone achieves it; many lottery winners have lost millions (and more!) thanks to their bad money habits.

So, even if a person receives a windfall, their habits regarding spending and saving will always catch up to them. If you’ve never developed the discipline to budget and save, your ten million dollars will disappear overnight.

3. “It’s normal to have a lot of debt.”

It’s a sad reality, but according to money.com, the average American has around $21,800 in debt. While it’s lower than the average debt before the pandemic, this number can be incredibly overwhelming to many.

Debt has become so ubiquitous in American society that many students who wish to pursue a degree put themselves in debt before entering the workforce. Such debt from these student loans can pile up over time, and it doesn’t help that many of these institutions charge enormous amounts for books, dormitories, and other resources.

While the United States government has made efforts to forgive some of these student loans, it may take a while for it to happen.

Nevertheless, while debt is typical, it is not inevitable. People can still find fulfilling jobs and careers without substantial student loans. Community colleges and trade schools offer many options for students where they can still pursue their dreams without breaking the bank. Credit card debt isn’t a certainty either if you pay your bills on time and use it only when necessary.

4. “Only rich people are allowed to invest.”

Many people think investing involves rich people in designer clothes who are gatekeeping the market from the public. However, modern technology has made it possible for people from all backgrounds to have easier access to various financial instruments, including investing. Investing in foreign currencies, cryptocurrency, and stocks is more accessible than ever. However, there is a fee if you’re going to work with a stockbroker. Nevertheless, you can still find other investment ways, like call and time deposits.

5. “Having a good salary means I’ll be financially stable.”

Their habits often define a person’s success, although some external factors also play a part in it. Having a good salary means you have more security compared to others. However, it doesn’t amount to anything if you live paycheck to paycheck. This instance can happen if you’re:

  • Spending more than you’re saving;
  • You are the sole breadwinner in your family;
  • You still have some debts to pay;
  • Some resources like gases and food prices increase;

And more

Nevertheless, it’s always good to make more than the average. However, if you’re not putting that aside from savings, it could become a problem.

So, how do I avoid falling for these misconceptions?

Misconceptions occur because people are talking from a subjective experience. What happened to them could be a warning for others while also serving as an opportunity call for some. In short, just because one method works for Elon Musk doesn’t necessarily mean it’ll also work for you.

Another way to avoid falling for these myths is to develop good habits around money. Here are some ways to ensure you’re handling your finances better:

1. Find happiness outside of money.

Money doesn’t lead to happiness, but having extra cash wouldn’t hurt either. Happiness is what you make it, but if you spend your entire life banking on reaching a specific net worth, you must remember to smell the roses or appreciate other simplicities in life.

If you’re adamant about becoming a millionaire or billionaire, at least find something that makes you happy aside from spending money and going on vacation. Finding happiness outside money ensures you don’t center your life around it.

2. Budget and save, no matter how big or small.

As children, we were taught to save our allowance in piggy banks for a rainy day. That habit still applies in adulthood, but instead of porcelain piggy banks, we turn to bank accounts and the hidden emergency funds in our homes.

Everyone must start somewhere, so before you start worrying about a value, consider building the habit of saving first. You can also make budgeting fun by challenging yourself to see how far you can stretch a fifty-dollar bill in two days. It may not be much, but at least it’s something.

3. Pay off your debts and bills ASAP.

Debts have become common in American culture, where nearly everyone has much to pay for. Nevertheless, it’s still possible to go debt-free, but if you’re currently in debt, prioritize paying that off before treating yourself. The same goes for paying bills.

4. Learn more about investing.

Investing is a skill anyone can learn, no matter how old or young. Fortunately, the internet has provided countless resources to help the average American learn more about the market and how to start investing. If you’re not into reading articles, consider listening to some podcasts or working with a financial advisor to get your financial affairs in order.

Takeaway: Many people are “bad with money” because they have yet to develop the right mindset and habits to reach their goals. However, you can improve your money habits by investing in yourself through education, a simpler lifestyle, and changing your perspectives.

While it may take time to see the significant changes in your bank statements, putting in the work and being critical of such misconceptions will help you to make better decisions in the long run.