Ten money lies you’ve been told
Money isn’t taught in schools. It’s too bad because everyone uses it and would benefit from financial instruction. Most people learn about money from family and friends. The problem is that these people have no formal financial education either. I’ll never understand why people will believe financial advice from those with no financial background, but they do.
With bad money advice being handed down from generation to generation, you can see why most people are in a financial mess. They’ve been lied to. YOU’VE been lied to. Your family and friends didn’t lie to you to maliciously, or even intentionally. They thought the advice was sound and they didn’t know any better.
Here are some of the money lies you’ve been told along with the real truth. Millionaire statistics are courtesy of Ramsey Solutions.
Ten Money Lies
Lie #1: You need to make a lot of money to be wealthy
Truth: The five most common occupations for millionaires are Engineers, Accountants, Attorneys, Managers, and Teachers. You’ll notice that doctors and investment bankers don’t even make the list. The process for building wealth is simple - spend less than you earn, invest the difference, stay out of debt, and do this consistently for years. It doesn’t require a big salary. To say it differently, income does not correlate to wealth.
Lie #2: The rich inherited their wealth
Truth: 79% of millionaires did not receive any inheritance. Not even a penny. People like to say wealth is inherited because it acts as an excuse and makes them feel better. Unfortunately it’s a lie.
Lie #3: Millionaires went to elite universities
Truth: Only 8% of millionaires when to an elite school, with 62% having graduated from a public college. They do go to college though, with 88% having a college degree from somewhere.
Lie #4: People with luxury cars are wealthy
Truth: The majority of millionaires drive average cars that are a few years old. The three brands driven most by millionaires are Toyota, Honda, and Ford per a 2016 study. Luxury cars are driven primarily by middle class people desperate to look rich. Don’t believe me? Read The Millionaire Next Door.
Lie #5: Some debt is ‘good debt’
Truth: Debt is bad, and that includes student loans. The only debt that can be considered good is money borrowed for an investment property. But unless you have a lot of financial education, even that can turn into bad debt.
Lie #6: Investing is risky
Truth: You can lose money investing but that doesn’t make it risky. Education reduces risk. The biggest risk you’ll ever take with your money is not investing at all.
Lie #7: Your house is an investment
Truth: Your house is a place to live but it’s not an investment. This makes people angry because houses hold emotional value, but they’re still not investments. Houses do tend to go up in value, sometimes a lot, but that’s largely offset by expenses. Look at it this way - If I tried to sell you a stock and I said you’ll have to pay me a huge monthly payment to hold it, as well as taxes and maintenance, and then when you sell that stock you’ll have to pay me a 6% commission on the total value, would you buy it? I hope not.
Lie #8: Buy the most expensive house you can afford for the tax deduction
Truth: Why would you spend an extra $1 just to get 25 cents back? You’re still out 75 cents. On an extra $100,000 of house that’s $75,000. Buy enough house that fits your needs and your overall budget.
Lie #9: Investing is for the wealthy
Truth: Wealth is a byproduct of investing. If you do it consistently, you’ll be wealthy no matter who you are.
Lie #10: I deserve it
Truth: We’ll say anything to convince ourselves it’s ok to spend money. And this one we only say when we know we can’t afford something. We justify it by saying how great we are or how difficult our day was. You may be the most wonderful person in the world, but if you want something, budget for it, work for it, and save for it.
