3 Money Myths You’ve Been Told Your Whole Life
Exposing the truth about popular money myths
Money is the Voldemort of the adult world. People do not want you to discuss it, it’s rude to ask questions about it, and it’s not taught well in school. By making money a taboo topic, misinformation is spread rapidly. I was told these three money myths growing up, and I’m sure others were too and genuinely believed them. Money is a tool and people shouldn’t be afraid to ask questions and take risks. However, understanding the fundamentals is a key part in the process of comprehending your finances.
In this article, we’ll cover:
- Debt is bad
- Investing is risky
- Your home is your biggest Asset
Money Myth #1 “All Debt Is Bad Debt”
As a child I was terrified of debt, the word itself seemed ominous and dark. I watched the adults around me go to cash advance storefronts and file for bankruptcy. My family's credit was in shambles and they heeded me to avoid their mistakes.
SOME debt is bad debt. As a rule of thumb, if it doesn’t put more money in your pocket, it is bad debt. For example, if you purchase a home that cash flows. Yes, you have a mortgage payment to deal with every month, but your tenant pays it down for you, and you pocket the difference. You get tax breaks, and equity builds in your home continuously. As a result, your credit will rise. In this type of scenario, your debt is putting more money in your pocket. Your money is working for you, as opposed to crippling you, and crushing you with stress.
Credit cards are another example of having debt work in your favor. If you pay off your credit card bill in full every month, your credit score will skyrocket. In turn, you’ll also earn benefits for your business, cash back rewards, travel points, etc. though you owe the credit card company money it’s the same as spending it from your checking account, you just earn cash back instead.
It’s not necessary at all to carry a balance on your card. Pay it off in full every month, and reap the benefits of debt.
Money Myth #2 ”Investing Is Risky”
I was told this all the time, “don’t get into real estate it’s risky,” “Don’t invest in the stock market, it’s risky”
I wholeheartedly believed this advice. I believed that the stock market was similar to the lottery, and you could only build wealth if you choose a lucky company whose stock sky rocketed. I believed that if the real estate market crashed that I would be screwed royally, and my money and property would be worth nothing. Luckily, that’s simply not the case and the phrase “Investing is risky” is just a money myth.
Uninformed investing is risky. Going into the stock market and buying at random without understanding of how the stock markets function is risky. Purchasing property without knowing a good deal from a horrible one is risky. Education cuts risk in half, and technology cuts it down to almost nothing.
Technology has allowed people to invest easily and with almost no risk. Services like Stash let you invest in index funds with as little as five dollars. Index funds compile several companies and allow you to own a small share in each. This means that if one company crashes there are several others to balance the loss.
Real Estate Investing is similar to the stock market in the fact that you have to be educated. You don’t have to have a college degree, but you need to understand your craft. Real estate investors need to understand the tax laws, how to find a good property, up and coming areas in their city, etc. Good real estate deals are difficult to find, and need to be assessed thoroughly before making that decision. It sounds daunting, but it’s not a difficult subject to learn. Once mastered, even in down markets there’s so much potential for profit. The property will sell for cheaper, and more people are looking to rent.
Investing is based on knowledge, if you know a good deal from a bad one it’s not risky. The alternative is to let your money sit in a bank and decrease every year from inflation.
Money Myth #3 ”My Partner Handles the Money so I Don't Have to Worry About Money”
When I was about 18 I worked a sales job selling Direct TV in Walmart. I was astonished how many people I spoke to who didn’t even know how much they currently paid for cable or internet. Not only that, but some didn’t even know anything about how the money was managed in the home. This is a huge money myth. Do not live in the dark about one of the biggest parts of your life.
I know your partner loves you, and would never put you in a position to fail. But the sad truth is people make mistakes, you may not be aware of a situation until they’re overwhelmed, and already in crippling, bad debt. Communication is necessary in all aspects of a relationship. Financial responsibility should be shared to take the weight off both shoulders.
Summing it Up
Everyone is a financial guru if you ask them for advice. Be cautious about where you get your information and make sure the people you’re trusting are reliable—including myself; cross reference what you read. expanding your financial education will do wonders for your future. Money is not Voldemort. It should be discussed and studied and understood. Above all else, make it work for you.
We got to destroy something, like a true myth buster. These money myths are debunked. Next week we’ll blow something up.
Share with a friend if you have been told any of these myths, and help them grow their financial intelligence as well.