Financial advisors that are trying to tell you how to manage your money and so on do this spend this much here, invest in this stock here, and so on. The reality is you can't really assign a percentage of spending to all people.
We're all in different situations different chapters of our lives and we all have different goals so you can't really tell everyone to do the same that just doesn't work.
There are so many false beliefs when it comes to money some people think that it's somehow evil some think that it isn't important and something that you have to stay away from debt at all costs this is all wrong.
Today I'm going to take 10 of the most common personal finance myths and bust them one by one.
1. Debt is dangerous and you should avoid it at all costs
You have heard this many times that
Stay away from all forms of debt because you'll never know if you're really going to be able to pay it back.
that's good advice for undisciplined and uneducated people. If you know how to use and manage your money, you know how to use debt in a powerful way. I'm talking about business loans, credit card debts, and so on
Business Loans:
In the world of business, we have two kinds of people who strongly disagree with the use of debt to start, buy or invest in a business. They believe that you should use your own money to start the venture and those who strongly disagree with using your own money and instead you should risk the bank's money.
I'm not going to take a final stand here but I do want to say this are you really going to save up all the money to start your business if we're talking about micro-businesses you can do that according to us administration of small businesses it takes around three to five thousand dollars to start one.
But a micro business is no better than a job that really doesn't give you what entrepreneurship promises, to start a proper business takes dozens and dozens of thousands of dollars, sometimes hundreds sometimes even millions.
If you have a valuable idea and a good plan it would be a shame to let it go by simply because it would take you 20 years to save the money to get started. I'll let you decide for yourself but if you're going to use it cleverly loans are a great way to start buy or invest in the expansion of a business.
Credit Cards:
Credit Cards are a heaven send and the devil among most people some people stay away from it even if they're in an emergency situation, they're almost afraid of it if you're one of them you shouldn't be.
Credit Cards are a powerful weapon that can help you on a day-to-day basis and as long as you don't overspend and stay disciplined you should be able to pay it off every single month.
On the other hand, if you're not confident about your money enough to use a credit card you probably should get educated before running away from it.
But credit cards aren't just a good tool to get out of an emergency or use money when you need it but don't have it.
Credit cards help you build your credit score which is your reputation and credibility from a financial point of view.
2. Buying a home is a dream come true
False, that's not the case anymore for a long time getting a house was everybody's dream. It was the goal in life for most people.
But in 2021 that's not the case anymore it really depends on what you want from life, maybe you don't even need to rent one maybe you would be much happier in an apartment, or maybe traveling all the time with no real stability.
It's totally up to you, but pushing this on everyone is deeply wrong you should do what you want to do, in a time like this having a home might even be a handicap, you should use them just like you use hotels when you're done with them you move on to the next one, don't buy a home just because everyone tells you that it's the right thing to do look at what you want in life and decide for yourself if it's a great option or not it's all about you.
3. Gold and other metals are safe havens
A safe haven in investing is an investment that might save you during times of crisis or inflation. In fact, since the coronavirus pandemic started in 2020, people started putting all their savings in gold, silver, or other metals thinking it'll save them from crisis or inflation.
Well there are two reasons why this is not the case
- During a crisis, cash is king: Having money in the bank during unpredictable times is peace of mind you should want, you never know what happens. If you have a job you might be laid off if you have a business you might have to turn in the key shut it down or maybe you'll need some cash to pay employees or to invest in something that will help you survive. If you have all your funds in some metal you aren't liquid which is a huge risk during a crisis like this one
- They aren't actually safe havens: Let me tell you the truth here financial safe havens do not exist, they just don't it's proven that gold and other metals will not save you from inflation the price of gold fluctuates too and if you look long term the price of gold is very volatile.
If you bought gold in 2001 and sold it in 2010 that would have been great and you would have made huge profits, but if you would have bought gold in 2012 and then sold it in 2016 you would have lost your money, the gold price isn't as stable as people want you to believe and it definitely isn't as predictable.
4. Bitcoin is a safe haven
For the same reasons why gold isn't a safe haven, bitcoin also isn't there are a lot of people who make money with it, and a lot who lost a lot of money I'm not saying that you shouldn't invest in bitcoin.
If you're willing to study it and understand how it works you go ahead but just a heads up it's extremely complicated, but if you think that putting your money in bitcoin will magically save you from inflation think again.
5. Anyone can start trading or investing:
I know that internet marketers and gurus are telling you the opposite truth is investing is a really complicated profession.
I'm not saying you can't learn how to do it but if you expect to become rich with it in a matter of months you're wrong there are people who did become extremely wealthy in little time but those are extremely exceptional cases.
Investing is complicated and trading is even more complicated most day traders aren't really making any money and believe it or not they do it for fun they literally gamble their money without really understanding the markets and analyzing patterns that they don't get.
6. Rich people are evil:
This is one of the most ridiculous myths ever this comes in many shapes and forms but it gives away the same message.
To become rich you must do unethical things that are very untrue, it really is up to you to do good or bad with your money.
Money is just a tool and if you have a negative connotation with it your mindset is probably stopping you from making any more of it.
7. Saving isn't worth it with small amounts
Wrong, It doesn't matter how small your savings are you have to develop the habit of saving as early as you can.
This is the concept of paying yourself first you can read about it in the book "the richest man in Babylon", by George S Clayson, it says that
No matter what happens you need to save a percentage of your income before paying anyone else taxes and rent included no excuses this percentage might be 10, 20, or 1 percent, develop the habit of putting money away and you won't regret it.
8. You should avoid risks at all times:
Wrong, In order to grow there are two things that you must be ready for failure and hard work. You should stop being so afraid of it failure isn't game over it's a lesson after failures you can pivot your strategy again and eventually you'll hit your target but don't get me wrong I'm not saying to start taking risks randomly you might as well burn all your cash that's not the point here.
You should always calculate your risk and your risk tolerance with time your risk tolerance will increase and so will rewards bigger risk equals bigger reward
9. You need to live below your means to become rich:
It depends on what level you're going for, if you're trying to save Starbucks money and buy cheap stuff for the rest of your life, just to save some extra cash, you can go ahead and live below your means.
But if you're trying to seriously improve your financial situation, and achieve financial freedom, you should stop listening to that advice am I saying that you should start buying random stuff No, I'm saying that you should budget your spending.
But still, buy things that you enjoy and make you happy there's a concept called practicing success, I want you to do it to practice success
You start behaving as if you've already achieved what you're trying to achieve do you want that car, go test drive it, smell the interior feel the road underneath it. Do you want a house visit one pretend that you're about to buy it this is the most motivating thing of them all and it costs nothing to try it as long as you only purchase things for yourself not because of peer pressure you should be fine.
10. You don't have to analyze your financial habits:
Wrong, you must analyze your spending, you don't have to count every single dollar but still even small expenses accumulate at the end of the month.
If you find it difficult to save, and you aren't analyzing your finances, you're going to be surprised by how much you actually could save, if you stopped wasting money on stuff that doesn't actually make you happy.
You can make a spreadsheet and divide your spending categories into investing, saving, needs, wants, and whatever.
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