Common Untrue Money Beliefs That Hold You Back

It usually not what you don’t know that causes life’s challenges, but instead things we believe that just aren’t true.

A couple of errors in your money beliefs can be a severe detriment to your finances. Increasing your understanding of money and personal finance is a surefire way to get on the path to permanent prosperity.

Steer clear of these untrue money beliefs:

Income is the same as wealth.

People that earn more money commonly have a tendency to then spend more. For example, lottery winners are notorious for spending all their winnings. Many families that earn over $1 million per year manage to outspend their income. You can make a very high income and still end up living paycheck to paycheck.

Wealth is considered what you have left over after you’re done the spending. The more money you’re able to save and invest in appreciating and income-producing assets, the more you can expect your wealth to grow. A high income provides opportunity. It doesn’t provide a guarantee of wealth.

More money equals more happiness or money has little to do with happiness.

Studies have consistently shown that more income results in higher levels of happiness but only to a point. The break-even mark appears to be $75,000 per year.

If you’re earning less than $75,000, you can expect your feelings of happiness to increase with a more income.

But if you’re already earning that much or more, more money does not make you feel any better.

Wills are for rich people.

Anyone with children or assets needs to have a will. Unless you’re okay with the courts to deciding who will raise your kids and receive your assets, you need to get a will in place. A simple will is only a few hundred dollars and priceless in terms of peace of mind. You may even be able to put together a will for yourself for even less money.

Owning is better than renting.

From a financial viewpoint, it depends. Mortgage interest is deductible, but it’s still a significant expense of owning a home. Homeownership also includes property taxes and home maintenance. The upside is the possibility for appreciation, and you have a place to call your own. You have to run the numbers to decide for yourself if homeownership is best for you.

Price and quality go hand-in-hand.

There are many examples of this statement not being accurate. Generic drugs are identical to the brand name version, and the cost is much less. Companies price their goods and services to maximize profit. That means the perceived value affects pricing instead of the actual value.

Many items are priced to accommodate expensive marketing campaigns. For example, Beats headphones which are popular with teenagers are considered by experts to be only worth half the everyday retail price. In this case, you’re not paying extra for better quality you’re paying for the name alone.

An index fund will never win.

Over time, index funds do outperform the most of the managed funds out there. Usually, the lower expenses and the turnover rate of an index fund are more important than a professional stock-picker. You can take advantage of the ability to match market returns for minimal cost with an index fund.

You should never have a credit card.

Credit cards are a fantastic tool if appropriately used. However, credit cards also are a means to spend money you don’t have. This can be a challenge or a helping hand, depending on the circumstances. Credit cards can also help (or damage) your credit.

Are your misguided beliefs limiting your financial growth? Consider all of your money beliefs and question if they might be false.

Having accurate money beliefs enhances decision-making and results so avoid buying into the myths and distinguish between fact and fiction.

Here’s to creating the life you LOVE!