What are the biggest money myths you have encountered?
Money myths are things that are believed by many to be true, but when examined in the light of truth are found to be falsehoods. An example might be that anyone who has wealth must be dishonest. Why not share what have you found to be your biggest money myths and how you overcame them?
__________________ Dave
www.prosperitypowerplan.com
Anonymous Date: Apr 17, 2009
I used to believe that "it takes money to make money." One thing I've learned from the debt to prosperity power plan is that all it really takes to make money is human thought and effort. We all have a resource called time. If we use and invest our time wisely we can make money. Then if we manage our money properly it will grow and eventually help us have more free time.
Anonymous Date: Apr 17, 2009
I haven't reached that section of the D2P lessons then I guess but I still think it takes money to make money. There's got to be a starting point. You can't make money w/o money can you?
I haven't reached that section of the D2P lessons then I guess but I still think it takes money to make money. There's got to be a starting point. You can't make money w/o money can you?
One of the reasons people find it so hard to increase their income or achieve financial freedom is that they don't see just how attainable the goal is. When you begin to understand that you can make money any time you want, you break those chains of disbelief. You don't need to already have money to make money. Let me give you just a quick example:
Every business provides goods or services to their customers. In order to survive, the business needs to find those people who need the goods or service the company provides, so they spend a lot of money in advertising.
In spite of advertising, there may be a lot of people who need the goods or service a business provides but are unaware the business even exists. An enterprising individual can make money simply by introducing the customer to the business. This is referred to as a finders fee or referral fee. A good example of this is RAM Financial's referral program. You can make money just by telling other people who need financial help about the services RAM provides. Every time a person you refer becomes a client, you get a referral fee. This is just one quick example and will work with almost any business - from chiropractors to painting contractors.
So always remember, you are only limited by your imagination and effort, not your bank account.
Reformed Shopper Date: Apr 21, 2009
"You Save Money When You Buy Things On Sale"
I fell for that myth bigtime. What I finally realized is that buying on sale doesn't mean you save anything. The only way to actually save money is to put it aside (in the bank, under your matress, or bury it in the back yard, etc) and unless you take the difference between what you would have paid, and what you did pay, and put it in the bank you haven't really saved anything. In fact all it means is you have more to spend. So don't be misled like I was, whenever you buy something on sale actually save the difference in price by putting it in the bank and build your emergency fund!
Anonymous Date: Apr 21, 2009
I know exactly what you mean. I used to joke with my friends that I saved a ton of money when I went shopping, and I could have saved a lot more money if I hadn't kept running out. The sad part is that there was some truth in the statement. Whenever I bought things on sale I always felt justified that I had more to spend...so I did.
I fell for that myth bigtime. What I finally realized is that buying on sale doesn't mean you save anything. The only way to actually save money is to put it aside (in the bank, under your matress, or bury it in the back yard, etc) and unless you take the difference between what you would have paid, and what you did pay, and put it in the bank you haven't really saved anything. In fact all it means is you have more to spend. So don't be misled like I was, whenever you buy something on sale actually save the difference in price by putting it in the bank and build your emergency fund!
Great post! It's a perfect example of how we can be deceived into thinking we are improving our financial lives, when in truth we aren't. Here is something else to consider about this myth...you never save money when you spend it. It is impossible to spend and save the exact same dollar. Whenever you buy something, you have spent money that can never be saved. Now, if you buy something you need at a discount, and put the remainder in the bank, you did save money. But if you buy something you didn't need you lost that money, no matter how much the price was discounted. Don't let a "sale" manipulate you into buying something you truly don't want or need because if you do, the "sale" is actually causing you to lose money.
Anonymous Date: Apr 23, 2009
"Rich People Are Obsessed With Money"
I'm not sure any more if this is true or just a myth. For most of my life I believed that you couldn't be a spiritual person and be wealthy and that wealthy people got that way because money was all they ever thought about. Now that I'm not living paycheck to paycheck anymore I find that I worry about money a lot less. Maybe poor people are more worried about money than rich people. Anyone else feel like that?
I'm not sure any more if this is true or just a myth. For most of my life I believed that you couldn't be a spiritual person and be wealthy and that wealthy people got that way because money was all they ever thought about. Now that I'm not living paycheck to paycheck anymore I find that I worry about money a lot less. Maybe poor people are more worried about money than rich people. Anyone else feel like that?
Everyone thinks about money at some time. The key is to not let money become an obsession in your life. Unfortunately when you don't have any money, or you aren't managing it well, money can be the driving force in your life. To really bust this myth just ask yourself:
"Who works all day, year after year, in a job they hate, just for the money?"
"Who constantly sacrifices their health and their family, just to make more money?"
The truly prosperous work because of a sense of passion, mission, and purpose - not just for money. Their lives are built on a more solid foundation. Some wealthy people spend far less time thinking about making money than most poor people do.
Anonymous Date: Apr 24, 2009
The myth I fell for was the good debt vs. bad debt myth. I know the reason I fell for it was I could justify in my case impulse buys on things like a house or maybe even a car which by no means is a good debt. I have found it to true in my case that the answer that gives me a warm fuzzy feeling isn't necessarily the best answer.
I know to this day I am still reaping from my bad decisions of rationalizing good and bad debt.
Anonymous Date: Apr 25, 2009
I fell for the same myth! And paying the consequences as well - literally, every month to the IRS.
Anonymous Date: Apr 29, 2009
"Time is Money"
This is undoubtedly one of the biggest money myths I have uncovered. There is a big difference between the two. You can spend all the money you have and then make more. Time is an irreplaceable resource. Once it is gone, it is gone. Unfortunately, we spend almost our entire lives trading time for money. If we want to get the most value from our money, we need to develop good money management skills. If we want to get the most value out of our lives we need to develop good life management skills. If we learn to properly utilize our time we can make more money. If we learn to properly manage that money we can have all the free time we want.
While it is true that time and money are different entities, they do have some similarities. Both have a value and either can be spent, wasted, or invested. Some people place a much higher value on their money than on their time and vice versa. One of the keys to a prosperous and balanced life is to value both appropriately. When we waste money on things that aren't really important to us we suffer financially. If we waste our time on things that are not truly important to us we literally waste our lives, because time is the substance life is measured by. That is why prosperous people have invested the time to identify what they value most and develop a sense of purpose and mission.
__________________ Dave
www.prosperitypowerplan.com
Anonymous Date: May 3, 2009
Anonymous wrote:
The myth I fell for was the good debt vs. bad debt myth. I know the reason I fell for it was I could justify in my case impulse buys on things like a house or maybe even a car which by no means is a good debt. I have found it to true in my case that the answer that gives me a warm fuzzy feeling isn't necessarily the best answer.
I know to this day I am still reaping from my bad decisions of rationalizing good and bad debt.
I'm a little confused by what you mean by good debts and bad debts. Can you explain what you mean by a good debt and a bad debt. I always thought a bad debt was one that you couldn't collect on.
Simply stated the "good debt, bad debt" myth teaches people to believe that some debts are actually good for you, while others are bad. An example of a bad debt would be something like a high interest credit card which was used to buy consumable goods or services. Believers of this myth claim that any debt which is used to purchase an asset of greater value (or potential greater value) is actually a good debt. An example would be using a mortgage to buy a home. The claim is (was) that the mortgage was a "good" debt because the value of the house would increase, or the house could be rented for more than the mortgage payment. A lot of real estate investors who fell for this myth have paid a huge price because of it.
For many, a mortgage is the only realistic method for them to buy a home, but it doesn't mean they should allow themselves to be misled into thinking the debt is "good." Every debt carries risks and should be eliminated as quickly as possible to minimize those risks.
Anonymous Date: May 7, 2009
I can tell you for certain that a mortgage is not always a "good debt" and sometimes it's not even a "good" or safe investment. I heard someone say one time that a safe investment was one whose risks have not yet become apparent. Every investment has some risk and every debt can be "bad" or toxic.
Anonymous Date: May 11, 2009
Here is one of the most common money myths I've heard:
"Money Is Power"
Money by itself doesn't have any power. Money is just a tool. People and ideas have power, money is just a toopl to help people make dreams a reality. Simply providing more money to our educational institutions won't equate to better education unless the money is backed by proper ideas. That's why money itself can't provide happiness, solve world hunger, or keep a mismanaged company out of bankruptcy. The power lies within people and ideas, not the little pieces of green paper we call money. Once we learn to focus on being of benefit to others, rather than just chase money, we will find money naturally finds it's way to us.
Here is one of the most common money myths I've heard:
"Money Is Power"
Money by itself doesn't have any power. Money is just a tool. People and ideas have power, money is just a toopl to help people make dreams a reality. Simply providing more money to our educational institutions won't equate to better education unless the money is backed by proper ideas. That's why money itself can't provide happiness, solve world hunger, or keep a mismanaged company out of bankruptcy. The power lies within people and ideas, not the little pieces of green paper we call money. Once we learn to focus on being of benefit to others, rather than just chase money, we will find money naturally finds it's way to us.
I agree that money is only a tool, much like a hammer or chisel. The power lies in the vision and skill of the craftsman or artisan and not the tool itself. A skilled artisan can use a hammer and chisel to turn a plain slab of marble or granite into a beautiful statue of the Venus de Milo. However, those same tools used by an unskilled artisan simply result in a statue of "Gravel Gertrude." Learning to develop a prosperity mindset coupled with proper money management skills is what determines which statue you create in life, not the amount of money you start with.
I myth I have come in contact with is "Money" is the Root of all evil. When actually reviewing the scripture people are refering to you find that "Money" isn't the root of all evil but the "LOVE of Money" is the root of all evil.
Anonymous Date: May 15, 2009
JackBlack wrote:
I myth I have come in contact with is "Money" is the Root of all evil. When actually reviewing the scripture people are refering to you find that "Money" isn't the root of all evil but the "LOVE of Money" is the root of all evil.
I agree whole heartedly, but I would even go one step further. The passage you refer to is found in 1Timothy 6:10 and the passage actually says that the love of money is a root of all kinds of evil. This passage warns us to avoid the love of money but doesn't say that money itself is evil. Paul even goes on to tell Timothy to encourage the wealthy believers to be generous, so obviously there were some Christians who had substantial wealth. Notice Paul didn't say they should get rid of their money because it was evil. Instead he indicated they should be generous and use it for good.
To shatter this myth once and for all, people should realize that Satan (not money) is the root of all evil.
Anonymous Date: May 25, 2009
MYTH: Using Credit Increases My Purchasing Power
What makes this myth so powerful is that at first it seems to be true. Using credit allows me to buy things I wouldn't otherwise be able to afford right now. So it seems like credit allows me to enjoy a higher standard of living, but that is only true for a while. Eventually credit actually causes me to live a lower standard of living because all my money is going to interest on previous loans.
Credit doesn't increase my purchasing power, it only allows me to borrow against my future purchasing power. And that borrowing comes with a steep price in the form of interest, so it costs a lot more in the long run. That means that my real purchasing power has been ultimately reduced in the long run, not increased.
This is undoubtedly one of the biggest money myths I have uncovered. There is a big difference between the two. You can spend all the money you have and then make more. Time is an irreplaceable resource. Once it is gone, it is gone. Unfortunately, we spend almost our entire lives trading time for money. If we want to get the most value from our money, we need to develop good money management skills. If we want to get the most value out of our lives we need to develop good life management skills. If we learn to properly utilize our time we can make more money. If we learn to properly manage that money we can have all the free time we want.
I think time is far more precious than money. The problem is we don't recognize it until it is too late. We spend all our time trying to acquire money, then we spend all our money trying to buy more time. I for one don't want to be laying on my death bed trying to buy a little more time because I waisted my life on things that really weren't important to me. I'd much rather spend the time I have on this Earth with my family and loved ones and helping others. That's why learning to build residual and passive income is so important.
Anonymous Date: June 18th
"Higher Risk = Higher Reward"
Every investor has heard this phrase over and over, but it is a lie. The concept is that the higher the risk in an investment, the greater the return you will receive. On the surface it makes sense, but assuming higher risk really means you have a greater chance of losing, not winning. If you ask me that sounds like Las Vegas when you really look at it. Anyone who has any investments in the stock market (even a 401k) has seen some big losses from all that "high risk."
The saying should say "higher risk = higher potential for loss."
Anonymous Date: June 25th
Higher risk = higher loss sure seems to describe the market right now. Just a quick thought about investment advice - It occurred to me that investment banks and stock brokers make their living by selling, not buying stocks. If they really knew what they were doing wouldn't they be making so much money they wouldn't have time to give advice? It's like the fortune teller who can't pick the winning lottery numbers.
Your comments indicate you have begun to realize an imoprtant truth about investing. Every investment involves some elemet of risk, "risk free" investments are simply those investments whose risks haven't become apparent yet. The key to successful investing is to understand what you are investing in, and minimize those risks. The problem with the stock market is very few people understand what they are buying and if that is the case they should avoid it. You wouldn't play a game in Vegas without knowing the rules or the odds and expect to win, why should we feel different about the stock market.
You have to learn to think like your banker. Banks don't invest in stocks and bonds. They put their money in businesses, insurance and real estate. Their investments are collateralized and produce great returns without high risk. The only reason they are in trouble in real estate now is because they themselves violated their own model. In other words they got greedy.
