Myths about money are everywhere. Unfortunately, much of what we know about money is probably wrong and holding us back from success in our financial life. We all must be aware of how our thoughts impact our behaviour with money as how we think and feel often dictates how we act.
We truly are living in the age where we have access to information 24 hours a day, seven days a week. We want enough information to inoculate ourselves against financial missteps, but not so much that it leads to behaviours that undermine our financial success.
Here are four of the most common money myths debunked.
1. “Money won’t make you happy”
To help debunk this myth, here are a few comments from celebrities:
- Samuel L. Jackson – “Anyone who tells you money can’t buy happiness never had any.”
- Ariana Grande – “Whoever said money can't solve your problems, must have not had enough money to solve them.”
- Robert De Niro – “Money makes your life easier.”
As if that’s not enough, a great deal of research has shown that people with more money are typically happier than those with less. Additionally, research has proven that spending on others actually increases happiness too.
2. “All debt is bad.”
Many people do not know the difference between good debt and bad debt. In fact, many do not know that good debt exists at all.
The conventional wisdom goes something like: debt that is backed by appreciable assets, such as property, is usually good. This is because the property will typically generate an income which can help pay some or all the debt – with rent, and likely increases to the property’s value over time. Debt that will likely help someone generate more income — such as a student loan so that someone can become a doctor — is usually also good. In this way, debt is a tool that enables a person to advance financially, in a way that would not be possible without it.
Meanwhile, debt that is backed by a depreciating asset, such as a car, is bad. This is because the value of a car nearly always depreciates over time. Revolving debt, such as credit card debt, is also bad. These sort of bad debts nearly always prevent financial growth.
Of course, there are always exceptions to the rule. For example;
- A huge student loan possessed by someone with limited employment prospects. This could still be described as bad debt, or
- Someone who takes out a small loan to buy a simple and economical car so they can get to-and-from a high paying job. Many people would describe this as good debt, as the car will help the person earn much more than without it.
However, the point remains that all debt is not necessarily bad.
3. “It takes money to make money.”
This phrase is sometimes used as a convenient excuse to simply not try to succeed. It takes nothing other than a basic job and filling in the sign-up form for KiwiSaver to become an income-earning investor.
Even the wealthiest people in the world had to start somewhere: Steve Jobs founded Apple in his mum’s garage, Oprah Winfrey was terribly poor and ran away from home as a teenager, the founder of Starbucks grew up in a housing complex for the poor, and (though we try and avoid politics) Barack Obama’s first job was scooping ice cream. Closer to home, John Key grew up in a state house before working his way to the NZ rich list, then later giving his entire prime ministerial salary to charity.
4. “Money doesn’t grow on trees”
Many of our parents drove this concept into our heads from a young age, and if they did so after 1999, then technically they’d be correct. This is because it was 1999 when New Zealand switched to plastic bank notes.
However, most money across the globe is still made of some sort of paper. In fact, the most widely used currency, the United States Dollar, is made of cotton – which is picked from the cotton bush – and so is therefore near enough to growing on trees!
Talk to the team at Milestone regarding how you can get ahead financially.