Myths and generally accepted axioms extend way past just financial matters. Mainstream knowledge isn’t always the most accurate (trying telling that to the guys spending a $400 on an outfit just to meet girls). Commonly accepted “facts” about dieting, life, love, and fitness, have been circulating through society since the beginning of time. Some of these “facts” are easy to accept, while others come off as a complete myth.
I read a very thought-provoking piece over at GRS lately about money myths and the importance of thinking for yourself. Since I took a look at college personal finance myths a while back, I wanted to open this discussion to other commonly accepted money myths.
Let’s look at some money myths…
You need money to make money.
This one is a classic. You need time to make money. You need ambition to make money. You need motivation to make money. You need great ideas to make money. In 2010 you don’t really need big money to make more money. Sure it helps to have a heavy amount of capital waiting on the side to invest into a McDonald’s franchise. It helps but it isn’t necessary. Don’t let your lack of funds discourage you from pursuing your dreams. Not everyone is going to be born into money.
A bad credit rating is permanent.
This is only true if you don’t change up your financial habits and take responsibility for your finances. Over time you can surely improve your credit rating. How? Well you can start off by consolidating your loans. Then you should strive to pay off your debt (and make payments on time). Once you get things in order and begin to eliminate your debt, your credit rating will slowly improve. It won’t improve over night, but you also didn’t destroy your credit rating over night.
It’s always better to buy than rent.
There is no one-size-fits-all answer when it comes to renting or buying. There are so many factors at play that I will only list three for the sake of brevity.
- How stable is your job? You don’t want to be building the home of your dreams on a salary that comes from an uncertain job. Job stability plays a MAJOR role when deciding on whether you should rent or buy.
- What city do you live in? Depending on the city you live in, it might be much easier to make your final decision. Many of my readers from the Bay Area have stressed the savings that come from renting as opposed to buying in their community. Every city is different and nobody knows your own city better than YOU.
- What are your goals in life? Do you want to start a family? Do you want to travel the world? The guy that plans on starting a family soon might want to settle down and buy a home. The 25 year old bachelor might just need a place to store his stuff while he travels the globe.
Check out the ultimate home buying guide for more detailed information on this topic.
Saving money is pointless because you can lose it all one day.
With this logic in place let’s look at other areas of life: Why bother eating healthy? Why bother taking care of yourself? Why hang out with family and loved ones? I certainly agree that life is too short to stress about minor stuff. However, there’s nothing wrong with at least attempting to save 5-10% of your annual salary “just-in-case-shit-happens.”
There are no guarantees in life (aside from taxes and death) so if you’re concerned about losing your money in the future, what will you do when an emergency comes and you need liquid cash to bail you out?
What money myths have I missed?
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These are some great myths. There are costs associated with buying and selling a home. If you plan to move soon, those costs would be recouped only in a very hot, hot market. Best to rent. But over the long term for most people, this one is no a myth. Like so many things in life, the truth is “It depends…”
I agree with you on all of them except the first one. You definitely need ambition, motivation, and great ideas to make money. But I feel all of them need money as a basis. To get a better job, you need a better education, which costs money (You may get a full scholarship but however, that is still money). To put your ideas on the back of a napkin is one thing, but putting that idea to use so everyone can see requires money. It is research, it is development, it is testing, it is marketing, it is cold-calling – all this equates to time and as we all know time is money!
There is no such thing as a free lunch because at the end of the day, no idea will come to fruition without money. Besides those who volunteer for goodwill, who else is working for free?
Not having money should definitely not deter you from pursuing your dreams or goals. It definitely did not stop me in creating the website that I currently have. So in order to make my website a reality, I saved as much money as I could to make it happen. Without the money, I definitely know it would not have been possible.
Having a little bit of money saved up definitely helps one invest into their business. Thankfully, these days you don’t need a million bucks to invest in your company. Small investments in eBooks/courses/consulting have yielded me decent results thus far.
What type of money have you invested into your blog?
I don’t have a blog. I simply have the website. I put in a couple of thousand dollars to have the logo, the website design, and the website development completed.
Having a bad credit rating is actually easy to overcome if you know the rules
I think the point about renting vs buying is a valid one. I agree that there are times when renting makes more sense. However, I believe the spirit of the statement lies in the fact that in the long run, most people will settle down and live in one place. When that time comes, it makes much more sense to own your place, than to rent it.
I just posted a piece of investment fallacies. I’d love for you to swing by and check it out MD. Love your site.
myth = carry a mortgage just for the tax advantages
myth = people who are living large are wealthy
Way to bust these myths. I know a lot of people that believe in some of these, especially the first one. There’s a reason that the saying is “time is money” and not “money is money.” Right?