With so much information available online, via podcasts, word of mouth, and many other sources, there is bound to be good and bad information. Today I’m writing about some of the bad information, or financial myths.
Why Write This Post?
Too much information can be overwhelming, especially when it’s hard to tell the difference between the good and the bad. Information overload is a very real thing and if I can write a short post to dispel some of the most common money myths, then that’s a win.
Who Does This Apply To?
This post applies to a beginner or intermediate who wants to learn more about money. Maybe you know a little bit about money but hear conflicting information online and want some clarity. Or there are some things that are in the gray area that you want a little more direction on.
Who is Coming Up With Financial Myths?
It’s not just one person, or one media outlet that contributes to financial myths. It’s coming from everywhere–online, podcasts, social media, TV, etc. I believe that most people spewing financial myths are well intentioned. The way the information comes out is confusing though and some of the “hot takes” are too dogmatic in their approach.
7 Financial Myths
Here are seven common financial myths. A few of the myths have some truth in them, but need to be put in the right context. Some of the others are completely untrue and need to be dispelled completely.
Number 1: You Need Money to Make Money
This financial myth has some truth in it. It helps to have money, but it’s not an absolute necessity. Three other things that really help make money are time, hustle and knowledge. In other words, you can hustle and use your smarts to make money.
Here are some examples:
- A real estate investor who works hard to find a great deal and then partners with people who have money to buy the deal
- The person who creates a great product and then sells it to make money
- An average person at an average job who hustles and works enough overtime to begin purchasing assets
None of these examples require money to start up. The activities eventually will lead to money, but having money from the beginning is not a requirement.
Number 2: You Have to Start Investing Early
Another myth with some truth in it. There’s a keypoint in the language though. And that’s between the words “have” and “helps”. You don’t have to start investing early, but it really helps.
The more time in the market, the more opportunity for compounding. However, it’s not an absolute necessity. Someone who starts investing later in life (like myself) can make up for lost time by contributing more, making smarter investments, hustling to find good deals, etc.
For example, a 40 year-old who hasn’t invested a single penny in his whole life can hustle to find a really good real estate deal, sell it for a profit and then invest the proceeds. Or that same 40 year-old can work extra at a job and invest all the overtime money into stocks, real estate, or something else entirely.
The point is there are options and while starting early is significantly better, it’s not a 100% necessity.
Number 3: Most Wealthy People Inherited Their Money or Got Lucky
This financial myth has been dispelled in books like The Millionaire Next Door and The Total Money Makeover. I also dispel it in my book Cash Uncomplicated. Fact is, most wealthy people did not inherit their money or simply get lucky.
What others may see as luck or “overnight success” was actually a culmination of hard work and many years of struggle. Steve Jobs said, “If you really look closely, most overnight successes took a long time.”
When we see a successful person, we have a tendency to see just the tip of the iceberg and attribute that success to luck or catching a big break. While the reality is the majority of successful people worked years and years before reaching that level of success.
Number 4: Wealth is Only for the Privileged
Another financial myth with some truth in it. Yes, it’s easier for someone coming from a place of privilege to achieve wealth. They have better connections, more resources, access to higher education, and a variety of other things.
But you don’t have to come from a place of privilege to achieve wealth. Intelligence, hard work, and outright hustle can get you there, albeit on a different path. I’ve known countless people who came from nothing and made it big through the attributes listed above.
Lastly, it’s worth mentioning that it’s harder to come from nothing, or minimal resources. You’ll have to work harder, acquire the intelligence, and put the extra effort in to make the connections. It can be done though and I’ve seen it happen throughout my life.
Number 5: You Have to Make a Lot to Become Wealthy
Let’s start out with a question here. Who is wealthier, the person who makes $100,000 per year and lives off $40,000 or the person who makes $800,000 per year and needs $798,000 to maintain their standard of living?
My answer is the first person. They make less, but they require less. Therefore, they are wealthier because their needs are met at a lower cost. They are happy with the money they have, and they have plenty.
While the second person makes a lot of money, but requires more to meet their standard of living. Almost breaking even is not wealth. They’d have to either make more or change their living standard to be on the path to real wealth.
Wealth is the gap between what you make and how much you need. The larger that gap, the more on track you are to wealth. And if you’ve consistently had a large gap between the two, you probably are already wealthy.
Number 6: Financial Prosperity Isn’t Possible for Me
To this statement, I would say, why not? Why isn’t financial prosperity possible for you? Are others that much smarter or harder working than you? I doubt it, so I think it’s really a mindset thing.
As I write about in the introduction to my book, I used to have the mindset that financial prosperity wasn’t possible for me. I thought wealth was for “someone else” or “other people.” What I’ve learned is that this was a complete myth and I was guilty of faulty thinking.
There are lots of ways to achieve financial prosperity, and it’s not limited to one type of person. Think of just a fraction of the many possibilities: a corporate attorney, the owner of a successful plumbing company, a teacher who has invested well over the years, a contractor, doctor, and so many more.
This list of people is just the tip of the iceberg and as technology improves, there will be myriad other opportunities to build wealth.
Number 7: Boomers Ruined It
This is one of the most popular money myths. “Boomers ruined it.” I’d like to know exactly how one generation can ruin it for everyone else?
Did this generation get houses for free and subsidies from the government? Or did someone magically place money into their investment accounts and let the money compound for years and years?
The reality is that every generation has had triumphs and struggles. Nobody has had it easy. No matter how old you are, you’ve experienced the good, the bad, and the ugly. So no blaming someone else or moving the accountability away from yourself.
Conclusion
The problem with financial myths is that people believe them. Our beliefs turn into our actions and daily habits. Negative daily habits over a sustained period of time leads to poor results and the inability to compound positive results.
That’s why I’m writing about financial myths. If we can eliminate some of the myths, we can improve our mindset and subsequent actions–and focus on what we should be focusing on. The things we can control and take action on, followed by the opportunity to grow and get better.
