Exposing 10 Common Money Lies That Keep You Broke (Part 1)
Do you practice bad money habits that keep you poor? Here are ten common money lies that keep you broke.
Do you believe common misconceptions about money? Poor financial beliefs can keep you in debt and prevent you from building wealth. Here are ten money lies that will keep you broke.
Lie #1: Money Is Evil
The first money myth is a frequently misunderstood saying: "Money is the root of all evil." It is a misquote of a Bible verse.
The origin of the actual quote comes from 1 Timothy 6:10, which reads, ""For the love of money is a root of all kinds of evils. It is through this craving that some have wandered away from the faith and pierced themselves with many pangs."
It is important to understand money itself is not evil. The relentless pursuit of wealth without finding satisfaction can lead to detrimental outcomes.
Second, people, particularly younger people, have been taught that money is evil. This belief holds you back from discovering ways to make more money, increasing your income, improving your skillset, and improving yourself.
Lie #2: I Can Afford The Monthly Credit Card Payment
You decide to pay monthly finance on your credit card to make a purchase. Financing is a marketing strategy to incentivize you to purchase something even when you cannot afford it.
I have worked in retail sales, selling printers and coffee machines. One of the first sales strategies I learned was to show customers the more expensive products first and then end with the least costly product. This is because the more expensive prices look better, and the brain remembers the smaller prices. It is then easier to get a customer to purchase because instead of seeing only a large number, they think of the smaller number.
This is the same sales psychology strategy that buy now, pay later, and payment plans use to entice customers to buy things they cannot afford.
Rather than saving to buy the item you want to purchase with cash all at once, you tell yourself that you can afford it by paying the smaller monthly payment. You may pay more for the original item than if you had just paid for it upfront. Additional interest will be charged to your monthly credit card payment for the purchase if you fail to pay it in time.
The monthly financing price does not tell you whether you can afford something.
The simple rule is if you cannot afford to buy it upfront with cash now, then you cannot afford it.
Lie #3: I Need A Credit Card
Credit cards have become standard for people to have today. No specific credit cards are marketed to college students to get them to use a credit card early.
But do you really need a credit card? Credit cards make keeping track of money more complicated. You must have enough monthly funds to pay off your credit card balance. If you do not pay it off, you will have to pay the additional credit card interest rate after a certain period, which is determined by the credit card company's terms and conditions.
A credit card merely brings convenience. The perks that come with credit cards are points, rewards, and travel are marketing strategies to get people to sign up for a credit card.
Again, that is just marketing. If you pay off your credit card each month, okay. Otherwise, you are falling for the marketing to get you to buy a credit card and end up paying the high monthly credit card rates.
However, if you have problems paying off the monthly balance, you could begin to accumulate credit card debt. Debt of any type is a financial problem. Credit cards are particularly sneaky with their usury.
Credit cards have high interest rates. Credit card companies entice people to sign up with "free rewards." Credit card companies make money from debt, which means they want you not to pay your credit card on time. While you get stuck paying outrageously high interest rates, the credit card company is making money from you being in debt.
Related - 15 Reasons Not To Have A Credit Card
Lie #4: I Want It, Even If I Can’t Afford It
You convince yourself you want something, even if you cannot afford it.
One way to avoid impulsive spending is to resist using your credit card for immediate purchases. Instead, practice patience and save up for what you truly want.
The pervasive culture of instant gratification pressures you to impulsively buy things you do not want or need. This short-term thinking, driven by a desire for instant gratification, makes you waste money.
The ease of credit card transactions is a double-edged sword. Credit cards make it easier to purchase things online. But at the cost of falling into credit card debt. Credit debt accumulates over time. You could find yourself in a financial situation where paying off your credit card debt with its high interest rates is impossible.
Lie #5: I Can Buy Things That I Don’t Need Because It Is An Investment
You tell yourself that the things you want are an investment. You rationalize your purchase.
Calling something an investment does not always make it true. Even if you invest money in the stock market or another venture, success is not guaranteed.
Meme stocks were a craze of the early 2020s during Covid. People financially overextended themselves by purchasing meme stocks such as Gamestop (GME) and AMC. They find themselves caught up in market hysteria.
Are any of those things truly investments? An investment is about finding ways to make your money work for you without jeopardizing your capital. It is not an investment if you're risking your capital and putting money into things you can't afford.
If you don't understand the stock you're investing in or the target audience for a business, you're speculating, not investing.
Lie #6: I Have To Spend Money To Make Money
The idea that you must spend money to make money has grown in popularity over the years. The problem is that the more you spend, the higher your return on your investment must be to make your money back and then make a profit.
You could have an investment portfolio. But the stocks you invest in continue to lose you money, even over the long run. You are spending money, hoping to make money.
Hopium is not a money management strategy.
Solution
Invest in stocks and businesses that you understand. Avoid following the crowd when it comes to investing or anything else. The crowd is usually wrong.
Lie #7: I Can Use Leverage To Purchase The Things I Want To Buy
You may think that it is okay to use leverage as a way to make money to buy something else that you want.
Leveraging is risky. You do not know what the markets are going to do.
How does leveraging work? An example is you could buy a real estate property. You continue to lose money on the property. The property has yet to generate enough cash flow to make back the money you have put into it. Once you make the first $500 from that property, you purchase a car with a monthly car payment of $500.
You are now leveraging yourself on real estate and a car payment. Leveraging this way is dangerous because you risk leveraging real estate and the vehicle.
By avoiding leveraging, you can keep your finances straightforward and manageable. This not only reduces the risk of debt but also gives you the freedom to budget and make cash payments, ensuring financial stability.
Lie #8: There Is Bad And Good Debt
It is a common misconception that student loans and mortgages are good debts while credit card debt is bad. However, it is vital to challenge this belief and recognize that all debts come with costs to your current and future self.
Understanding that each type of loan you take out can hurt your current and future financial situation is critical. Opting for lower-cost options like attending a community college, buying a used car, or choosing a more affordable home demonstrates practical financial management.
Lie #9: I Need To Keep Up The Joneses’
You tell yourself you must keep up with celebrities and social media influencers. In the social media age, seeing people living various lifestyles is easier. Some pictures and videos on social media may be genuine, while others are just for show to drive views and content.
Just because someone shows you they live a lavish lifestyle does not mean they can afford it. They could be in debt. They could be living beyond their means.
There is no need to compare ourselves to celebrities and influencers. It is liberating to stop trying to keep up with others and instead focus on living a lifestyle that aligns with living a lifestyle you can afford. By living below our means, you can free yourself from going into debt and buying more things that take up space in your home.
Lie #10: I Will Be Happier When I Have More $$$ In My Bank Account
Another common lie is that money is when you think of money as the key to happiness. Money is simply a tool.
Can a seven or eight-digit bank balance truly bring you joy? Solely chasing money creates a bottomless pit and a never-ending pursuit of more money.
By fixating solely on wealth, you neglect crucial aspects of life: health, relationships, and personal growth.
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Summary
Once you stop believing these common financial lies, you can begin to free yourself from the grip of living beyond your means, overleveraging yourself, and going into debt. The more complicated you make your finances, the more difficult they will become. Instead, change your financial life by living below your means and buying things you can afford.
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