Nothing I love more than talking to people about money – their beliefs around it, how they go about earning it, what they do with it when they have it and how their beliefs about money completely shape their life. Sometimes though, our money beliefs can negatively impact our lives, so I put together 5 common money misconceptions that I’ve seen over the years.
You probably have thought one of these at one time or another and maybe still hold it as a core belief. No matter where you are at, my hope is that you don’t let these misconceptions hold you back from the financial life you desire for yourself.
Misconception #1 – Money means financial security
Money will never equal financial security. There is no security in life; we know that, however we still like to ‘create’ security in our heads or back up plans. Being prepared as best we can and having a plan for potential likely scenarios that could play out in our lives is important, and part of our basic human needs for safety. Life, fortunately, keeps us from being prepared for everything. This is what makes life an exciting adventure. If we had ‘insurance’ for everything that goes wrong we’d be a world of actuaries, underwriters and claims departments. I’m glad that’s not the case.
Misconception #2 – More money means less worry
Nope. In most cases it just means you have more to worry about or be obligated to. The trick is to not worry. Period. Worry doesn’t add one second to your life. More money sure doesn’t end worry, it just gives you new things to worry about. Being rich or poor has nothing to do with your worry factor. So stop worrying about money and get a plan in place to either make more money or use what money you are given more wisely.
Misconception #3 – I’ll get out of debt when I make more money
HA – you won’t – you’ll just buy a Rebecca Minkoff or Kate Spade! When I saw Preet Banerjee speak last year (author of ‘Stop Over-thinking Your Money‘ and TV host of Million Dollar Neighbourhood), he mentioned that for most people your expenses increase in step with your income. It’s true! As a planner and financial coach, I see this ALL the time. More money for most people means more to spend. The only way you will get out of debt is if you create a plan to get out of debt and then take the actionable steps to do so. (By the way – I think it’s great to spend money. My beliefs lie with one word: balance. Everything in balance. So spend away – just remember to save too!)
Misconception #4 – There is only so much money to go around
Wealth is unlimited. Everyone can be as rich as they choose to be. Most people believe wealth and financial abundance is only for a small percentage of people. The truth is that money and wealth can be created. It’s not finite. The Richest Man in Babylon by George S. Clason is a classic you should read if you haven’t. In that book he talks about how something as simple as building a house creates wealth for all that are involved. It’s a fantastic illustration on how wealth can be created and multiplied (and I’m not talking about the FED printing money out of thin air – that just compounds the situation – good or bad).
Misconception #5 – Stock Market is risky
Carrie Schwab-Pomerantz, President of Charles Schwab Foundations says:
“Risk-averse millennials should remember that the stock market is ‘engineered to grow.’ Underlying the sometimes cryptic seeming graphics and streams of numbers that many people associate with the stock market are companies. Like you want your investment and money to grow, the people running those companies you are investing in want to grow too. Need more proof? From its 2007 high through its 2009 low the S&P 500 lost more than half of its value, but people who stuck with it would be up close to 20% from the peak by now.”
So define risk for yourself. Maybe the risk of not reaching your financial goals is greater than the risk of being invested in quality stocks or ETF’s. Everything is risky – even a GIC because it won’t meet your goals. You already know this – there are no guarantees in life. The dooms day stock market mentality has to go at some point (and usually comes and goes along with the economic cycle). GOOD NEWS THOUGH! We need each other (and the products and services we provide) to survive and live a full life – we are all on the same team. Increasing and advancing is built into us humans. SO, no matter where in the economic cycle we are – everything will be okay….. unless of course aliens come down to earth – then you are on your own my friend. 😉
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