7 Stupid Money Myths Debunked

Written on October 30, 2007 by Tezza

Tuesday’s weekly guide to Personal Finance from 4EvaYoung.com

Old sayings are timeless because they are profound in there meaning and thus have been embraced over time. However, some old sayings can be embraced even though they no longer are relevant in it’s message. We have all heard different sayings about money that have been spoken to us by our parents, friends, colleagues and other people in our lives but how often do we take time out to question whether these sayings are actually truthful for your personal situation or whether they are in some ways holding you back. Here are some stupid money myths debunked:

Myth 1 - Money Can Buy You Happiness

“Surveys have found virtually the same level of happiness between the very rich individuals on the Forbes 400 and the Maasai herdsman of East Africa. Lottery winners return to their previous level of happiness after five years. Increases in income just don’t seem to make people happier -and most negative life experiences likewise have only a small impact on long-term satisfaction”, according to Forbes Matthew Herper.

Mathew goes on to say, “The central problem is that the human brain becomes conditioned to positive experiences. Getting a chunk of unexpected money registers as a good thing, but as time passes, the response wears off. An expected paycheck doesn’t bring any buzz at all -and doesn’t contribute to overall happiness. You can get used to anything, be it hanging by your toenails or making millions of dollars a day. Mood may be set more by heredity than by anything else: Studies of twins have shown that at least half a person’s level of happiness may be determined by some of the genes that play a role in determining personality.”

Myth 2 - When I Have More Money Then I’ll Start Investing

“If you save and invest money every month, you will become a millionaire at some point. As Einstein put it, compound interest is the “eighth wonder of the world.” It all depends on how much money you currently have, how much interest that money will earn (the tricky part), and how much you can save each month — and, of course, how long you can wait. Another critical part of the equation is that you leave the interest earned alone so that it keeps earning interest.” - How Stuff Works

“There’s one often-cited example of the power of compound interest. If Christopher Columbus had placed a single penny in a 6 percent interest-bearing account and instructed someone to remove the interest every year, the value of the interest earned by 2005 would be almost 31 cents. But if he had placed the same penny into the same interest-bearing account but left the earned interest to compound - earning interest upon the interest - the resulting balance for 513 years would be $95,919,936,112. That’s $95 billion!”

The key to compound interest is that the earlier you begin investing, however small, the greater the effect of the compounding return over time.

Myth 3 - I Save Money Buying Things On Sale

While we all enjoy snapping up a bargain and getting something on sale the reality is, if it wasn’t something that you had already planned on buying then you really haven’t saved any money. Even if you got the item at 50% off, if it wasn’t planned then you’ve paid 50% more than you had bargained for. Buying things on sale that you don’t really need is a fast way to the poor house.

Myth 4 - Rich People Are Greedy, Selfish, Corrupt.

“The easiest way for anyone to become wealthy is by creating a means by which to create the most value for the greatest number of people possible, at the least possible cost. If your product or service doesn’t give your customer enough value for your price, they will go elsewhere and you will not make money” says Chris J “If you’re not generous with the value you create, if you’re not constantly looking for ways to deliver more value to more people for less money, you will find it much more difficult to become rich. Resenting rich people is a trap, not only because it makes you unhappy over something not in your control, but also because it will prevent you from modeling their behavior - you don’t want to become like someone you hate, right?”

“The truth is that most wealthy people are admirably generous - not only do they create and deliver value to as many people as they can, as a group they give more, more often to charities and causes than any other group can.”

Myth 5 - I Have To Make More Money If I Want To Get Rich

“Sure, making more money can give you more opportunities for growing your wealth, but only if you make sure that an increase in income does not result in a corresponding increase in lifestyle. Alternately, even when you make less money if you can find ways to keep more of it, you can still get to become rich eventually.” from Grad Money Matters

The difficulty many face is to assume that when they are making more money then they have more to invest. The truth is most people tend to increase their living and lifestyle in relation to their income levels and thus do no better financially then someone on a lower income but is a better net saver. Discipline with savings and investment begins when you have little.

Myth 6 - Rich People Are Born With A Special Gift

According to The Millionaire Next Door:

* “More than 80% are ordinary people who have accumulated their wealth in one generation. They did it slowly, steadily, without signing a multimillion-dollar contract with the Yankees…”
* Fewer than 20% inherited more than 10% of their wealth, and more than half never received a penny of inheritance.
* They “wear inexpensive suits and drive American-made cars. Only a minority… drive the current-model-year automobile.”
* About half have lived in their current home for 20 years or more.
* 80% are college grads, and 38% have advanced degrees.
* 20% are retired. Of those still working, about two-thirds are self-employed — mostly entrepreneurs, but also self-employed professionals, such as doctors and accountants.
* On average, they invest nearly 20% of their household realized income each year.
* Nearly half of all millionaires never received any support in funding a college education from their parents or other relatives.

Rich people are neither necessarily born rich, or given any special privileges or opportunities that aren’t open to the rest of us. Wealthy people live below their means, work hard and limit their reliance on bad debts.

Myth 7 - The Love Of Money Is The Root Of All Evil

Thought we’d finish with a classic and often misquoted passage from the bible. “For the love of money is the root of all evil: which while some coveted after, they have erred from the faith, and pierced themselves through with many sorrows.” - Timothy 6:10

Money in of itself is not evil, it’s merely a form of legal tender we use to exchange for something else. Thus money is really neutral until we place a certain value on it, those whose ambition is the mere pursuit of money and all that it represents is when money can be evil. The quote is not suggesting that the opposite action of poverty is needed but rather seek first faith and service to people. Money is just a by product of what you do.

Popularity: 8% [?]

If you're new here, this site is dedicated to inspiring, motivating and encouraging anyone who is young at heart to live a life of significance filled with peace, joy, and success. If you enjoy your stay consider Subscribing to my Feed or Subscribe Via Email. Thanks for visiting!

Posted in Money Habits, Personal Finance