11 Myths About Money That Are Costing You Happiness
It would be great if you could go to sleep and wake up happy and problem-free. With enough money to do whatever you want, whenever you want.
But that's not going to happen. You aren't going to have a rich uncle leave you a massive inheritance. Or buy that winning $400 million Powerball ticket.
Being good with money requires you working for it, making better decisions with your money.
But first, you have to stop believing the myths about money that have been pushed on you over the years. Myths that are costing you happiness and fulfillment.
Here are a few of them:
1. "I’m not meant to have money..."
Maybe you grew up poor. Maybe you think you need to settle for your lot in a life of poverty -- despite your drive and your great ideas.
Nothing could be further from the truth. You deserve to have money as much as anybody else.
But it won’t happen until you start believing it.
If you change the way you feel about deserving wealth, you change everything.
2. "If I make more, I’ll just spend it..."
Living below your means shouldn’t be looked at as unnecessarily painful. It's smart. But not a reason to aspire to less.
It’s human nature to want to spend money because you have it. But just like dieting and exercising, discipline will make you a superstar. Having a goal and saving and investing towards it is life-changing.
Just because you make it, doesn’t mean you will go and spend it. You shouldn't. And won't.
3. "I don’t need money to be happy..."
A landmark study from Princeton University conducted by economist Angus Deaton and psychologist Daniel Kahneman found out that "The lower a person's annual income falls below $75,000, the unhappier he or she feels."
Sure, you don’t need money to be happy. But you do need it to pay your rent or mortgage.
You need it to gas up your car. You need it to start a business. And when something goes wrong with any one of the things listed above, you will need money to fix it.
In fact, it's guaranteed to make your entire life more difficult. Unnecessarily.
Having more money is like having a well-stocked toolbox. If something breaks you have the device to repair it.
It provides you the freedom to do whatever you want without the constraints of time or responsibility.
4. "You have to be rich to invest..."
Actually, you don’t have to be rich to invest, but you do have to invest if you want to get rich.
While it is true that the bigger, more popular brokerages expect no less than $100,000 to work with you, the internet has changed all that.
Online investment brokerages like Betterment offer automatic investment services for as little as $100. And most banks offer you the ability to "save the change" when you make a purchase.
When you put your saving and investing on auto-pilot you open up countless new options for your future.
5. "Only invest in what you know..."
Familiarity does not guarantee return-on-investment.
It can give you comfort when you feel like you understand the industry you have chosen to invest in, but that doesn’t always make it a sound investment.
You need diversity in your portfolio. Especially when what you know is facing an economic downturn.
6. "All debt is bad debt..."
From the outside looking in, debt is never a good thing. But that is not always entirely true.
When you increase your debt in order to increase your future opportunities, that’s good debt.
That's a smart investment most of the time.
For instance, taking out a student loan to get specific training that can help you hone skills to make your future more promising -- that's a usually a home run.
Debt becomes a problem when you are trying to dig yourself out of a credit card hole while continuing to buy things on credit.
7. "I should cut up my credit cards..."
Your credit cards aren't the problem. Your lack of self-control is.
If you don’t carry a balance over each month and you pay that off every time you get a bill, having a source of credit will actually help you.
But if you know you can’t bring your balance down to zero when the bill is due, you should reconsider making the purchase at all.
The perks of a credit card include sign up bonuses, cash back offers and even earning points for travel. And who doesn’t love free travel?
So, if you can use your credit cards responsibly, you can put your scissors away.
8. "I don’t make enough to save..."
It’s not that you don’t make enough money to save. The ugly truth is that you buy things you don’t need.
A $5 cup of coffee every day.
A $10 lunch at least once a week.
A $100 cable package each month.
Find that one little luxury or vice and give it up.
Better yet, do the math yourself and see how much you’d save in a year if you stopped splurging on one little item. And then decide for yourself if it’s worth it.
9. "I don’t need an emergency fund if I have a credit card..."
You always, always, always need an emergency fund.
It doesn’t matter how high the limit is on your credit card. If you use it, you have to pay it back. With interest.
You’re going to want to save for that rainy day.
Even if you end up using your credit card to get the perks or the points, it will not benefit you unless you have enough in your slush fund to pay it all off at once.
10. "A home is a good investment..."
If you are going to rent out your home, then maybe a home is a good investment. Mostly because you will be making money from it.
If you have a family and you want the assurance of knowing where you will raise the children, then, that too, can be a good investment.
But, if you are single or even married without kids, if you travel for work a lot, or aren’t a handy person, then owning a home can actually turn into a money trap.
When you add the extra expenses that come with homeownership, like HOA fees and general maintenance, not to mention your monthly mortgage and homeowners insurance, you could finance a vacation if you chose to live in an apartment instead.
In fact, according to Andrew Henderson when you actually do the math, home ownership is quite possibly the worst investment you could ever make.
- Average home price in the United States ≈ $355,000
- Required 20% downpayment = $71,000
- Loan balance = $284,000
- Current interest rate for a 30-year fixed mortgage = 3.5%
- Monthly payment ≈ $1,700
- Total principal and interest paid by the end of the mortgage: $612,000 (or roughly $260,000 more than the original amount)
- Average property tax rate is 1.15% ≈ $122,500 over 30 years
- Maintenance (for upkeep, repairs, etc.) at 1% per year = $3,550 a year or $106,500 over 30 years
Which begs an important series of questions: What would you do with the extra $260,000 you would be saving in interest payments? What would you do with the extra $3,550 per year saved in home repairs? And how about that $122,500 you would save over the years by eliminating your property tax?
Live smart. Make sure you aren't just spending money to buy a house because someone else told you it was smart.
11. "If I can get it on sale, it’s totally worth it..."
Buying something you don’t need just because it’s on sale doesn’t negate the fact that you still don’t need it. A sale is only as good as the usefulness of the item.
If you’ve been looking for new scrubs for work and you find some on sale, that’s totally worth it. You needed them. You were going to buy them anyway. You saved money.
Buying scrubs because they are on sale even though you don’t work at a hospital, don’t have a job that requires scrubs, or know anybody that does is a terrible idea. It doesn’t matter how cute the kittens on the shirt were.
That rule applies to purchases big and small. If you don’t need it, the sale doesn’t matter. Keep your money in your wallet.
It’s these myths about money that leave you tossing and turning at night and wondering why you are still living paycheck to paycheck.
Whether you’ve always had money or never had money, the rules are the same.
Save where you can. Save as much as you can. Spend less. Invest more. And make sound choices.
If you don’t know where to start, look for a professional financial planner. If you aren’t quite ready for that, check your circle of friends. Talk to the one who orders water at dinner, but manages to go on weeks-long vacation every year.
That person probably has it all together. Just like you can too, if you stop buying into these myths about money.