False Beliefs About Money

It’s easy to sabotage your own success when it comes to funding your financial future. Between ever-increasing bills, expenses and the buy-now culture in western civilization, it can be hard to put money aside for things like an emergency fund and retirement savings.

However, there is some good news. Saving and investing doesn’t have to be difficult and complicated. In fact, if you can change some of your beliefs about money, you’ll find yourself on the path to financial stability and success. Here’s a look at some of the most common self-defeating financial beliefs and how you can overcome them and achieve your financial goals and dreams.

You Don’t Have Any Extra Money

This is probably the most common excuse for not saving money. And for many families, it can certainly seem as if there isn’t extra money for things like savings, investments or paying off debt.

A simple rethinking of your finances can help you get beyond this hurdle. Instead of thinking of saving and investment as what you do with your money, make it a priority. As soon as you get your paycheck, take 5%, 10% or even 20% and deposit it directly to your savings and/or investments. Then, use the money that is left over for your monthly bills, expenses and discretionary spending.

This strategy is known as “paying yourself first,” and it’s an outstanding way to always make sure you have the extra money you need to save and invest.

Only Wealthy People Can Invest

Some people have the belief that investing is only for the wealthy and that the cards are stacked against them. But in reality, investing has never been more open to the average working-class family.

Between the no-commission investment houses, the financial news media, the rise of low-cost robo-advisors and the general availability of information on the internet, investing is no longer a “members-only” club. Many investment accounts and mutual funds have minimums of $1,000, $500 or less, offering access to nearly everyone.

The truth is that success in saving and investing comes from consistency, not from being wealthy to begin with.

Next time you think investing is just for rich people, remember this — if you invest $400 per month at a 7.5% average annual rate of return starting at age 25, you’ll have over $1.2 million at age 65.

Investing is Expensive

Some investments can be expensive. However, the simplest and the best investments are those that don’t cost much money at all.

Billionaire Warren Buffet has long encouraged everyday investors to simply use an S&P 500 Index Fund for the bulk of their investments. These types of funds track the daily movement of the U.S. stock market and have incredibly low expenses. The iShares Core S&P 500 ETF (IVV), for example, has an expense ratio of just 0.03% per year. That means for every $1,000 you invest, the fund only charges 30 cents per year!

Better yet, most big-name online brokerages, from Charles Schwab and Fidelity to Merrill Lynch and E-Trade, charge investors $0 commission on most equity and ETF trades. The bottom line is that there are plenty of ways to invest at an exceedingly low cost.

Making Minimum Payments Each Month on Your Credit Card Balance is All You Have to Do

When you get your credit card bill every month and make the minimum payment, you might feel like you are being responsible by paying your bills. However, if you only pay the minimum payment on what you owe, your debt will take months or even years longer to pay off, and the additional interest you will pay can be insanely high.

While you may feel like making payments beyond the minimum on your credit card debt is flushing that money down the drain. In reality, it’s likely one of the best investments you can possibly make.

Most credit cards charge double-digit interest rates of 15% or more. When you pay that debt off, it’s like you are earning that same double-digit return on the money you use to pay it off. The sooner you can pay off your high-cost debt, the faster you will be on the road to financial stability and prosperity.

Believing You Have To Keep Up With the Joneses

Another aspect of human nature that sabotages your financial success is the irresistible impulse to “keep up with the Joneses.” While not every act in your financial life may be a response to what your friends, family and neighbors are up to, the fact of the matter is that people tend to move in similar socioeconomic circles. They tend to match the spending habits and behaviors of those they hang around with.

While you may not feel the need to buy a new Mercedes to “impress” anyone. But, if everyone on your block and in your circle of friends drives a luxury car, it’s hard to drive a 15-year-old car … even though it looks and runs good.

If you are struggling to pay your bills and never seem to have enough money to save, you shouldn’t feel the compulsive need to “keep up with the Joneses.”

Put together a financial plan that works for you and stick to it. Otherwise, you’ll always find yourself running to keep up financially … year after year.


Creative Commons License
This work is licensed under a Creative Commons
Attribution 4.0 International License.

Published by W. M. Brown

I am a retired U.S. expat living in Ecuador. I was a business owner for 32 years before retiring in 2012.

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