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Home > 16 Lies We Believe About Money - Part 3
 

16 Lies We Believe About Money - Part 3

July 26th, 2011 at 03:15 pm




Throughout your life you’ve heard millions of messages about money, debt, credit, savings, retirement and spending. Most of them came from the advertising industry; some may have come from teachers and mentors. But perhaps your greatest source of financial influence came by observing your parents’ financial habits. For most of us, that’s not good news. We’ve all been sold a long list of financial lies. But it’s time to wake up to the truth and start making a better choice.

In parts 1 and 2 of this blog post series, we started the journey toward financial truth. Now to wrap up the series, I present:


16 Lies We Believe About Money

(part 3 of 3)




11. Everyone Should Aim to Save 10 Percent of Their Income.
“My parents always said that 10% of my paycheck needs to go straight in the bank.”

Why It’s Bogus: It may be a good idea to put 10% of your income into savings. But that percentage will vary (sometimes drastically) depending on your life-stage and where you are in your financial journey. You may need to save much more than 10% when you’re building up your $1,000 beginner Emergency Fund. Once you’re debt free, you need to build your Emergency Fund up to cover 3-6 months of your living expenses as fast as possible. That too may require you to save much more than 10%. If you’re on the verge of needing to replace a to vehicle, planning have a baby soon, going back to college, starting a business or saving for a down payment on a house, you most definitely need to be saving much more than 10% of your income.


12. Putting Money Into a 401(k) Is Always The Best Investment
“I just need to invest in my company’s 401(k) and I’ll be set at retirement.”

Why It’s Bogus: Another “usually”…it’s usually a good idea to invest for retirement inside of your company’s 401(k) plan. It’s almost always a wise choice to invest at least up to the amount your company will match you. However, most 401(k) plans have very limited, and often under-performing, investment options. If they don’t offer a match, it would be a better idea to invest in a Roth-IRA which gives you the same type of tax benefits, but with more investment options. Do your research and get professional guidance. Don’t flippantly set up a mis-allocated 401(k) plan and think it was automatically a good decision. It’s your money and no one will care about your money as much as you!


13. Money Is The Root of All Evil
“It says in the Bible that money is the root of all evil. People lie, cheat, steal and kill for money….it’s evil.”

Why It’s Bogus: I’m not here to preach, but let’s be clear…the Bible says no such thing! The often misquoted verse actually says that “the love of money is the root of all kinds of evil” (1 Tim 6:10). It is dangerous to love money. Greed causes people to do some horrible things. But money itself is neutral…it’s not good or evil. It’s just paper; it does what you tell it to. We sponsor a child in Africa with money, we help fund a non-profit with money. Money feeds the homeless, treats disease, cures addiction and provides shelter, clothing and education. Because of the good that money can accomplish, good people (including you) need to concern themselves with making money and accumulating wealth so we can do some good with it!


14. It’s All Their Fault
“I just can’t get ahead because of…the government…my parents’ bad example…bad luck…the crooked bank…”

Why It’s Bogus: Most people, myself included, are pre-programmed to shift blame and resist taking responsibility. But the truth is only you are responsible for your financial situation. The bank didn’t trick you when they jacked up your credit card rate. It’s not the mortgage company’s fault that you signed up for a mortgage you couldn’t really afford. Stop playing the blame game. We’ve ALL made dumb financial moves. But taking responsibility for your actions and learning from your mistakes is incredibly liberating! And when you do, you’re able to take the steps toward a solution. You can’t change the past, but you can take responsibility for creating the future you want!


15. If I just try harder, I can save more, keep a budget and pay off my debt.
“I just need to set my mind to it and exert my will-power.”

Why It’s Bogus: Let me have a Dr. Phil moment here and ask, “How’s that workin’ for ya?” Will power is great for launching off, but it’s almost never sustainable! If it was, we’d all be skinny and we’d all be rich. Just saying you want to do something and “trying harder” is a great plan for failure. Financial success does require some will-power and it does require you to try harder. But more importantly, it requires you to make some tough decisions, set some specific (written) goals, to develop a systematic plan, to seek accountability and to surround yourself with people who are moving in the direction you want to go. Learning to manage your money and getting out of debt is hard work. But if you have a solid plan, accountability and support, you can absolutely do it!


16. But Clint…you just don’t understand myyyyy situation…
(note the *whiny* emphasis on the “my”)
“You just don’t understand, I can’t….I don’t….”

Why It’s Bogus: In the words of Tyler Durden, “You are not a beautiful and unique snowflake” (us guys will recognize this from Fight Club). I’m not trying to be insulting in anyway. But I want to acknowledge that we are ALL in the same boat….and your situation…it’s probably not that unique. And you definitely shouldn’t let it hold you back! There are a million reasons NOT to start a budget…NOT to begin paying off debt…NOT to save an emergency fund…NOT to start planning for retirement… But you work too hard and make too much money to live your life broke and in debt! You, your family and your future are too important to make excuses. So unless your family is vastly wealthy, it’s time to start taking control of your finances…today…right now…get to it!


If any of these money lies have been preventing you from living the life you want, I want you to know there’s no better time than now to change course and start achieving financial freedom and peace!


This is your money and your life…take control!


Yours In Freedom,

Clint



***Join the conversation…what will you do immediately to begin taking control of your money and life?



Debt Free

3 Responses to “16 Lies We Believe About Money - Part 3”

  1. Miz Pat Says:

    ROTH Ira's don't have the same tax advantage as a 401K. I save about $90 every two weeks in taxes. The advantage to the Roth is hopefully that its not as risky and you have already paid taxes on it so you don't pay taxes on that money when you retire.

  2. clintdavis Says:

    You are right Miz Pat. The tax advantages are not the SAME. However, both retirement plans have significant tax advantages. Roth-IRA's provide better tax advantages due to the tax-free growth and a wider range of investment options, generally speaking.

    If you have a company match program for your 401K, it's wise to take advantage of that free money. If you are ineligible for a ROTH-IRA due to income limits, a 401K is also a great option.

    However, in the absence of a company match for your 401K, the ROTH-IRA is generally a much more attractive retirement option.

    i try to keep my posts to no more than 1,100 words and that often means that I cannot fully explain every idea or concept. So this article is obviously not an in-depth explanation of the two retirement vehicles. The main point of the article is to encourage individuals to do their research and make informed decisions about how they handle their money, as opposed to just "buying" the generalized conventional "wisdom" floating around. But thank you for bringing up in more detail some of the differences between the two.

    Thanks for your comment.

  3. Jerry Says:

    That misquote about the root of evil always drives me crazy, as well! Some of the most wonderful, good, and faithful people I have ever met have been people of significant financial means (and, alternatively, also some of the very poor). It is the LOVE of money that is dangerous. If you view money as a tool for doing good, then it leads to a better world and you have some pretty decent insurance of happiness. If you view money as the end-all-be-all, you are probably in for a lonely and miserable life (with lots of fancy toys). Great post, indeed!
    Jerry

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