Friday, November 9, 2018
10 Money Lies We Tell Ourselves
Money lies are all around us. The powers that be tell them to us, mainly to separate us from our money. Sadly, we also tell them to ourselves. The second kind is the most destructive as it leads to poor money management. We need to realize when we are believing a money lie and reverse that trend. Today I am going to give you my 10 most popular money lies that we tell ourselves. Hopefully, you can nip the ones you believe in the butt before it’s too late.
1) The bank is my friend
Now if I ask everyone of you point blank if you think the bank is your friend, you would say hell no. Here is the problem, do our actions match our beliefs? Chances are they don’t. I meet people daily who speak of how they got bad information from someone at the bank. I also meet people who go in wanting to open a savings account and instead open a line of credit. We all need to understand that the bank makes money off us whether we are in debt or are wealthy. Therefore, everyone is a mark to them. We all need a bank account, but we don’t all need to have all our products with the bank. I have seen banks kick down to the retail level 80-year-old lifelong clients. Imagine how that must feel for that loyal old lady.
2) My workplace pension is enough
This one can be very damaging if it goes sideways. There are several problems with believing this money lie. First, in order to have a workplace pension, we must work for a place that has one. Seems simple right? What if they downsize? What if you get sick/injured/killed? What if the company goes belly up? Local bars on a Friday night are full of stories of people who lost everything, depending on their workplace pension. I can truly say I would rather not have one. The reason is also simple, it means I will depend on nothing but my own hard work and dedication. One final reason for a workplace pension being not all it’s cracked up to be is that it isn’t liquid. You are chained to it every month in retirement, waiting for the next deposit to come in. I personally like freedom and don’t want to wait for the first of the month to have money.
3) The government will be there for you when you retire
We all know that the government doesn’t care much for us, and yet many of us believe government retirement benefits will be enough to live off when we retire. The truth of the matter is that the system is so bogged down with bureaucracy that it cannot sustain helping individuals out. What you get when you retire from the government is a subsistence living. You won’t starve, but only if you shop at the discount stores. Government retirement benefits were meant to be a subsidy for our own retirement savings. Make sure you understand that, or you could be in for a world of despair when you are older.
4) Credit cards are good
This falls into the “we know its bad for us, but our actions say otherwise,” category. Loyalty points, special balance transfer rates, airmiles, cash back, blah, blah, blah. It’s all a bunch of crap to get us into debt. Now I will be honest, I like my credit card and I use it all the time. The reason I do that is not because of the airmiles or that I even need to. I do that because it is part of my cashflow system. I don’t carry a balance, but I also don’t think my “reward points” amount to anything substantial. Gurus like my main man Dave Ramsey shun credit cards. He is right, but I look at it a little different. Credit cards to me are like alcohol in the house. You don’t keep it there if you have an alcoholic. You also don’t have a credit card if you can’t be trusted to not get into debt.
5) A line of credit is an emergency fund
I hear this one a lot and it troubles me greatly. An emergency fund by definition is money you can easily access if something goes wrong. Now you can access your credit cards and lines of credit easily, but that is not your money. If you owe it back after the transaction, that is not an emergency fund. This lie is believed for two reasons. First, banks and credit card companies want us to believe this, so we don’t save money and therefore need these when disaster strikes. They then make interest off our bad choices. I also think that many of us believe the lie because believing that lie is easier than saving money for an emergency fund. It is the same as saying you don’t have time to work out. Make time for that and put in the effort to save up an emergency fund. Or believe the lie and pay heavy interest, the choices are simple.
6) Your employer cares about you
Now, this sounds a bit cold, so please hear me out. I am sure there are many great bosses out there who truly care about their employees. What we need to understand is that they only care about you as much as they can. Do they care about you more than the business itself? No, of course not. Should you want them to care about any individual employee more than the business itself? No, that puts everyone at risk. What I am getting at is that employment is an agreement between you and the employer, nothing more. Now you might be friends and really enjoy your job, but when push comes to shove it is the employer that will make the tough decisions. That may include letting you go. That also may include not giving you a raise, or cutting back benefits, or cutting back hours. They will do what they must do, and rightfully so. You need to do what you have to do. We develop emotional attachments to things that are just a business transaction. Care about your job, and care about the work you do, but always understand the situation.
7) A home is a good investment
I have been hearing this one a lot lately. I think it is important to understand what an investment is. An investment is something you put money into with the opportunity of it growing over a period. Sounds like a home, right? Wrong. The growth of the value of your home does not outpace the cost of borrowing to service your mortgage. Also, homes must be maintained for them to grow in value or just plainly exist. How many other investments do you have to add money to keep them going? Also, and most importantly, an investment’s value is only realized when you sell the investment. When you sell your home you now have the money you put into it back, plus the growth. You do however have to live somewhere, so you must buy a different home, or rent. A home should be looked at as one of many different housing options. It is one of the better options, but it is not an investment. What a home is to its owner is a large bank account. You fill up the account, and one day you can empty it. Oh yeah, and you get to live there.
8) Insurance is a waste of money
Yes of course it is, until you need it. I hear a lot for people how life insurance is a waste of money. If you live, no one gets anything. Well, living is pretty good, I think, right? So that’s something. But the point of life insurance is not for the person that buys it, it is for the people left behind. Your life has value to it, the value you bring to those around you. You might not think so, but that value has dollars associated with it. While it is impossible to determine the emotional value you have, the monetary value is quite simple to calculate. The same goes for disability insurance, or critical illness, or even health insurance. I never hear complaints about homeowner’s insurance, when the odds of you claiming on that are so small that it is essentially free money for the insurance company. Understand what you have, and why you have it. And for god’s sake, get some life insurance.
9) There is good debt and bad debt
There is no good debt, only bad debt, and really bad debt. Owing anyone money sucks. Debt should have a purpose and while the purpose might be good, buying a home, going to school, etc., having the debt is not good. Saying there is good debt and bad debt is the lender’s way of telling you to get into debt. Anything that takes your cashflow on a monthly basis is not good. Now the outcome when it is said and done might be good, but it is always a burden to bear. Don’t get caught up in that nonsense.
10) Having a job is enough
Simply having a job is not enough these days. While it might be enough to get by, you won’t get ahead. You need to work hard, and practice good money management. Many of us fall into the trap of thinking that our good jobs will be enough to have an amazing life. This sort of mentality leads to keeping up with Joneses, and then debt accumulates. We should always be striving to get ahead, while keeping our expenses low. The mentality of “Having a job is enough,” is a complacent attitude. This will lead us to live a mediocre life. No one wants that, so don’t be satisfied with just having a job.
Money lies are meant to keep us down. We can overcome them by not falling for them and recognizing them when we see them. While you can’t stop others from telling you these money lies, you can stop yourself from believing them. Stay vigilant and get your money right.
“The most common lie is that which one lies to himself; lying to others is relatively an exception.” – Friedrich Nietzsche
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