Do you believe you’re being honest with yourself regarding money? We may believe we understand our financial situation. However, our opinions often eclipse the facts.
Our desires, aspirations, and anxieties may sway the scales away from reality. This allows us to think anything we want about money — and it may happen without our even recognizing it.
The “money falsehoods” we tell ourselves may alter how we think and behave about money. And since most of us seldom discuss money with our friends and family, the money myths we tell ourselves persist. This may lock us into harmful assumptions and encourage bad financial practices.
But, no matter how many money lies we tell ourselves, it’s never too late to correct the record. Let’s take a look at some of the most popular money falsehoods that we’ve all bought into – and the reality behind them.
1. My Credit Score Is Only Important When I’m Making A Large Purchase
When you make a large purchase or borrow money, your credit score is important. However, it is also important when looking for a new location to reside or applying for a new job. It even matters when you buy a new mobile phone or have your utilities switched on.
- You must pay all of your bills on time. The most important component in establishing your score is your payment history.
- Maintain the lowest feasible credit use rate. Credit usage is defined as the amount of credit used divided by the amount of credit available.
- At least once a year, request a free copy of your credit report.
Want to start developing good financial habits and stop lying to yourself about money? First you need to deal with unforeseen expenses that cannot be postponed, instead of looking where to borrow money instantly, and then, planning your finances, save money and close the loan.
2. I Deserve It, Regardless of My Financial Situation
These are just a few of the justifications we use to persuade ourselves that it’s okay to acquire something.
Whatever legs this money lie sits on, it’s frequently employed to assuage the sting of pricey purchases — ones that aren’t really necessary — and possibly products we know we don’t really need.
3. I Can Put Off Retirement Planning Till I’m Older
No matter how young you are, retirement will be here before you realize it. Because compound interest earns interest on interest, the sooner you start, the more your money will be worth.
Learn about the power of compound interest and how to use it in your life. Assume you invest $300 every month, make an average of 7% on your investment, and aim to retire at the age of 67.
- If you start at the age of 21, the $300 a month investment will be worth $1,104,306 when you retire.
- When you reach the age of 35, the same $300 each month will be worth $396,785.
- When you retire at the age of 49, your investment will be worth $122,397.
4. I Have Great Financial Determination
When confronted with temptation, most of us convince ourselves that we are adept at avoiding it. But, when was the last time you opted not to purchase something you really desired? When was the last time you bought anything on the spur of the moment?
The typical American spends several hundred dollars every month on impulsive purchases.
Furthermore, many of us who purchase using credit cards are probably spending more than we think. The typical credit card buyer spends around 10% more than they would with cash. Not to mention the expense of interest if the amount is not paid in full.
5. Next Year, I’ll Start Saving
There is never a good moment to save money. Perhaps you have bills to pay, items to purchase, or loved ones that need money. We persuade ourselves that we’ll start saving next year since we’ll have more money.
The difficulty is that next year will bring the same, if not greater, financial obligations and temptations. And saving money, even if just a little at a time, provides us with a financial buffer against the unexpected.
Begin slowly. Put it in a savings account and pretend it’s not there, even if it’s just 2% of your salary.
6. I Have Plenty of Time to Make Financial Plans for the Future
When we gaze 10, 20, or even more years ahead, the future might appear quite distant. When we believe we have a lot of time between now and then, it’s simple to find reasons not to prepare or save for it.
This money deception serves as an excuse for procrastination. It’s the reasoning we employ when we’re having trouble dealing with bad thoughts or concerns regarding our financial destiny. And it causes us to ignore the years of interest that we miss out on when we don’t plan.
Only 30% of American households have a long-term financial plan. The rest do not have a clear plan and experience periodic financial problems. You need to stop pretending that everything is fine and take your finances seriously.
7. Debt May Be Both Beneficial And Harmful
We have a tendency to attribute moral worth to debt, seeing mortgages and school loans as “good” debt and credit card debt as “evil.”
This money illusion causes us to think incorrectly about debt. Every loan has a cost, and it’s vital to understand how each one impacts our present and future selves.
Instead of concentrating on whether the debt is “good” or “bad,” consider the entire cost of interest over time (which is typically larger than you believe) and if the loan is really assisting you in reaching your objectives.
8. When I Have Money, I’ll Be Happy
Goals and goal figures for wages, savings, and budgeting are excellent. But if you assume that some magical number will turn on the happy switch for you, think again.
We invest too much emotion into a single figure when we tell ourselves this money lie. And we may be setting ourselves up for disappointment if we never receive money, or if we do obtain money and find it doesn’t make us as happy as we expected.
Consider how you can be deceiving yourself about money. Whatever your financial circumstances, there are money falsehoods you should avoid telling yourself because they may be preventing you from achieving financial success, happiness, and peace of mind. Set financial priorities and objectives. They will hold you accountable to your money and to yourself.