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How Myths About Money Keep You From Living a Better Life

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Bookshelves are full of bright headlines about millions, and many coaches promise to reveal super secrets at their lectures. But often, it all comes down to this advice: give up coffee, stop playing at a live casino online, even though you enjoy it, and save for an apartment; visualize wealth and get it, don’t be afraid to invest – it’s easy!

Let’s sort out which tips really help you get rich and which only confuse you.

The Latte Factor

David Bach gave advice about saving on small things and became famous. There is a grain of truth in that, but only a grain. Sometimes it’s better to cut back on small expenses because if there are a lot of them, it’s already a big expense. Moreover, the longer the habit lives, the bigger the hole in your pocket. But saving on small things won’t help you accumulate a large sum and live impoverished. You need to earn more and spend wisely, not less.

Often those who give advice along the lines of the “Latte Factor” forget that in the book, it works in conjunction with investing at 11% for 40 years. He didn’t just give up coffee; he also invested very successfully and only then saved up. But Bach has a problem with the calculations. The stock market is constantly changing, income is affected by inflation, and in general, such a percentage is too much. For example, we see a drop in 2021 in the S&P 500 Index, which is calculated on the 505 stocks of the 500 largest-cap companies.

How to Do It Right

Keep an eye on petty spending and control your consumption. Paid subscriptions, for example. Make a list and check it monthly so you can turn off the ones you don’t use now. Or make a habit of turning off auto-renewals right away. Then there are all sorts of unnoticed expenses.

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For coffee drinkers, there’s a cost-optimized solution. Buy a coffee machine if you get coffee in coffee houses often. It will pay for itself in about six months to a year.

Dedicated Financial Thinking

You need to think not about how money energy flows into your life on its own but about how to increase your income and save properly. Of course, if the connection with the cosmos helps you to tune in to hard work and self-development – you’re welcome. But the main thing isn’t to forget that only actions lead to results.

There is also a myth about the thinking of the rich. According to its adherents, you have to live as if you were already a millionaire: buy expensive things, take only a cab, live in a big apartment, and so on. In general, to attract success to yourself, even if it isn’t affordable. There is a tiny grain of truth in this approach, and perhaps it will motivate you to be more active at work, expand your circle of acquaintances, and through it, move up the career ladder. But splurging isn’t the mindset of the rich. Rich people always make their money work; otherwise, the chances of becoming poor are high.

Financial thinking is only useful when it comes to financial literacy. And it’s better to develop it through scholarly literature rather than popular fiction. As we discussed above, the advice is often questionable, and the authors themselves are ambiguous. For example, Napoleon Hill was accused of fraud, and Robert Kiyosaki was bankrupt and hid his real income.

Among your acquaintances, you are likely to find people who, almost without diving into the subject, earn on the stock exchange. Sometimes you are lucky, but life is unpredictable, and any changes, e.g., in politics, can leave you not only without savings but also with debts.

How to Do It Right

To manage money effectively, you need to understand how it works. Look for reputable authors with degrees or watch free classes from universities.

If you want to master the financial markets, try going to a qualified advisor. A specialist will analyze your income, help you distribute it comfortably, and assemble portfolios. Remember that the consultant should have a good reputation and achievements. Don’t be fooled by scammers who promise you the golden mountain for three cents.

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If you study investing on your own, don’t invest all the money. Leave yourself a safety cushion for at least three months. Sometimes the unpredictable happens: illness, job loss – you need to be covered.

Stocks and Reckless Consumption

Rash consumption due to stress, poor man’s thinking, and other traps of the mind causes us to make mistakes. You can read more about this in special books.

Basic mistakes:

  • Recruiting the cheap stuff. Let’s take clothes as an example. Sometimes it’s better to buy something inexpensive and wear it a few times, but sometimes this approach becomes destructive. A person buys low-quality goods, which quickly wear out, and accumulate them. The result is a closet full of clothes, but there is nothing to wear because everything looks bad, doesn’t match each other, and has lost relevance. And if you add up the amount of everything that was bought cheaply, it comes out to just the price of high-quality and more expensive things that you can wear many times.
  • The opposite situation: a person buys something expensive, thinking that this is the only way to get quality, overlooking the cheaper counterparts. If you don’t really care about brands, you shouldn’t overpay for them. More often than not, from a certain level of price, extra is what you pay for, not the special quality. Obviously, this is not because of some incredible properties of the thing.
  • Ignore promotions or always fall for them. Everything is clear with the first problem: a person thinks that stocks are a scam, so there is no point in following them. Sometimes this is the case, but often a stock item can be affordable. So it’s better not to miss the opportunity to save on sales with the help of loyalty programs.

How to Do It Right

You need the golden mean, a clear understanding of your needs, an assessment of opportunities, and discipline.

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Look for items that are valued for money. Watch for promotions, but don’t take the red price tag as an instant buy signal. These are all obvious tips, but you have to develop habits to live by them. Over time, you will definitely succeed.

Total Economy and Strict Discipline

There is a misconception that you can save a decent amount of money only if you limit yourself in all expenses, count every penny, and spend only when there are no other ways to solve the problem.

But what happens if you eat bad food, wear ugly and low-quality things, and live in Spartan conditions? Poor health, bad moods, and insecurity. Such a life takes energy and time: here, you are badly sleeping on an uncomfortable pillow or are always busy fixing some nonsense in the apartment because much is saved on repairs.

How to Do It Right

Sometimes you have to go to extremes and significantly reduce spending for the sake of global goals. But it’s important not to turn into an eternally unhappy person – after all, life is one. And some expenditures should even be increased, for instance, for quality education. Because the more knowledge and experience you have, the higher your salary will be.

Sometimes it’s better to spend money and make your life easier than to look for other ways to solve a problem, to sacrifice and suffer. For example, if you have a small child, sometimes you can leave him with a nanny. That way, you will have time to go to the gym, study, or take a trivial vacation. This will help you preserve your health and nervous system, and that’s worth a lot.

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