6 Common Money Beliefs That Aren’t True
Hi everyone, thank you for coming back to my blog. I hope you found my last blog interesting and useful, where I covered ‘9 Facts About UK Inheritance Tax Exemptions’.
In today’s blog I’m going to cover the money beliefs we often have, which aren’t often true. It’s not the things you don’t know, but rather the incorrect things you believe, that cause many of the real challenges in life and this goes for money too. A few errors in your thinking can be a detriment to your finances. Enhancing your understanding of money and personal finances is an effective way to get on the path to prosperity.
Avoid the believing these common money myths:
1. Income equals wealth
People that make more have a tendency to spend more. Lottery winners are notorious for losing everything. Many of the families that earn over £1 million per year manage to outspend their income. You can earn a very high income and still live pay cheque to pay cheque.
· Wealth is what’s left over after you’re done spending. The more money you’re able to invest in appreciating and income-producing assets, the more you can expect your wealth to grow. A high income provides opportunity. It doesn’t provide a guarantee.
2. More money equals more happiness
Money has nothing to do with happiness as studies have consistently shown that more income results in greater levels of happiness to a point. The break-even mark appears to be £75,000 per year.
· If you’re earning less than £75,000, you can expect your feelings of happiness to increase with a greater income.
· If you’re already earning that much or more, more money isn’t going to make you feel any better.
3. Wills are for rich people only
Everyone with children or assets needs a will, unless you want the courts to decide who will raise your children and receive your assets, you need a will.
A simple will is only a few hundreds of pounds and you might even be able to do it yourself for less.
4. Quality and price go hand-in-hand
There are many examples of this statement being false. Generic drugs are identical to the brand name version and cost much less. Companies price goods and services in order to maximise their profits. That means the perceived value affects pricing, not the actual value.
· Many items are priced to accommodate expensive marketing campaigns. The Beats headphones so popular with teenagers are considered by experts to be only worth half the common retail price. In this case, you’re not paying extra for higher quality.
5. An index fund never wins
Over time, index funds outperform the majority of managed funds. More often than not, the lower expenses and turnover rate of an index fund are more important than a professional stock-picker.
Take advantage of the ability to match market returns for very little expense. I personally use Vanguard because their fees are really low, which allows you to take home more of your returns from your investments over the long term.
6. You should never have a credit card
Credit cards are a wonderful invention if used properly. However, credit cards also provide a means to spend money you don’t have. This can be a challenge or a godsend, depending on the circumstances.
Credit cards can also help (or damage) your credit score.
Here are just a few common examples of money beliefs that aren’t true and can limit your financial growth if you believed them. Consider all of your money beliefs and question if they might be incorrect, too. Having accurate beliefs enhances decision-making and results. Avoid buying into the myths.
Until next time, stay safe and please share this blog with anyone who might find it useful. Thank you.
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