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It’s an inconvenient truth: money is confusing. When it comes to complicated matters like refinancing student loans, planning for retirement, or getting life insurance, it’s hard to know how to separate good advice from financial lies. I feel this way, and I write about money to support my family!
And the worst part of it all is that the misinformation floating around the web and office break rooms everywhere is only getting worse. I’ve noticed a consistent problem:
There is a prevailing sense among many people that their situation is somehow different, special, or daunting, and that these specific circumstances prevent them from paying off debt, building emergency savings, buying a home, or investing for retirement. For these people, whining and complaining drive the self-pity train toward mediocrity. They have bought the financial lies.
4 Common and Ridiciulous Financial Lies
Over the years, I have heard a number of financial lies. I imagine each one starts innocently enough. But over time, the damage adds up. And as misinformation is repeated over and over, louder and louder, many people buy into the myths. Then they join in and spread the nonsense themselves. In no particular order, here is a collection of common financial lies:
1. The little guy never gets ahead.
I often wonder who started this myth and why people continue to believe it. It is ironic because so many underdog stories prove otherwise.
For example, consider the life of businessman Tom Gores. Born in Israel, Gores moved to the United States prior to turning five years old. He grew up playing playing football, basketball and baseball at Genesee High School in Genesee, Michigan. He stocked shelves at his father’s grocery story in nearby Flint, graduated high school in 1982, and attend Michigan State University, where he earned a Bachelor of Science degree in Construction Management.
Gores did not experience a privileged upbringing by any stretch of the imagination.
Today, Gores’ net worth is $3.3 billion. The founder of Platinum Equity and majority owner of the NBA’s Detroit Pistons, Gores is a self-made man. His high school coaches credit his business successes to his competitiveness, perseverance, and decision-making. None of them expected the quiet-but-talented athlete from a town of 24,000 people to follow the path Gores has blazed, but the little guy did it.
2. I’ll always have debt of some kind. It is a necessary tool for most people.
My head nearly explodes every time I hear this or a similar variation. Yes, debt is a tool, and I do believe it can be used wisely in select situations. But to insinuate that it is necessary hints at a larger problem: Americans are drowning in consumer debt.
I won’t lie and claim that debt has not helped me. Debt has allowed me to earn two college degrees and buy a house. However, these experiences would have been unquestionably sweeter had debt not been part of the equation.
The truth is that getting out of my student loan debt was one of the hardest things my wife and I have ever had to do. It took straight-up hustle and sacrifice. And there were absolutely ZERO guarantees borrowing money for college would be worth it in end.
3. I’ll always have a car payment/car lease because I can’t afford a nice car without one.
This financial lie makes my blood boil. The truth is that moving up in vehicle is a process which need not involve debt nor take long if you are willing to be patient for a short time. Mathematically-speaking, a car payment is costly and a car lease is usually the worst method of operating a vehicle.
Let’s suppose you currently own a $2,000 beater car. While it is likely to depreciate over the next 12-24 months, I am willing to bet the vehicle could be sold for $2,000 in 18 months with careful marketing.
Let’s also suppose that you saved $250 per month for 18 months prior to selling the beater. Through this flipping method, you could afford a $6500 vehicle. Continue the plan for another 18 months and an $11,000 vehicle is in reach. One additional cycle could allow you to purchase a vehicle valued at $15,500.
In four and a half years, you’ve moved up in car from a 1993 Honda Civic to a 2013 Hyundai Elantra. And you did it without a single payment! Of course, saving more than $250 per month could significantly change the conversation.
4. I deserve to be paid more than my current salary.
I find this phrase (and similar offshoots) is most often uttered by millennials. As a millennial myself, let me apologize for the whining of my generation.
Most millennials really need a lifestyle and attitude adjustment, not a salary adjustment. While the millennial median income is admittedly low across the United States, that hasn’t stopped millennials from living far beyond their means (think champagne lifestyle when a beer budget is really what’s appropriate).
Why does this happen? Facebook envy and the fear of missing out is largely to blame. Pictures of new cars and new houses lead the average millennial couple into foolish spending in order to maintain appearances. And like a house of cards, it’s just one blow from caving in.
I am not saying that millennials should not increase their earnings. I’m saying that whining is not the way to achieve that increase. If you believe you are underpaid, do something about it. Hustle, prove your worth, and back it up with statistics.
And if your boss doesn’t agree with your assessment, cut ties and get a new job. Or find other ways to boost your income.
Readers, what financial lies do you most often hear? Why do you think they continue to spread?