5 Half-Truths of Financial Fitness Exposed!

Check out the last guest post from a fellow personal finance writer, Mr. Compounding.  Stay tuned for his bio at the end of the post. 

A lot of us want to make the right decisions when it comes to our money.  At the end of the day, we all want to have more of it, right?

Where is gets tricky is when it’s actually time to take action.  There are a lot of universally accepted money principles that are downright false.  As a result, many people think they are better with money than they actually are because they follow these half-truths we all grew up hearing.

If you think you are doing the right things but can’t seem to gain any traction with your finances, or if you are like me and think of your financial success strictly in terms of net worth, here are some of the false and way too common assumptions you want to avoid.

5 Half-Truths of Financial Fitness Exposed!

I can pay my bills

True, but doing just that and nothing else has zero effect on your net worth.  Even if you spend your entire life always keeping your accounts current and never going into debt, you will still have zero to show for it if that’s the only thing that you do.

What I would rather hear: “I make sure the gap between my income and expenses is high enough that I can build wealth with the difference.”  I’m not recommending anyone to actually repeat that in a normal conversation.

I have a higher standard of living than my parents did

Too often do we equate societal progress with the goods and services that we have access to from one generation to the next.  I think we must make the difference between technological progress and personal finance success.  Just because I have a smartphone, a tablet, and a smart watch today and my grandparents didn’t, doesn’t mean I am doing better than they did.

What I would rather hear: “I will retire 10 years earlier than my parents did.”

It’s 0% interest for X months

This one is a direct shot at some of the commercials I see on television and consumers who fall for them.  Whether it’s a car, a mattress or a laundry unit, borrowing the money to buy it at 0% interest does not mean you are getting a deal.  Especially if you don’t have an emergency fund sitting in your bank account just in case something goes wrong, and it’s a fair assumption that many of those who take on consumer debt do not.

If you lose your job or have any type of unexpected big expense in the middle of your repayment process, you are stuck with a creditor that is just waiting in the wings for the grace period to end and the ridiculous interest rates to kick in.

What I would rather hear: “I had to save up for 6 months to get it”.

It’s on Sale!

Buying something on sale does not mean saving money.  It’s actually quite the opposite.  Obviously, we do have to buy stuff in order to function.  But make no mistake, no matter how much an item costs, it counts as an expense.

What I would rather hear: “I fixed it so I don’t have to buy a new one” or “Dammit, I had to replace it for $x.”

I don’t trust the stock market, I just don’t wanna lose my money

This statement usually implies that the person does not hold any type of investments.  No mutual funds, No ETFs, no retirement accounts, no real estate other than their home.  Just good old cash.

Well, this is just financial suicide, pardon my language.  You literally get poorer every year by not trying to at least keep up with inflation.  That’s not even counting the fact that historically, U.S. securities taken as a whole have always been profitable if you take a long-term approach to investing because guess what, American companies usually make money.

If you’re trying to buy yourself a yacht next month, I agree that stocks and bonds won’t get you there.  You might actually have to downgrade to a banana boat depending on how the market performs.  But if your goal is to be financially independent and you have some patience, smart, steady investing will get you there.

What I would rather hear: “I am a cautious investor and I don’t fall for get rich quick schemes” or “I invest for the long run and don’t pay attention to daily fluctuations of the market.”

5 Half Truths of Financial Fitness Exposed!

Key Takeaways

There are many other examples that I could think of, feel free to share some of yours in the comments.  What I think is important to do when it comes to this topic is to always ask ourselves the following:

  • Does a decision cause an increase, reduction or any change at all in my net worth?
  • Does it have the potential to cause financial harm, even if it may look reasonable today?
  • Am I actually doing it well or am I lying to myself (and my balance sheet)?
  • Did I really think about why it’s a smart decision or am I don’t it just because “it’s just what people do”?

 

Mr. Compounding is a part time personal finance blogger who works in the technology sector. On his blog, he writes about his money lessons and experiences and hopes to show others that financial independence is an attainable dream. He lives in the gorgeous, cold city of Boston and aside from helping people make wiser decisions with money, he is addicted to music and basketball. He can be found at networthisking.com and you can also keep up with his stuff through twitter, Facebook or Pinterest.

 

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20 comments

  1. Very good info! I am a tight wad with my money and very cautious with how I invest it. I finally was able to open up a savings account a few months ago for the first time in many many years and that felt good.

    1. That’s awesome! I’m also very cautious with my investing and for me, the key was making a clear distinction between investing and gambling aka chasing get rich quick schemes.

    1. Me too! I used to not even think about that stuff and now I write about it. I took it to the extreme but I feel you lol.

  2. Great way to reframe. We often get the wrong idea about what money and wealth really mean. You can make a ton of money and still have a broke mindset and be a paycheck away from being off the street.

  3. This post really got me thinking. There’s so much disagreement about the difference between having money vs. financial wealth. Great post, we need more education on finance matters

  4. I love the structure of this post — common scenario & a better response as seen through financial expert’s lens. All great perspectives…thanks!

  5. I have an ETF and a separate retirement account but I admit I may need to get a little more aggressive with my investing. I just realized I have 18 more years before retiring lol.

  6. “Am I actually doing well or am I lying to myself (and my balance sheet)?” This is a word! You can tell yourself whatever you want to hear but numbers DON’T lie! lol I love how you had alternative statements. We do that in my school to encourage the kids to speak more life into their statements. I need to do this more for myself.

  7. This is a wonderful wealth of information. Because of the lack of financial education many Americans dig themselves in a financial whole.

  8. Such great financial tips. I’ve heard people say many of these things, and I wish there was more financial education in high school or college.

    1. Same here. I literally first started learning about personal finance on my last semester of college in an elective class.

  9. I love this list! There are a few ways to look at something. One way keeps you broke, and the other helps you start building wealth. Sometimes I will catch myself thinking about something with a poverty mindset, and I always try to flip that around quick.

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