A misconception is defined as:
A view or opinion that is incorrect because it is based on faulty thinking or understanding.
In the personal finance space there are a huge amount of misconceptions that people often hold about money that simply aren’t true. Here are some of the most common “money misconceptions” I hear on a regular basis, along with my response to them:
Money misconception: “You shouldn’t worry about money too much in your 20’s.”
Actually, your 20’s is one of the best times to build wealth. I would rather focus on money in my 20’s than in my 30’s, 40’s, 50’s, and 60’s.
Money misconception: “Spend your money while you have it since you can’t take it with you when you’re gone.”
Or you can save your money and put it to work through investing. This way, you don’t have to work for your money until the day you’re gone.
Money misconception: “If you want something, buy it. Life is too short to deprive yourself.”
Buying everything you want is not only a terrible way to find happiness, it’s also a recipe for financial disaster. Life is too short to carry financial burdens. Learn to question your motives for buying.
Money misconception: “If you’ve worked hard enough, you should treat yourself and buy something nice.”
If you treat yourself every time you work hard, you’ll be forced to work hard your whole life. The best way to treat yourself is through saving your money and buying financial freedom. The real treat is not in buying stuff, but in buying time.
Money misconception: “Money is just an object. It holds no meaning.”
Yes, intrinsically money is just an object. But it’s actually a tool you can use to build a life customized to your unique interests and values. Money by itself holds no meaning, but it has the ability to help us do the activities in life that do bring us meaning.
Money misconception: “Some people are just born with no money skills.”
Actually everyone is born with no money skills. But everyone has the ability to become educated on money and how it works through reading financial blogs and seeking out help from financial experts. Financial knowledge is a learned skill, not a natural talent.
Money misconception: “Life isn’t all about money. Learn to live a little.”
I agree, life is so much more than just money. But living within your means allows you to live a lot, not just a little.
Money misconception: “If buying stuff makes you happy, you shouldn’t feel guilty about it.“
I agree. But have you found happiness through buying stuff up to this point? If stuff actually brought you lasting happiness, why do you have to keep buying more?
Money misconception: “I can worry about saving for retirement when I’m older.”
The longer you delay saving, the harder it becomes down the road. Instead, save early and often so you don’t have to worry about saving for retirement at all when you’re older.
Money misconception: “I could never retire early. I would be too bored.”
Early retirement isn’t about not working, it’s about having options. Early retirement doesn’t require that you stop working, but instead it allows you to do work you love.
Money misconception: “Financial Independence is only for people who are good with money.”
That may be so. But the only people who are good with money are the ones who take the time to understand it.
Money misconception: “You need millions of dollars to retire.”
Actually you only need 25 times your annual expenses. So you only need several million if you spend over six-figures every year.
Money misconception: “Debt is just a natural part of life.”
Debt is only natural if you make it natural. Unfortunately, debt has become so common that we mistakenly think it’s natural. Don’t fall for this trap.
Money misconception: “Money isn’t important to me so I don’t need to spend time thinking about it.”
But understanding how money works allows you to do the things that are important to you even more.
Money misconception: “Money can’t buy happiness.”
I agree. But it can buy freedom.
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