With social media controlling our every thought, it’s super easy to get caught up in the noise and create an opinion based solely on nonsense. I know I’ve fallen victim to the many money myths that live deep within the social realm, poisoning our minds into thinking we have to work a job we hate for the rest of our lives.
F*ck that! Here’s to breaking free from the societal constraints that rich people have tried to force-feed us with. Let’s dedicate our time to learning as much as we can, proving everything we know to be right, wrong. Stop listening to the masses, start listening to the 1%.
It’s no surprise that the majority of people are never financially free. Too many opinions are believed way too easily!
With that in mind, here are 5 money myths that you’ve probably heard of, but need to forget ASAP…
Table of Contents
Money Myth 1 – Investing is ONLY for the Rich
Okay, no.
This is just straight up bullsh*t, complete cap, utter nonsense, just not true.
Investing is for literally everyone over 18 years old (heck, you can start investing like I did at 16 if you really want to).
Investing is easy, too. It’s not like you need to be a millionaire with an IQ above Einstein to make some money through investing. It’s possible for virtually anyone to make money through investing IF you are willing to learn the art and put in the time.
The Money Myths
Investing is only for people with money, in order to make more money. It’s hard and very risky, basically a gamble.
While all of those have truth behind them, they aren’t necessarily the only truth.
The Truth
Investing can be as risky as you want it to be. Don’t like risk? Invest in some Commonwealth Government Bonds – these are virtually risk-free. Want more risk? Try your luck in Penny stocks.
The point I’m getting at is that people pick a very small sub-section of investing and then apply a blanket term across all facets of investing to act as though you need some special X-Factor to make it work for you.
No. Investing is simple and can be done with as little as $1 through what’s called micro-investing. My micro-investing app of choice is Raiz. Raiz allows you to invest as little as $0.01. Each time you tap your debit card or credit card, Raiz will round that purchase up to the nearest dollar and invest those few cents into the stock market.
With Raiz, you get to decide what portfolio to invest in based on your appetite for risk, and you also get to decide how often you invest, and how much you invest. Sign up for RAIZ here.
Anyway, I digress. Point is, you can invest with basically no money at all. AND, it’ll still perform better than it would in a bank account (at these interest rate levels).
Investing in something as simple as an ASX 200 ETF (a portfolio of shares that tracks the top 200 companies in Australia) has returned an average of 10% per year over the last 40 years. Compare that to the bank interest rates which sit anywhere from 0.01% to maybe 1.5% if you’re lucky.
If you want to learn more about what investing is and how to get started, check out this post:
The Ultimate Beginner’s Guide to Investing
Money Myth 2 – Stay AWAY from Credit Cards
I’ll be blunt here. This one is certainly true for some people. Credit cards are damn dangerous if you aren’t taught how to use them properly.
BUT, credit cards aren’t always bad. They are a great tool for building your credit score and provide a lot of convenience on those weeks that you may go over budget (so long as you’re certain you can pay it all back before the end of the month).
The Money Myths
Credit cards are what the banks use to make money off you. They are dangerous. Credit cards will keep you working until you die, they are for the poor.
Huh, wrong!
The Truth
If used properly, credit cards can be an amazing tool for building your credit score, earning free rewards, investing capital into your small business, etc.
The key here is “IF USED PROPERLY.” I cannot stress this enough…
IF YOU ARE BAD WITH MONEY, DO NOT GET A CREDIT CARD.
What does being bad with money mean? Basically, if you find yourself getting to the end of each month with no money in your account, eagerly waiting for the next paycheck, or if you find yourself spending more money on food and clothes each month than you do on education and assets, or if you find yourself stuck each month trying to pay rent because you spent it all on other stuff first. These are all signs that you need to improve your money skills.
However, if you consider yourself to be good with money (i.e. you’ve never missed a payment on any debt you have, you always save a little each time you get paid, you pay your bills before you treat yourself, etc.)
If this is you, then a credit card could be your new best friend!
Check out this post to learn how a credit card SHOULD be used:
Your Guide to the Credit Score – What, Why and How
Money Myth 3 – Working Longer Hours = More Money
Oh how I wish more young people understood this one.
More hours does not equal more money. Well maybe it does in literal terms, but not in comparative terms.
The amount of effort you have to put into those extra few dollars, just isn’t worth the extra money you get out of it. This isn’t how money works.
The Money Myths
If I work more, I can earn more. A pay rise is how people get rich. If I can’t get a promotion, I’ll just work longer hours. I’m casual, so the more I work, the more money I get paid each week.
All somewhat true, but not right.
The Truth
Think about it, if you were to only earn money by trading your time for dollars. Meaning you only got paid for the hours you spent physically working, you’d never be financially free. This is because you’d constantly be needing to work for the next paycheck.
Let’s take a more analytical look:
The average person is alive for about 80 years in Australia. That works out to be 29,200 days, which equals 700,800 hours.
If you only trade your time for money, meaning you basically work as an employee all your life, never invested anything, never earned any interest, never bought assets that paid you…
You’d have the potential to earn $21,024,000 at $30 an hour. Granted, that’s a lot of money. But, now let’s factor out 8 hours of sleep each day, 4 hours of what I call ‘you’ time which could be playing a sport, going to the gym, watching tv, spending time with friends, etc. and let’s say you spend around an hour in the bathroom each day (in total). That’s 13 hours each day that you can’t be earning money.
That takes our lifetime hours down to 321,200. Which gives us an earning potential of $9,636,000.
We haven’t even factored in weekends yet and that’s already not enough to survive for 80 years after expenses such as rent, food, transport, and everything else that life encompasses.
What am I getting at?
You shouldn’t spend your time trying to earn money. You should spend your time trying to learn how to earn money while you sleep. What I mean by that is this:
Trade your time for money in the beginning. Use that money to buy assets (an asset is something that pays you to own it, like a share, or property, or a successful business). Then use the money from those assets to buy more assets, until eventually the income from your assets will be more than your income from work and you can quit your job and do whatever the hell you want for the rest of your life.
Simple.
Learn how to make money while you sleep by reading this post:
How the Rich Get Rich – Making Money While you Sleep
Money Myth 4 – Your Emergency Fund SHOULD be in a separate Savings Account
Your emergency fund doesn’t have to be in a bank account at all!
Now, don’t get me wrong. You do NEED an emergency fund.
An emergency fund is quite simply a backup sum of money that you never touch unless you have a severe financial emergency. Things such as your house burning down, a family member getting extremely sick overseas, emergency surgery, any unforeseen circumstances that are expensive to repair.
You should start creating an emergency fund early on in your 20s to ensure it’s there during the ‘risky’ years (your early 30s) as you start a family, buy a house, start a new job, and all the other stuff that conveniently pops up around that age.
It can be as simple as putting $50 away each week into a separate account that you don’t have quick access to.
The Money Myths
The myth here is that the emergency fund has to be in a bank account. Most people believe this because they think it’s a short-term thing. Wrong.
The Truth
An emergency fund is typically something you won’t touch until that inevitable shock happens. Everyone hits this point in their life (maybe except for a very lucky few). It’s the moment your life changes, you think it’ll never be the same again, and you’re faced with the choice to make it better than it ever could have been, or just start hating life. Don’t take this the wrong way, the choice is damn hard to make! I’m awfully glad I haven’t had to make it yet.
Anyway, I digress again.
The truth is this:
The emergency fund isn’t really something you should be touching in the next 5-10 years if you’re in your early 20s.
If that’s the case, it doesn’t have to be liquid! You could be putting that money to work by investing it in an asset that will help it snowball through the power of compound interest.
Like I said before, the difference between a bank account interest rate and average stock market returns are absolutely astounding (around 1% vs. 10%). Over 20 years, there’s a difference of just over $100k!
If you don’t need the money anytime soon, that emergency fund doesn’t have to be earning peanuts in a savings account. That’s simply a myth! Put it to work in an asset.
Want to learn more about what an asset is? Check this post out:
Assets vs Liabilities – What’s the difference and how will it make me rich?
Money Myth 5 – Cash is KING
I’ll keep this one short because I’m sure you’re sick of me telling you that you’re wrong.
There seems to be a completely inaccurate saying floating around these days. “Cash is King”
Look, cash is better than debt. It’s less risky, it’s yours, and you can do whatever you want with it. But, having cash isn’t enough.
The Money Myths
If I have cash, I’ll be fine.
The Truth
Cash and cash flow are very different.
If you have rent coming up this week, you need cash flow, not just cash.
Cash can often be tied up in assets such as stocks, which means even if you have “cash”, you can’t really use it whenever you need to.
The saying should be this:
“Cash Flow is KING”
Because quite honestly, without cash flow, your cash ain’t doing sh*t.
There you have it.
The Money Myths that you really need to forget about.
I hope your world hasn’t been too shocked by these. That would be a great outcome because it means you already knew that these weren’t fact.
My goal is to help you learn as much as possible at a young enough age to capitalise on those learnings and create a life for yourself that makes you want to wake up each day with a smile. I hope this post has helped you get there!
If you have found value in this, I’d love for you to have a listen to our podcast. It’s packed with interesting stories full of value! Find the podcast on Spotify, Apple Podcasts, Google Podcasts or wherever you get your podcasts or visit this link – The Post-School Podcast
Don’t forget to follow Uncle Nathan on Instagram @unclenathanco and send us a DM if you have any questions!
Until next time,
Uncle N.
WE ACT AS AFFILIATES FOR TRUSTED MERCHANTS AND WE MAY EARN REFERRAL COMMISSIONS (AT NO EXTRA COST TO YOU) RESULTING FROM PURCHASES OF PRODUCTS OR SERVICES RECOMMENDED IN THIS POST