Money Management Myths Exposed

Money Management Myth #1: I can’t save or invest because I don’t make enough money.

I can’t tell you how many times I’ve heard people say: “I don’t make enough money to save or invest. I’m barely making enough each month to pay the bills.” This kind of thinking is so prevalent. In fact, how many of you have heard people say this? Better yet, how many of you have said this yourself? It sounds so simple: “If I made more money I could save more. But right now, I just don’t make enough to ever put anything away.”

Well, it may sound believable, but it’s absolutely false. It really doesn’t matter how much money you make. In fact, we’ve all heard about celebrities and people who inherited large fortunes who went broke. Sometimes these people had hundreds of millions of dollars and then one day we’re reading about them and they’re penniless. So, it’s not how much money you make, it’s what you do with what you have. Until you learn to manage what you have, you’ll be short of money, regardless of how much you earn.

Learning to live within your means and to manage what you do have is the key, and anyone can learn to do it. For now, I want to examine some of the other myths that keep people from even trying to get control of their financial lives.

 

Money Management Myth #2: Once I get my finances in order, then I’ll start saving.

This one is related to Myth #1. For some people, it’s not that they don’t have enough money, it’s that they want to wait until the time is just right. They say they want to wait until they get their finances organized and under control, and then they’ll start saving. But, that’s backwards. If you don’t start planning and saving and investing, you never will get your finances in order. By the same token, if you wait until everything is all right before you begin to start managing your money properly, you’ll be waiting forever. So, you might as well start now.

 

Money Management Myth #3. I’m X years old. It’s too late for me to start an investment program.

You can put any number there you like, this one is still false. What number do you want to put there: 40? 50? 60? 70? People at any age can benefit from creating a money management plan and a wise investment strategy.

Sometimes, people jokingly say to me, “What about 90 year olds? Surely 90 year olds don’t have to think about investing, do they?” Do you know what I say to that? I say even people in their 80s and 90s need to make wise financial decisions. For example, I’d ask a 90 year old: “Do you have a will? Are your records in order so your family can easily identify your financial resources?” I don’t care how old you are, it’s not too late to develop a financial management plan.

 

Money Management Myth #4: If I have an emergency, I can always get a cash advance.

Yes, it’s true, that the credit card option is always there and in theory you can almost always draw a cash advance. But you shouldn’t want to, and you shouldn’t have to. The heart and soul of good money management is planning. With good planning you can have money that is set aside for emergencies. You won’t have to go into debt if you have an Emergency Fund. A cash advance is nothing but more debt, usually at exorbitantly high interest rates.

Instead of going into more debt, your goal should be to get out of debt completely. That’s why we tell people to get rid of their credit cards, or put them on ice, literally. I tell people to put their credit cards in a container of water and put the container in the freezer. That way, you can’t get to them right away—you’ll have to wait for them to thaw out. Hopefully, in the time you’re waiting, you’ll reconsider and won’t try to use that little piece of plastic to solve your money problems.

 

Money Management Myth #5: I don’t have to plan for retirement. That’s what my superannuation fund is for.

It’s true the Australian government mandates that your employer set aside money for your superannuation find. But the money that’s being set aside is not enough to guarantee you a comfortable retirement. Not only that, when you rely solely on your employer to put money in your fund, you’re letting someone else control your destiny and your future. Today the law says they’re required to put money in, but who knows what the law might say in 10, 15, or 20 years. You shouldn’t base your retirement plans on that. Financial independence comes from taking charge of your own financial situation and making your own plans for your future.

If you have harboured similar mythical beliefs about money, now is the time to change your thinking. It will literally pay dividends for yourself and your family. Take action now and get started by checking out some of my free resources on my website. Click here to request your copies now.

Copyright © 2012 Robert Bauman. Feel free to use this article in your hard copy or eNewsletter, provided you display the Copyright notice and source reference in its current form.

Disclaimer: This information (including taxation) is general in nature and is for Australian residents only. It does not consider your individual circumstances or needs. Do not act until you seek professional advice and consider a Product Disclosure Statement. To find out more about services provided by Straight Money Talk Pty Ltd please visit my website.

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