Money. It’s what we work for and can’t get enough of. It’s what buys everything from an education to a fancy car. With its high level of importance in society, why then, is money so misunderstood?
Everyone has a story about why they don’t have as much money as they would like, and how it’s impeding their own happiness. But these are mostly due to misunderstandings about money and how to manage it.
Let’s examine some of the biggest misconceptions people have about money.
A good salary means financial stability
Salary is the first thing that most people think about when choosing a career. A good salary means you will have financial stability for life, right? Not so fast. Just because you have a high-paying salary does not mean that you will always be financially secure. Outside of your salary, there are many things you need to control in order to build and maintain wealth.
Imagine you have a job paying you €50,000 per year but you have a credit card debt of €10,000, and your friend has a job paying them €35,000 per year but doesn’t have any credit card debt. Even though you are making more money than your friend, they are in a better financial situation!
As you can see, you first must manage your debt, whether it be through student loans, credit cards, or anywhere else. No matter your salary, mounting debt will be like an anchor tied to your feet, weighing you down from achieving your true wealth potential.
As long as I am making money, everything will be fine
These days, having a steady job is something to be proud of. But just because you have a job and are making money, doesn’t mean you can sit back and relax. You still have to put the work into your financial life to have a positive relationship with money.
Do you know exactly how much money you spend each month on groceries? How about how much you are spending on leisure activities? In order to protect your earnings you should create a detailed budget and understand your recurring expenses. You might find out that the money you are making isn’t being saved at all because of unwanted monthly expenses.
I’m too young to plan for retirement
There is an old adage when it comes to retirement planning. The best age to plan for retirement is…right now! No matter if you are 20-years old or 50-years old, the sooner you start saving for your retirement the better. With the average life span increasing, more of your years are likely to be spent at retirement age, meaning, you will need more savings in order to enjoy those years fully. Investing as early as possible will allow you to take advantage of compounding interest, which is the best catalyst for growing wealth over time.
I can only invest if I already have a lot of money
Maybe you have heard billionaires like Warren Buffett giving tips and tricks on how to invest. This might have gotten you thinking that only the wealthy can invest, and it’s not for everyone. You couldn’t be more wrong.
Sure, there are investments like real estate where you might need a significant amount of capital to get started, but there are also plenty of investments where you can start with no money at all. Think about it like starting a business. These days, you can start a business by investing a lot of money, or, you can start a business with very little and bootstrap new projects and initiatives with next to nothing.
Take Bondora Go & Grow as an example investment. With Go & Grow, you can start investing with as little as €1, and work your way up. This means anyone, no matter who you are, can invest in peer-to-peer loans.
Money will solve my problems
This may be the most heartbreaking misconception of them all. Thinking that money will solve all of your problems is only a fool’s errand. Most wealthy people are exactly the same before, during, and after they made their fortune.
Even if you come into a significant sum of money instantly, that doesn’t mean you will be happy. In fact, many past lottery winners have shown to be just as unhappy as before they won their money, with some of them not even able to hold on to their newfound fortune because they don’t understand how to manage it..
The most important thing to recognize here is that you can be happy at any point in your life, with or without money. So don’t expect all of your problems to magically go away the bigger your bank account gets.
The only way I can attain wealth is with a higher paying job
Yes, having a high-paying job is a great way to make significant sums of money. But getting a raise or starting your own business isn’t the only way to grow your wealth.
The first way to attain more wealth is to cut useless expenses, or opt for cheaper versions of expenses you are already incurring. Instead of eating at a restaurant twice per week, you could save money and make a home-cooked meal. Instead of subscribing to three different streaming services, you could pick one. You would be surprised at how much money this could save you over time.
As we already discussed, investing is another way to attain greater wealth. In fact, the majority of millionaires use investing as a means to grow their wealth outside of their day jobs. Once you begin to save and invest your money, you will see the power that investing has over growing your wealth outside of your salary.
Don’t get tripped up
Hopefully you have not fallen into one of these money misconception traps. Because money, like it or not, is a powerful tool that when understood and used properly, can lead to financial security. It’s important to acknowledge that while money isn’t the be-all-end-all, through understanding it better, you can utilize money in a positive way in the life of you and your family.