Money Myths That Empty Your Wallet
By Mary Hunt
Founder and Editor of Debt-Proof Living
Signs were posted everywhere throughout the mall: “The more you spend, the more you save!” Wow. Imagine that. Right there, I had all the justification I needed to charge my way through store after store. That’s just one of many money myths that got me into a lot of trouble years ago. These lies are so easy to believe because we want to believe them.
Money on its own is neither good nor bad. Our beliefs and attitudes about money are what make it such a powerful force in our lives. And with good reason. Money determines where we live, what we drive, and where our kids go to school. The trouble starts when our money beliefs are not based on truth.
Whether you are slightly uncomfortable with your financial situation, up to your eyeballs, or someplace in between, the problem might be what you believe about money and its role in your life. Perhaps it’s time to replace your money myths with a big dose of reality. Then you can start rebuilding your finances and your future.
Myth: There’s stuff I simply cannot live without.
Reality: No, there isn’t. Once your basic needs of food and shelter are met, just about everything else is optional. (Well, there’s also transportation and taxes, but you get the idea.) It’s easy to convince ourselves that we absolutely must have new clothes each season, new furniture, new cars, and all kinds of gadgets and services to make our lives easier.
Solution: Make a pledge that you will never go into debt for “stuff.” Period. There’s nothing wrong with having nice things and enjoying life to the fullest—provided all of your bills are paid, you’re not incurring new debt, and you’re saving for the future. Become brutally honest in defining true needs versus desires.
Myth: Buying things on sale is a great way to save money.
Reality: Let’s be clear: Buying things on sale has little to do with saving money. Unless you stop at the bank and deposit the difference between the sale price and the regular price, you’re not saving at all. At best, you’re simply spending less. I must admit I still struggle with this myth at times because it’s so easy to justify buying something just because it’s such a great bargain.
Solution: Find a form of entertainment other than wandering through stores looking for bargains. And always remember: A true need is never realized while standing in front of a sale rack. If you needed glow-in-the-dark placemats, you knew that before you entered the store. It wouldn’t have come as a revelation upon seeing them marked down.
Myth: Buying things on credit is a smart financial strategy because I’m using someone else’s money.
Reality: You’re using the bank’s money. Buying on credit creates a very expensive rental agreement. Suppose you “use” $2,000 of your credit card company’s money at 18 percent and agree to pay the monthly “rent,” also known as the minimum monthly payment. Before this is over, more than 18 years from now, you will shell out $4,615. Any chance you’ll remember what you bought with that original $2,000? I doubt it.
Solution: Use your credit card company’s money, but only for the grace period. Paying your balance in full every month makes a credit card a useful tool.
Myth: If I don’t buy things on credit, I’ll never have anything.
Reality: If you don’t buy things on credit, you won’t have debt, but you will have options.
Solution: If you want something you can’t afford, save first, then buy it. It’s a brilliant concept. You will appreciate things so much more knowing you really can afford them. Waiting builds financial maturity. Delaying gratification promotes self-discipline. Bonus: You’ll have time to change your mind, and that means fewer buying mistakes.
Myth: No lender, bank, or credit card company would give me more credit than I can afford or handle.
Reality: You’re kidding, right? Many banks and credit card companies don’t care about you personally. If they keep your credit limits to what you can afford, they lose. They’re determined to grab as much of your money as possible through fees and penalties—on top of that big interest rate you’re paying. Many lenders are desperate to find customers who revolve balances that exceed what they can repay in a single month.
Solution: Take control of your own situation. In your heart you know what you can and can’t afford. Do not accept new credit you cannot reasonably handle.
Myth: If things get too bad, I can always file for bankruptcy and get a fresh start.
Reality: Bankruptcy is a very serious matter, not an easy way out. If you qualify, it will impact your life negatively for a very long time. And bankruptcy does not represent a clean slate. It’s more like a 10-year jail sentence on your credit history.
Solution: No matter how strapped you are, try to avoid bankruptcy. Do whatever it takes to build a safety net—an emergency account. Set a goal of $1,000. Go to a credit union or online savings bank like INGDirect.com or EmigrantDirect.com to open a no-fee account with no minimums. You can get started with as little as $1. There. You’re on your way. Feels good, doesn’t it?
Mary Hunt is the founder and editor of Debt-Proof Living newsletter, the new finance columnist at Guideposts magazine, an AOL Money Coach and a contributing editor of Woman’s Day magazine. She is the author of 16 bestselling books, and her syndicated Everyday Cheapskate column can be found online and in newspapers nationwide.
CBN IS HERE FOR YOU!
Are you seeking answers in life? Are you hurting?
Are you facing a difficult situation?
A caring friend will be there to pray with you in your time of need.