Five Personal Finance Myths That You Need To Ignore

May 22, 2007 By Matthew Paulson

A lot of hear some basic tenets of personal finance when we’re young, and tend to accept them as fact without ever really thinking about the merits of the statements being made. At this time, we’re too young to know the difference, and we hear these things from adults, so we accept that they are most likely true. We take these ideas with us into adulthood and think that they should be part of our financial lives. There are a lot of myths about personal finance around that really should not be followed. Conventional wisdom does not mean correct wisdom. Here are five personal finance myths that you need to ignore.

1. More Money Means More Happiness – A lot of us believe that if we only had a little bit more money, we would be happy. The stress of life wouldn’t be there, and we could have all the things that we want. The reality is that money makes you more of what you are. If you’re generous, you’ll be able to give a lot more. If you’re greedy, you’ll be even greedier when you get more money. Money and happiness have very little relation to each other.

2. It’s Extremely Important to Protect Your Credit Score – A lot of people put far too much emphasis on protecting their credit score. There are stories of people putting their visa payments ahead of providing basic living expenses just so that they can avoid a late payment and a ding on their credit score. The reality is that you can get away just fine in the world without having a credit score. You can borrow up to pay for vehicles, live life on a cash basis, and get a manually underwritten loan when purchasing a house. Life will not end if you don’t have a great credit score.

3. Rich People Are Jerks – A lot of us have the messed up notion that rich people are greedy, mean, selfish, and cold. We would never say this out loud, but deep on the inside we hold the belief. Money has no relation to whether or not you are a good or bad person. Think about it, the richest man in the world, Bill Gates, is giving a huge section of his fortune away so to help eliminate diseases, promote quality of life in Africa, and do a number of other things that’s good for the world.

4. We Need to Keep Up with the Jones’s – A lot of people compare their financial situation to their neighbors, but they only do so superficially. They see that their neighbors have a lot of nice things that they don’t, and they want to go get them. Statistically if your neighbor has a lot of nice stuff, they’re probably in debt up to their eyeballs paying for it. Just because someone has a lot of nice stuff, doesn’t mean they have a lot of money. In order to be the Jones’s, you need to live like a family that makes much less money, so that you have money to build wealth with.

5. If I Work Hard, I’ll Be Successful – I have a friend who cooks for a country club, she always works extra, is on time, and works rather hard. She thinks that if she does those things, she’ll get noticed and impress her bosses. Unfortunately there’s not a ton of opportunity for advancement and places to move up in the organization. In order to be successful, you need to not only work hard, but work smart. You need to work hard, but you also need to be doing the right type of hard work to do so that you can be successful. If you’re going to school for computer science, you need to get all the programming and computer support experience you can while in school so that you are the most qualified candidate among your classmates when you graduate. Working hard at McDonalds all the way through school is not going to guarantee you a great job in the future.

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