As I introduced in the previous post, a lot of our behaviour is triggered by emotions and we use denial and avoidance—playing ostrich, playing dumb and acting helpless—to keep ourselves from changing what we know deep down is preventing us from being more successful and fulfilled than we currently are.
Though debunking our personal fabrications is powerful in and of itself, debunking commonly-held beliefs that are built on these fabrications can further empower us to consider what’s really needed to lead a successful and fulfilling life.
I’ve chosen to pick on seven beliefs (which I chose to call “lies”) that are repeatedly parroted in the media. Each one of these is perpetuated as truth, despite being nothing more than perception and perceptions are as malleable as we’re willing to make them.
Seven Money Lies We Tell Ourselves:
- Saving money is hard.
- Money is complicated.
- I only buy necessities.
- I can’t find affordable housing.
- I need a car.
- School is expensive.
- Debt is just part of life.
Here’s each lie accompanied by the truth (or just be a different way of looking at it).
Lie #1: Saving money is hard to do.
Truth: Figuring out how to save is easy.
There are great examples at nearly all income levels of people who manage to save money successfully (hopefully minimum wage legislation will improve the situation for those who truly can’t), just as there are examples of people going broke at every income level. For the majority of us, saving money can be easy and doesn't need to involve hardship—in most cases hardship is a state of mind, not a state of being.
The math is simple: Net Income - Expenses = Savings (or debt, if negative)
$100.00 - 80.00 = $20.00 (GOOD!)
$100 - $110.00 = - $20.00 (NOT GOOD!)
If we have negative savings, we need to spend less (less house, less car, less stuff, less going out). As we start to have extra, we set it aside in a separate savings account on a regular basis (weekly/monthly/yearly), preferably before we spend on anything beyond fixed expenses.
Let’s not obsess over rate of return on savings and investments. Though we want to get something for the money we choose to set aside, it’s our savings rate that’s the single greatest indicator of financial security over the long term.
Note: Tracking our savings rate lets the rest take care of itself because it redirects our lizard brain’s attention toward a more useful type of accumulation.
Lie #2: Money is complicated.
Truth: Money is only complicated when we make it complicated.*
Debt = complicated and makes everything cost more
No Debt = simple
*And anything that requires us to read fine print is usually a bad idea anyway.
Lie #3: I only buy necessities.
Truth: Need is not synonymous with want.
The vast majority of what we buy is NOT a necessity. We, as residents of wealthy countries buy more stuff than any previous generation and we buy more than 99% of the rest of the people on the planet. Can we really call all our stuff necessary?
Our sense of need vs want is completely warped and it’s driven by nothing more than expectation, and expectation that more will make us happier. We have the power to dial it back.
Here are some suggestions to help us keep our lizard brain in check when it tells us we need to buy stuff we don't need.
Lie #4: I can’t find affordable housing.
Truth: If we can’t find housing, what we’re saying is that our means don't match our expectations.
We’re driven by our expectations and feeling of entitlement as opposed to what would constitute sensible spending. Most times, this is driven by the desire to present a certain image to others as opposed to the need to put a roof over our heads.
Square footage + location + upgrades = housing cost (monthly costs & fees + furnishings + maintenance + utilities + taxes)
Reduce your square footage, location expectations and interior finishings and, amazingly, housing becomes affordable, regardless of whether you rent or buy.
Here's a post on rather unconventional housing Mr. F2P and I came across during a trip to Vancouver last September.
Lie #5: I need a car.
Truth: A car is not a necessity.
For the vast majority of us, the only reason a car is a necessity is because we choose to make it one. Where we decide to live (far from public transportation / far from work) is the biggest driver—pun intended— for justifying car ownership, and a comfortable one to help us deal with a long, stressful commute. A close second is a need to show status.
There’s no problem with wanting a car, when it makes sense to buy one. Justifying it as a necessity is where the problem starts. Seeing a car as a necessity makes it far more likely that we’ll accept the idea of monthly car payments and not wait and save enough money to be able to buy one outright.
If we want a car, we need to consider the total cost of ownership before we make our purchasing decision: cost of car + insurance + maintenance/repair + gas + parking and storage (garage). The total cost is usually much more than we think it will be and it can become a money pit on wheels.
Lie #6: School is expensive.
Truth: School is only as expensive as you want it to be.
There are many local options when it comes to getting an education and many part-time and online options from reputable organizations as well. And more money on school does not mean there's a return on that investment: there is zero correlation between where you went to school and your long-term success.
Regardless of where we go to school, scholarships are part of the answer in reducing our overall cost of education, as is working part time or full time as we study to help cover our living expenses when savings and scholarship money isn't enough. Surprisingly to some, students who work while going to school are not penalized with lower/poor grades. In fact, working part time even seems beneficial to their academic performance, up to a point.
Lie #7: Debt is just part of life.
Truth: Debt is a copout and we use it because we can’t stand delaying gratification.
There's no good debt (including a mortgage, though can be considered it a temporary evil—emphasis on "temporary"). I’m not suggesting that we can’t have some credit vehicle available in case of an emergency, but an emergency fund is a much better option. If we have debt, we need to get rid of it—sell stuff, downsize, pay if off—pronto.
Life gets a lot easier when we don’t live pay check to pay check and when less of every pay check goes to debtors. As a result of being debt-free, we have fewer bills to pay and we don’t have to constantly worry about unexpected expenses. If it still feels complicated, it’s possible to operate on a cash-only basis. It doesn’t get much easier than that!
Did I miss a major money lie? If so, which one?