If there is one thing I’m still angry about for not really learning in school it’s how to handle money. I actually remember the moment I asked my mom how to write a check. I was 18 and had no idea how to write a check. We didn’t learn about it in school and prior to turning 18 I’d never needed to do it before. It seemed self explanatory but I still wanted validation from her that I was doing it right. I’ll never understand why my high school forced me to take chemistry and calculus but didn’t think a basic budgeting or personal finance course was a good idea. I’m far more likely to overspend in a budget category than I am to blow myself up in a chemistry lab.
It’s just stupid. I would hope there would be at least one course that prepares kids for personal finance and maybe there is now. It’s been a long time since I was in high school and I don’t have kids now so I’m not really in the loop. I just know that I had a lot of issues with money back in the day and I see a lot of people continue to believe the same money myths I did.
5 Money myths to stop believing
I want to talk about the stupid money myths I believed once upon a time and why I no longer accept them as truth.
Don’t talk about your salary
This frustrates me so much! Obviously, don’t walk around bragging about your income because that can make you come across like a complete jerkface loser. Don’t brag about your income and don’t belittle others for theirs but you also don’t have to keep it a major secret when talking about careers and income in the appropriate circles. How can you expect anyone to understand if they are being treated fairly at work and earning income equal to others in their field if no one is willing to open up and talk about it?
Now, be careful because some employers do have policies about discussing your salary, bonuses, and benefits with co-workers. You don’t want to get yourself in trouble or risk losing your job for a conversation! Just be aware of who you’re talking to and be open in those conversations. If you’re considering changing fields, ask about salary. If someone is asking you about your profession because they are considering changing careers, offer information about what you do and what you earn. It helps everyone understand reasonable expectations.
You should earn $X before starting to invest
NO. Just…NO. I cannot deal with this one. I actually had a co-worker (a Jr. hire who was 24 years old) tell me he really wanted to start building an investment portfolio but he had been told to wait until he was earning at least $50,000 per year before doing that. I swear, I think my jaw dropped and hit the floor. There are so many things wrong with that, like:
- A lot of people go their entire lives without earning $50,000 per year
- There’s no magic number before you begin investing
- It’s never too early to start
I told him to get on the phone asap with a financial advisor and explain his position. At all times you should be budgeting to save at least 10% of your income. If you’re able to set aside even 3% of that for investments you’re ahead of the curve. As you invest more each month, you’ll watch your money grow. Sure, you’ll have to start out small with cheap stocks or a short term CD but it’s better than sitting there doing nothing.
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Don’t use credit cards
I don’t believe in this anymore either. At one point I thought credit cards were the worst decision ever but as I’ve grown older I have realized that’s not true. People just don’t understand how to manage credit cards. Once again, if we taught kids about money and personal finance I don’t think this would be such an issue.
Credit cards are only a problem when you don’t manage them responsibly. When we didn’t have or use a credit card we found ourselves in a couple of situation where we had to change or cancel plans at the last minute. Once, we couldn’t pick up our rental car because they didn’t accept debit cards. We were left scrambling at the last minute trying to find a company that did accept debit cards. That was not a good experience at all. We had the same issue one time at a hotel in Tampa, Florida. I mean, who doesn’t take a debit card?!
Now, I use credit cards but I’ve learned how to do it right. Choose a credit card that is right for you and your lifestyle, use it responsibly, and pay it off each month. When you learn to manage your financial tools rather than letting them manage you, you’ll be fine.
Invest as much as you can into your 401k
This one is kind of two-sided. I do believe you should invest as much as you can into your 401k but there is a limit. If you have an employer-matched 401k then you should invest as much as they will match. This is usually about 5%. If they match 5%, then you should invest 5% so that a total of 10% is going in to the account each month.
If you are able to invest a total of 10% of your monthly income then you need to look at your options. You could invest 10% into your 401k, have your employer match 5%, and therefore contribute 15% each month. You could also invest the 5% your employer will match and invest the other 5% into another kind of investment, stock, mutual fund, etc. Never assume that your 401k is the best investment option, it’s not. You need to diversify your investment portfolio so take what you can afford and spread it around.
I don’t need to budget
You do need a budget. It doesn’t matter how well you think you track your money, you need a budget. I used to think I knew where my money went each month but I didn’t have a clue. One day I finally sat down, opened my online banking, went through each charge one by one. I reviewed over 180 days worth of transactions! It was insane but I defined categories, calculate totals, and was blown away by the results. It’s extremely eye-opening and you need to do the same thing.
Once I saw my totals I chose to switch to cash-only for a period of 30 days. I paid bills with my debit card then withdrew cash to use for every other transaction (gas, groceries, shopping, dining out, etc). I had set a limit for each category and withdrew only that amount of cash for my wallet. The rest of my money stayed in the bank account, untouched. I saved a ton more money that month and was surprised to see how stupidly I’d be draining away my income. You never know where you might find money to save and not setting a budget for yourself is a big mistake.Get a better grip on your finances by getting over these 5 money myths! #money #finance Click To Tweet
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