How Changing Your Beliefs About Money Can Dramatically Change Your Financial Success
Sixty-four percent of Americans are living paycheck to paycheck! Seventy-seven percent also have debt, with the average debt being over $100,000. Only 25% are totally debt-free.
These numbers haven’t changed much since the 1970s. The economy and the jobs market rises and falls over the years, but the stats don’t change very much. Why is that?
The fact is that most people don’t know how to manage money. Robert Kyosaki, author of Increase Your Financial IQ, further states that most people don’t have “financial intelligence.” Financial intelligence is the part of our mental capabilities that we use to solve financial problems.
He says, “It is not real estate, stocks, mutual funds, businesses, or money that makes a person rich. It is information, knowledge, wisdom, and know-how, a.k.a. Financial Intelligence, that makes one wealthy.”
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In the development of our financial intelligence, we must understand that many of us have beliefs about money that often tend to sabotage our ability to successfully manage money. In this post I will share “the seven deadly myths about money,” that may be negatively affecting your personal financial success. I offer common sense, key financial principles from Benjamin Franklin, one of the wealthiest and most successful men in American history.
Myth #1-More money will solve all my money problems
Making more money does not solve your financial issues. Your spending habits tend to expand to the increase in income. That is why people can make more money and still have difficulty making ends meet.
People in every income group say that they need about 10 percent more income to work things out. They may achieve that extra 10 percent but still end up with financial difficulties.
Amy and Mark are high income earners with two children. They put in about $24,000 per month into their checking. It’s a good chunk of change going into their checking right? However, at the end of the month their bills come in and they discover that they have spent $27,000 on what they consider “necessities.” Sound familiar?
You can’t count on a raise or other extra income to get you out of financial trouble. Living within your present income is the key to sound money management. You must take control of your spending.
Notice that I said, “YOU must take control of your spending.” No one is going to do it for you. The best time to start is now!
Myth #2- Creating a budget inhibits my freedom of choice
Many people are averse to creating a budget because they feel that they have to account for every penny they spend. They feel that this budget will restrict their freedom to spend as they want to a level that they feel enslaved by the budget. They want to live their “rich life” regardless of what their budget would suggest.
The purpose of a budget is not to account for every penny, but rather to establish reasonable guidelines and limits. It gives you an accurate account of where your money is going. It’s a financial GPS that will tell you where you stand and what you need to do to get to your financial dream life.
Myth #3- My checkbook balance is my best spending barometer
As long as there is money in the checkbook, you can spend it. We tend to adjust our spending based on the amount of money we have left. If there is $500 left in your account, you may be tempted to go ahead and buy that Coach purse you’ve been wanting.
The problem with this way of thinking is that it does not take into account an unanticipated expense. For example, the transmission goes out on your car. Your air conditioner stops working right in the middle of the hottest day of summer just before the day of your big party. Or, perhaps taxes are coming due.
Unexpected expenses often become financial emergencies. This can add a significant amount of stress to your life. It is best to make sure that you have an emergency fund, so that if any unexpected expenses occur, you will have it under control.
It’s not a matter of ‘if’ there will be any unexpected expenses- it is only a question of ‘when’.
Myth #4- I spend according to my needs
This is false! Most people spend according to emotion! This is what gets many people into financial trouble. They confuse “wants” with “needs.” You may want that five hundred dollar Callaway driver, but do you really need it?
Beware of little expenses! They start to add up and then they become like slow bleeds. You start to “bleed” money and eventually you can end up bleeding a slow death financially!
Maria, by her income is a wealthy lady. She receives $30,000 per month in child support. However, she is about ready to default on her mortgage because she can’t stop spending on things she doesn’t need.
She has a closet full of designer shoes, purses, and clothes. She drives a Ferrari and eats at the most expensive restaurants. She looks rich and acts rich, but her account balance indicates that she is spending more than her income. Who is she trying to impress?
Benjamin Franklin said, “ The eyes of other people are the eyes that ruin us. If all but myself were blind, I should want neither fine clothes, fine houses, nor fine furniture.”
Beware also of the “sales” quicksand! Just because it’s “On Sale”, you don’t have to buy it! My girlfriend has a “need” to buy things when they are “On Sale for X off.”
She has recently started cleaning out her closet of clothes she doesn’t use. If only you could see the pile of clothes she took out, all with the original tags still on the clothes! That is a waste of money!
Remember also, that sometimes a purchase will bring with it additional expenses. You buy a dress, well now you need the matching accessories and shoes. You buy a house, well now you need new furniture, because your old furniture does not look good in your new house.
One must take into account these additional expenses in order to maintain control over your finances.
Finally, don’t use shopping as therapy for your depression. Many people try to mask their emotions by spending money. They say “I feel terrible so I need to go to the mall.” This is no better than drinking, or gambling to quell your bad feelings. You are trying to solve one problem by creating another one!
Myth #5- Going into debt gives me options now instead of having to wait.
Unfortunately, today’s consumer mindset is, “If you want it buy it. Just put it on the credit card. You can worry about the payment later.” We want things now even if we don’t have the money to pay for them.
According to Experian, the average consumer debt was $101,915 in 2022. Just in credit card debt, a typical American household now carries $10,000 debt. Sadly, with 24 percent interest, it would cost $250 per month and the debt would not be paid-off until 2030. The total cost would be twice the original loan!
Interest will put you into financial bondage! Most people only make minimum payments. This results in never ever paying off the credit card debt or at least it would take years to pay off.
Often times, the products that were purchased on a credit card are old, out-of-date, or in need of repair before the debt is paid. Maintaining a lot of debt is like paying for a dead horse!
Now, I’m not against using credit cards, but you have to use them wisely. In fact, I now use credit cards for about 90% of my purchases.
First of all, I don’t buy what I don’t need. I’m not an emotional shopper. I use my credit cards to pay my monthly bills, restaurants, groceries, and miscellaneous purchases that I may make during the month.
My strategy with credit cards, is to make sure I have cards that don’t charge a monthly fee. Secondly, I pay my cards off completely at the end of the month so that I am not charged any finance fees. Then, I make sure that I have a card that pays the highest points per purchase.
As a result, I have turned my credit cards into mini income streams. If I get 2% cash back, it may not seem like a lot, but it adds up. There have been months when the credit card company has paid me $500 or more toward my debt. While other people pay substantial interest, the credit card company pays me! Isn’t that smart!
How many credit cards should you have? Most financial experts recommend that a person should only have 2-3 cards. I often see women open their wallets exposing about 10 or more credit cards. The problem is that they get too difficult to manage. If you can’t manage them it’s easy to end up in financial trouble.
Remember this: “Interest never sleeps nor sickens nor dies; it never goes to the hospital; it works on Sundays and holidays; it never takes a vacation; it is never laid off work nor discharged from employment; it never has short crops nor droughts; it never pays taxes; it buys no food; it wears no clothes; it has no repairs, nor replacements,no shingling, plumbing, painting; it has neither wife, children, father, mother, nor kinfolk to watch over and care for; it has no expense of living; it has no love, no sympathy; it is as hard and soulless as a granite cliff. Once in debt, interest is your companion every minute of the day and night; you cannot dismiss it; it yields neither to entreaties, demands, nor orders; and whenever you get in its way or cross its course or fail to meet its demands, it crushes you!- J. Rueben Clark, Jr.
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Myth #6- Money is intrinsically valuable.
Money itself is worthless. It is only worth the paper or the metal with which it is made. Money is only paper stamped with colored ink.
If you had $10 million in the bank right now, you would probably consider yourself rich. However, if there was a world catastrophe and you were the only one left on earth, how much would your money be worth?
Money is worthless if we cannot exchange it for something of value. Wise money management is the management of exchanges. The goal of wise money management is to maximize the value of each exchange. “Success often depends not on how much you spend, but on how wisely you spend; not more money but more for the money.”
Therefore, to make wise exchanges you must educate yourself about every exchange you make. Check the price, quality, added benefits, longer warranties etc. The more you know about the exchange, the better you will be at money management.
Benjamin Franklin advises. . .
“It’s unwise to pay too much, but it is worse to pay too little. When you pay too much you lose a little money- that is all. When you pay too little you sometimes lose everything because the thing you bought was incapable of doing the thing it was bought to do. The common law of business balance prohibits paying a little and getting a lot- it can’t be done. If you deal with the lowest bidder it is well to add something for the risk you run and if you do that you’ll have enough to pay for something better.”
Myth #7- My present financial situation is a result of circumstances and events beyond my control.
Many people refuse to take responsibility for their own actions- especially mistakes. Obviously, there are some events, such a tornado, that we can’t control but the responsibility for our finances lies with us. YOU must take responsibility!
You direct your financial position by the choices you make and the money principles that you adopt. If you make a poor choice, you can change your choice the next time to avoid making the same mistakes.
You must adopt the idea that “My present financial situation is a result of decisions I have made and the money principles I believe.”
Once you accept this reality, then you can start taking control of your financial situation.
“It’s your choice whether to live in a suffering state or a beautiful state. You have the capability to become a master of enjoyment, to fill your mind with appreciation, to be happy no matter what.”- Tony Robbins
To your success,
David C Figueroa- Success Coach
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