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  • Writer's pictureZachP

#100. The Three Biggest Myths In Personal Finance

Updated: Jul 26, 2023

With our football season fast approaching, I am now publishing one article a week. If I am feeling eager, I may pump out some bonus articles every so often as well.

Too many myths float around when it comes to personal finance and investing.

These myths then keep people from trying to better their financial situation. Sometimes it is an income problem, but many times it is a money management or spending problem on our end.

To help make sure these myths do not leave you feeling down, I have picked out the three most common that are on the tip of too many tongues.

One. "I cannot afford to invest."

This is a tricky one because there are some people in the world who truly cannot afford to invest.

However, until you've done a budget where you track all your spending, you will not know for sure.

And the worse part about this myth? The price of not investing is far worse than pinching pennies in your 20s and 30s. Working into your 60s and 70s is fine, as long as you are choosing to work - not because you MUST work.

The Harsh Truth And A Simple Fix

With most people's spending habits, some frivolous spending is going on. The issue is most people do not realize how bad this frivolous spending problem can be.

A common phrase among people in personal finance is "Pay yourself first."

What this simply means is you are paying yourself first before spending ANY dollars on other expenses. So, once you pay your bills and the tax man, you should immediately pay yourself a portion of the remaining dollars to use for saving/investing.

The most basic principle is to save/invest 10% of any money received. This 10% should go directly into your investment accounts (assuming you have the emergency fund covered).

Most people can accomplish this through their work-sponsored retirement funds. But, if a 401k or something similar is unavailable, here is an introduction on learning to invest in the stock market.

Personally, we like investing 25% of any money received straight into index funds. Index funds are low-cost and great for the lazy, long-term investor.

Two. "Investing is gambling. I might as well keep my money in my savings account."

I hear far too much about how the stock market is for the wealthy, and this couldn't be further from the truth.

When John Bogle created index fund investing, he created a world where anyone could access the wealth and secrets of the stock market.

Then, with the advancement of technology, anyone with a phone and internet access can invest with the click of a finger (I still recommend using either Vanguard, Schwab, or Fidelity as your brokerage firm).

So, if all this is true, why do people still believe investing is the same as gambling? Most people take shortcuts.

Wealth-building is a long-term game. True wealth is built after spending 20 or 30 years making sound financial decisions over and over again.

The surest and safest way to speed up your wealth-building timeline is to focus on your savings rate, NOT investment choices.

Your savings rate is how much you are able to invest per month. Thus, if you invest 25% of every paycheck, you have a savings rate of 25%. The more you increase that number, the sooner you should be able to retire.

Here is a fantastic article that illustrates this point perfectly.

No matter what you do, do not take shortcuts with your personal finances. Put in the work, invest in safer investments such as index funds, increase your savings rate when possible, and continue this pattern for years.

Three. "I don't have time to budget."

Believe it or not, I would argue that +80% of people budget and do not even realize it.

When most people think of a budget, they visualize someone sitting in front of an Excel spreadsheet inputting every purchase they make.

This is one form of budgeting, but it is not the most common way.

Budgeting is simply tracking and allocating your money to pay for certain expenses. Most people have a general idea of how much they can spend on groceries a month and how much they need to save for next month's bills. This is a form of budgeting.

A good budget can take up 5 hours of your week or just 1 hour a month.

The simplest form of budgeting that will make a lasting impact is using the above "pay yourself first" method. If you are allocating money to pay your bills first, then paying yourself a set percentage to invest second, you are able to spend whatever is leftover freely.

This method can work for most people, as long as they are disciplined about paying themself first.

I would love for you all to post other personal finance myths in the comment section below. Let us be a community that helps each other grow. And if you enjoyed this article, don't forget to hit the heart icon, share it with your friends, and subscribe for more content.

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