8 Common Money Myths

common money myths

Debt hasn’t always been around. It’s a product that has been marketed to death and now people line up to get into debt. There are many common money myths plaguing the American people today. Here are just some of them.

Money Myth: Rent-to-own places help the poor.

Fact: These companies only benefit themselves and are ripoffs.

These kinds of companies are usually scattered among poor neighborhoods because wealthy people don’t buy into their scams. These businesses allow people to take home items today after they’ve signed a written contract agreeing to pay a monthly amount on it.

Because of their ‘kind service’, people can expect to pay 50% more or sometimes double the original cost of the item. That’s right! Customers of these services are getting scammed and losing a lot of money.

The best thing to do will always be to save money and pay cash for whatever items you need.

Money Myth: Gambling and the lottery will eventually make me rich.

Fact: The lottery is a tax on the poor.

I’ve known a lot of people in my life that played the lottery and none of them are wealthy. None of them have gotten wealthy playing the lottery either. 

Just think about it. Have you ever seen a line full of people in business suits and expensive dresses to buy lottery products? No, you haven’t.

Because the lottery is a broke person’s sport. If the lottery was a way to make money, the lines would be full of rich people trying to make more money. But the truth is, the lottery is a way to get more money out of people who cannot do the math right.

One study found that you are two times more likely to play the lottery if you make under $20,000 per year compared to those who make over $40,000 per year. [1]

Money Myth: If I allow my friends and relatives to borrow money, I’ll be helping them.

Fact: You may destroy the relationship.

By allowing someone to borrow money from you, you’ve just strained the relationship. 57% of people lost a friendship because of loaning money. Another 63% of people have witnessed someone not pay back a friend. [2]

In short, loaning money causes the destruction of many friendships and it’s best to steer clear of that route. If someone needs money, consider gifting them the amount or just saying, “I’m sorry, but I can’t do that to you.”

I’ve personally done that to a relative before. They really needed the money and asked for a loan. I simply said, “I don’t believe in debt, so just take the money.” In all honesty, if someone is really in need of money, debt is the last thing they need.

Money Myth: If I shop around, I’ll be able to find a great deal on a new car.

Fact: A new car loses 70% of its value in the first four years.

A vehicle is a large purchase. Not only that, but it’s a large purchase that goes down in value extremely fast. A brand new, $28,000 car will be worth $8,400 in four years. In other words, that object is losing $408 in value every month. Ouch!

My husband used to work at a car dealership and it always amazed him that people who are barely making it would be approved and would sign off on such hefty loans that he knew they couldn’t afford. People would leave in tears at times because of the high amount they just agreed to.

However, no financial genius would take a loan out on something that’s rapidly losing value. Your best bet is to buy used and pay with cash.

Money Myth: If I give my teenager a credit card, it will help them manage money better.

Fact: Credit companies are targeting teenagers like never before.

It’s unfortunate that parents are giving their teens credit cards because credit cards are extremely dangerous to someone’s financial life. Many adults cannot responsibly use one, so image how devastating it could be to someone who doesn’t have any knowledge of how money works.

The reason why credit card companies are targeting young adults is that many adults already have as many as they can have. They need to recruit more people to spend money on credit cards which means moving onto the next generation of spenders.

A great way to teach teenagers how to manage money is to open up a bank account for them. Deposit a certain amount each month and allow them to pay for their needs. This can be their phone bill, clothes, school supplies, and whatever else. By only giving them a certain amount each month, they will have to learn how to budget and properly spend money to make sure they can cover all their expenses.

And if they make any mistakes, at least they’re still at home!

Money Myth: Debt is a tool and can help create prosperity.

Truth: Debt makes you a slave and steals your income.

Your number one tool to becoming wealthy is your income. When you’re in debt, your income flows right through your hands and to someone else. You’ll never be able to reach your financial goals as long as your giving someone else all your hard-earned cash.

The most important key to becoming wealthy is being debt-free. When you don’t have payment going to someone else, now you can save and invest. Pay yourself.

Money Myth: Credit cards are a necessity because I need them to order items online or by phone.

Truth: You can do that will a debit card.

common money myths

People love their plastic forms of money. I get it. However, there are people who believe they need to pay with a credit card in order to pay online or over the phone. But nope. That isn’t true.

The truth is a debit card linked to a bank account can also do those things. The only thing it won’t let you do is to spend money you don’t have.

Money Myth: When I cosign for a friend, I’m helping them!

Truth: The bank needs a cosign for their loan because the person isn’t reliable to pay.

Banks love to sign people up for debt. Therefore, just because they know someone won’t pay will not stop them from trying to make money. By cosigning a loan, the cosigner is now legally responsible for the loan being paid back.

Many relationship and friendships are torn apart because the original signer cannot afford to pay the loan and the cosigner now has to. It’s a horrible thing.

What do you think? Are there any common money myths that I’ve missed? Are there any money myths I’ve listed that you think are true? Please comment below and tell me your thoughts.

References:

  1. https://mcdanell99.wordpress.com/2014/06/06/dave-ramsey-on-the-truth-of-the-lottery/
  2. https://www.daveramsey.com/blog/the-danger-zone
Common money myths that people fall for all the time. The truth about money.

Common money myths people fall for all the time. The truth about money.

Thanks for sharing!

Related Post

Leave a Reply

Your email address will not be published. Required fields are marked *