Not too long ago, I was $40,000 in debt.
But I was determined to gain financial freedom. So, I started educating myself about finances and discovered that a lot of the ideas I had about money were straight-up wrong and keeping me in debt.
And money myths might be holding you back from financial success, too.
I'm going to dispel five common money myths that might be holding you back from the financial success that you are capable of achieving.
Money Myth #1: I just need to make more money
I hear this all the time. People think that the only solution to their money woes is to simply make more. And I used to believe this myself.
So, I worked crazy hours trying to get to the next level in my career so I could earn more. I even went back to grad school, trying to get another degree to get a raise.
But I discovered finally that the problem wasn't my income. It was how I was managing the money I was already making.
See, if you can't manage $1,000, then you also can't manage $10,000, Making more doesn't lead to you keeping more.
It's very common for people to be mismanaging the money that they're already making, because we simply fall into habits and routines and don't stop to re-evaluate whether or not the way we're spending money is working for us.
So, what's in the way of saving for a lot of people is not just a lack of income. It's simply spending too much of your income.
Before you start looking for a side hustle or killing yourself to get a promotion, take a step back and look at the money that's going out of your life. As a guideline, I recommend following the 50/30/20 budget method.
Basically, you shouldn't spend more than 50% of your monthly income on needs — the things you need to live, like housing and transportation. You don't want to spend more than 30% of your income on wants — the things that make life fun, like a night out or a new outfit — and at least 20% of your income should be going into savings every single month.
If you find that your needs or your wants are taking too big of a chunk of your income, then you need to re-evaluate your spending.
Money Myth #2: it's bad to buy expensive things
I used to believe that it's better to spend money on something cheap than to save up for what I really wanted. I was raised to be a deal hunter, a bargain shopper with the best of them. I would never pay full price.
While I still love the thrill of a good deal, I've realized that most wealthy people save their money to buy items of quality. They buy fewer but higher quality items that will last longer.
If you really think about it, sales, discounts, and deals, those are all things that are created by savvy marketers to try and get money that we weren't planning on spending out of our pockets.
Try to think long-term about what you really need, what you will really use, and if it will last for a long time.
Money Myth #3: I need to be rich to invest
Hold the phone. People don't wait until they are rich to invest. They become rich by investing.
Your investments need time to grow, and so it's much more important to be able to start investing as soon as you can than it is to invest a lot of money at once.
Realizing this is how I managed to finally turn my finances around. I came across the story of a janitor who managed to amass an $8 million fortune by saving and investing. And I realized that if he could afford to invest, then so could I. I didn't have any excuses left.
There are no minimum amounts required to start investing. In fact, people invest with pennies and cents. If you're not sure how to start investing, just check out this article.
Money Myth #4: I don't need to save for retirement yet
If you're in your twenties or thirties, retirement may seem like a long ways away, but do you ever find yourself telling a story from when you were in high school or college and then suddenly realize, whoa, that was like 10 years ago? *mind blown*
Time flies. And you need to make sure that it doesn't leave you behind, because retirement is going to be the biggest expense of your life. And whether you want to spend it traveling or spending time with family and friends, you want to make sure that you can live comfortably in the last years of your life.
So, max out your retirement funds as soon as you can, and if you have any sort of employer matching your contributions, make sure you are saving the maximum amount because they are giving you free money. Take advantage of it.
Money Myth #5: it's too late for me to save for retirement
On the flipside, maybe you're in your forties, fifties, or sixties, and you're starting to panic because your retirement account, isn't where you want it to be.
The good news is if you are still earning income, you are not out of the game yet, but you do need to start, like, now.
The good news is that your retirement money keeps growing even after you retire. You don't pull it all out on the day you retire. You just remove the amount of money that you need as you need it.
So, if you retire at 65 and live until 85, that is 20 more years that your money keeps growing.
Realizing the truth about money myths is a good start, but if you want to really take control of your finances, you need to learn to think the way wealthy people do. For a start, you should check out our free masterclass, How to Think Like an Investor.
Best of luck!