Most of us are kept from our potential because we labor under false ideas and perceptions about money, wealth and prosperity.
The myths about money are primarily originated during major economic times such as the Great Depression and are solidified by financial institutions that have a vested interest in maintaining the status quo. These myths are further spread through the misguided advice of well-intentioned family members and friends.
We rarely think to question the financial concepts we believe in and follow. Truly, in most countries we have the herd mentality and seldom do people consider that these alleged “tried and true” strategies might in fact be false.
This happens because we are trained in our perceptions about money at a young age. Our parents pass along to us their ideas about money just like their parents passed ideas along to them.
Even if their ideas are not explicitly stated, we absorb them through observation of our parent’s use of money. I used to observe my father count his money by adding up his bank account balances and his mortgage receivables. He had a specific drawer that had all his information and after a while, when he wasn’t counting it, I was. As a result of my father’s actions, my brothers and I keep meticulous records of the various assets we own. If your parents were careless spenders, than chances are, you are careless as well. If they were cautious and suspicious of others then you will probably hold on tight to your money in a like manner and you could miss opportunities for cash flow and wealth creation. Conversely, as it happens in some families, their behavior about money could have the opposite effect on you and you get yourself into different problems. Sometimes, without even knowing the source of our feelings about money, we will behave in ways that perpetuate financial mismanagement throughout our lifetime.
The members of our families and communities contribute to our miseducation through their buying habits, employment and investment advice and through other motivating behaviors.
Most people have good intentions, but their advice relies on the same myths they were taught or information that may be pertinent to their situations but does not relate to yours.
The myths we absorb from our parents and community are supported by society as a whole. Our culture offers “wisdom of the ages” in the form of clichés about money that we rarely question. These clichés are often rooted in historical events that have little to do with our current economy or our personal financial situations.
For example, the Great Depression resulted in a hoarding and scarcity mindset that permeated American culture and heavily influenced succeeding generations. After World War II, the belief that led to financial security came from tying oneself to a corporation. These beliefs are perpetuated by institutions within our society because they support their goals or because the people within the institutions don’t know any better.
I can still remember my parents telling me, “You need an education” and their idea was for me to get a job. They were indoctrinated to working for someone else while I turned out to be the polar opposite. I worked to be rewarded in direct proportion to my knowledge and the conviction of the actions I took. For me, the only income ceiling I wanted was the one I put there. For my parents, they sacrificed entrepreneurship for a steady pay check.
Think About This
Financial service companies sell their products by promoting perspectives and methods with fancy names such as “The Miracle of Compounding Interest.” These motivating messages have been used for so long that we have come to accept them as viable and trustworthy strategies. But financial institutions have always practiced and continue to practice the very things that we are either told to avoid or are completely unaware of. The ideas they promote are good for them, but not necessarily good for us.
Conventional retirement planners are usually not helpful in the quest for financial freedom.
Not only do financial planners receive their training from financial institutions, but they often work directly for these companies as well.
Even if a financial planner or retirement planner is knowledgeable in correct economic principles, they usually have an underlying incentive to sell their suboptimal products.
This does not mean that financial institutions are inherently evil because they preserve their self interest. It does mean that you must be aware that institutions are in business to increase their revenues and their bottom line, not yours.
My goal is not to tell you to avoid financial institutions; it is simply to point out that they have their own distinct interests and those interests may not coincide with yours.
For example, the bank manager recommends a 6 month Certificate of Deposit at 3 percent interest. The bank can lend money based on these investments plus deposits at ten times that amount in the CD. That is in their best interest, while you’re getting 3 percent interest, paying 30 percent tax on it and losing the value of your money due to inflation. That is hardly in your best interest. The same goes for stock brokers, bond sellers, etc. They generate commissions on the sale of products to you and seldom do you hear back from them regarding optimal timing to sell your asset.
YOU NEED TO TAKE CHARGE OF YOUR MONEY!
To combat the compounded influences of family, community experts, education, and society – a daunting task – we must realize that popularity and the majority opinion does not necessarily point to the truth. In other words, twenty five million people making a dumb statement, doesn’t make it any less dumb.
The herd mentality is destructive. Consider this question:
If only a minority of people are wealthy, why do we follow what the majority of people do financially?
True principles of personal finance exist that can lead to prosperity for anyone in almost every circumstance. But succeeding with these principles requires the courage to step away from the crowd and choose “the road less traveled.”
When we accept financial myths, we accept untold opportunity costs. Every single thing we do comes at a cost, the cost is everything we could have done instead of what we actually did. For example, every time we decide to accumulate money in a bank account because it’s safe, it comes at the cost of returns we could have earned had we found a more productive use of the money. One of the most critical steps we can take toward financial freedom is to accept the possibility that what we thought to be true may be completely false, and that there are infinite truths we have yet to learn.
We’ve become a society of people used to accepting assumptions and handed-down advice, often choosing not to take the time and effort to question them.
That’s just not smart- Question everything!
When I hear people say, “It sounds too good to be true,” my answer is that we only believe this about things with which we have no experience. Granted, a healthy tendency to critical analysis can save us a lot of headaches. I am not saying that we should be naïve and blindly accept what we are told. But, it is much healthier and conducive to happiness and creativity to remain open to learning how and why things work, even if we don’t initially understand.
Casually discarding everything that sounds “too good to be true” will lead to a life of poverty even if we are surrounded by success and prosperity.
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Part of the article above was taken from Killing Sacred Cows, a book written by Garret Gunderson. I recommend it highly.