We’ve all been there: You hear a motivational speaker discuss personal finance, or you read the latest financial advice column in a newspaper or magazine. For a while you feel fired up, ready to transform your financial life, and maybe even become the next rags-to-riches story.
A few weeks later, however, you realize that the finance management techniques have not made a dent in your bottom line. What went wrong?
Regardless of what some so-called professionals would have you believe, many common pieces of financial advice are myths. However, if you fall victim to a money myth, do not despair. For every common money myth, there is an alternative method that will likely be more effective.
Debunking Common Money Myths
1. You Need to Change Your Entire Life to Be Financially Successful
You cannot run from your problems. Research suggests that we actually carry our habits, thoughts, and emotions around with us from one place to another. Therefore, if you want a different outcome, you must work on internal change, rather than just changing your geographical location, living situation, job, or bank.
The internal changes you make may include learning and practicing new financial habits, such as curbing excess spending and differentiating between needs and wants. Consider that some individuals find themselves saddled with greater debt as their salary increases. This exemplifies that external changes, such as greater income, can be futile in transforming your life for the better without a corresponding internal change.
2. If You Visualize Piles of Cash and Fantasize About the Riches You Desire, Money Will Appear in Your Life
It would be nice if that’s all it took. While it certainly doesn’t hurt to gain clarity in regards to your financial dreams, visualizing the end goal is only the first step. The money will not appear until you write down specific long-term personal financial goals, break them down into a logical series of steps, and then set a timeline for the achievement of each.
Furthermore, some psychologists suggest that for each step, you complete two statements:
- “I believe I can achieve this because…”
- “My reward for achieving this will be…”
Now you have a concrete, step-by-step plan that will carry you to your dreams much faster than merely visualizing the result.
3. If You Think Positively, Forget Your Mistakes, and Avoid the Dark Side of Your Financial Situation, You Can Change It
Unfortunately, the more we try to suppress negative thoughts, emotions, or memories, the more power we actually give to them, and the more they intrude into our consciousness and affect our decisions. Think about pushing a beach ball beneath the surface of the water – the harder you push down, the more it resists. Eventually, when you push it down far enough, it springs up someplace else, likely in a place you do not want it to emerge.
The same thing happens when we try to push dark thoughts and memories to the recesses of our mind. Eventually, those thoughts pop up and interfere with our best-laid financial plans. The solution is to open up our awareness to all parts of our financial situation: the good, the bad, and the ugly, and to take the appropriate actions to make change.
4. If You Focus on a Wealthy Person You Admire, You Will Be Motivated to Become Wealthy
It can be motivating to use another person as a financial role model, but there’s a catch: Your role model must be as similar to you as possible. Focus on choosing a role model who comes from a similar background, who has similar resources available to him or her, and who is in the same stage of life. Identify exactly what this person has done to become successful, and begin replicating this formula for success in your own life.
For example, if I had to choose between Donald Trump and one of my coworkers to become my financial role model, my gut reaction would be to choose Donald Trump who is famous for his financial success. However, with further thought, I realize that I have very little in common with a 65-year-old man who grew up in a wealthy family and focused his energy on mastering the world of business.
I am more similar to my female coworker who grew up in the same generation and socioeconomic class as me, who completed the same degree, and who works at the same job. When she accomplishes important financial goals, I need to take careful notes and implement her habits in my own life.
5. If You Focus on Worst-Case Scenarios, You Will Be Motivated to Make Better Choices
Most people are actually more motivated by positive feelings, such as optimism and anticipation, rather than negative ones like fear and sadness. Make a list of the benefits you will enjoy once you have achieved your specific financial goals. Post the list in places where you will see it frequently, such as on your refrigerator, computer monitor, and steering wheel. Read the list and use the positive emotions to inspire forward movement toward your goals.
If you are trying to improve your diet, would you feel more motivated by conjuring up the self-disgust felt after eating too many potato chips, or by picturing the healthier, slimmer you of the future? Most people would choose the latter. Similarly, if you are trying to improve your financial habits, would you rather focus on the fear of not being able to pay the rent, or the anticipation of buying a home? Odds are, the latter choice will provide greater fuel for your efforts. However, don’t confuse this strategy with ignoring the negative aspects of your situation (myth #3). Be aware of financial challenges like debt, but focus on how it will feel to pay off that debt instead of how it will feel to file for bankruptcy.
6. If You Have More Willpower, You Will Be Able to Achieve Your Money Goals
The problem with this statement is that if you ask 10 different people what constitutes appropriate “willpower,” you will get 10 different ideas. Having self-discipline and taking better control of your saving and spending habits can definitely improve your finances. However, rather than focus on “willpower,” recognize the obstacles to which you are the most vulnerable. Decide what you need to do to navigate around those obstacles – know your strengths and weaknesses, and use them to your financial advantage.
There’s never a bad time to step back and evaluate what you’re doing to achieve your financial goals. Are you taking concrete steps toward measurable results, or are you going about your finances blindly?
Once you identify the strategies you are using, see if they are affected by any of these myths. For example, do you mentally beat yourself up every time you look at your credit card balance? Or do you conveniently forget how high that balance is when you swipe your card at the store? If you identify any myths in your current mode of thinking, tweak your existing approach according to the relevant suggestions above. You never know, you just might find a motivational technique that lasts more than a few weeks and makes your rags-to-riches dream a reality.
Which money myths have tripped you up in the past, and how did you move beyond them?