Financial behaviors and beliefs are learned. Unfortunately, most individuals have inaccurate points of view of finance and money. As a consequence, individuals do not adequately allocate their financial resources. Most believe their financial challenges are the result of not having enough money. Money will make an individual happy. This is totally untrue. Money does and will not make you happy, but neither does poverty!
The common misconceptions that individuals have regarding finance and money are numerous and varied along the spectrum. Young entrants to the workforce believe that time is on their side so they delay the start of their retirement savings. However, the exact opposite is true. Compounding returns and time may allow the early establishment of retirement savings to have a handsome payout. To the contrary, this payout is diminished with the deferral of time to start retirement saving. More than likely, the delayed start at an older age is not likely adequate enough to replenish the retirement nest egg for lost time.
Many believe that consumer debt is normal. Almost 80% of Americans have consumer debt. Consumer debt should not include high-interest rate credit cards from banks, department stores, or other retailers. Good debt may include mortgages, given the mortgage terms are reasonable for the borrower and prevalent market conditions.
Many believe financial professionals are needed to effectively manage money. While finance professionals may offer good advice and insights, they are not necessary for money management. There are multiple self-help books that include money management tips and tools. Multiple money moves can be assessed and evaluated.
Many believe that investing is reserved for the rich. An individual does not have to be rich to invest. Anyone can start investing with small amounts of money. Consistency, time, and dollar-cost averaging can yield favorable returns to most investors. One of the primary factors to understand about investing is the risk tolerance of the investor and time horizon for investing.
Others believe that money is a requirement for leisure travel. Being rich is not a requisite for travel. People with any economic status can travel and take vacations. However, some travel and vacations require more planning for certain individuals than others.
Money myths also include leasing, mortgages, salaries, professions, retirement age, economic security, and so many other notions that individuals believe to justify their points of view on finance and money. Wherever an individual lands on the spectrum, the key takeaway is to make sure your financial perspective is closely aligned with the current economic, financial, market, and money trends.
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Nicole Michelle
Finance and Money Wiz
March 22, 2022
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