5 Personal Finance Lies You Tell Yourself

I’ll go through five personal finance lies you tell yourself and discuss how harmful they can be, and give you a few tips on how to learn from them and make smart financial decisions moving forward.

It’s easy to get misguided advice when it comes to money, and the truth can often be hidden. 

Let’s get started.

1. Get Rich Quick

Forgetting the odd exceptional circumstance, making money takes time. There is no shortcut or cheat code to suddenly become rich.

In fact if you were to look into some of those ‘rich overnight’ stories, you’ll likely find something that has been built up over a long period of time. For example:

James Dyson has a net worth of about $5 billion but before his first successful model there were over 5,000 failed prototypes and over 15 years of work.

Some of you might think you have me beat with the lottery, that gets people instantly rich.. Right?

Well, firstly, about 70 percent of lotto winners lose or spend all that money in five years or less and not to forget that it’s a 1 in 45 million chance to win in the first place. Personally I’d say it’s not a great way to get rich.

The fact is if someone can’t manage their finances at £1,000 a month; they don’t suddenly gain those skills by being given a winning ticket.

The Solution:

Forget the idea of getting rich quick and get some well grounded, realistic financial goals. Make a plan, get into the details, have short term and long term timelines and stick to it.

2. “It’s OK I Got It Half Price”

If a TV costs £500… and you buy it for £400

You haven’t saved £100… you have spent £400.

… and if the reason you bought it was because you thought you were saving £100 by buying it now and didn’t want to miss out.. Maybe you’ve instead wasted £400. Did you really need it?

You shouldn’t justify any SPENDING of money based on supposed ‘SAVINGS’.

You really shouldn’t make a purchase BECAUSE of a ‘saving’. Even on the little things like a pack of clearance donuts dropped down to 20p. If you don’t need donuts… and who ‘needs’ a donut if we are honest.. Then you are not saving money, you are spending money you wouldn’t have otherwise.

The Solution:

Consider the value instead of the saving. Is it worth the money you are spending and is it something you really need or want? It’s not about cutting back and not spending any money. It’s about not justifying bad money by saying how much you ‘saved’

3. Managing Money is For Rich People

This is so backwards it’s one of those funny personal finance lies to tell yourself. If you have enough money coming in it should be easier to find a way to fumble your way through some bad money choices.

When you’re living on a low income, especially during this cost of living crisis with low interest rates, high inflation and crazy energy prices.. if you start making some bad money choices things could get really bad.

So being clear about your income, managing sinking funds for upcoming expenses and working towards an emergency fund is more vital when finances are tight. 

Putting or spending £10 in the wrong part of your budget will make a bigger difference to you.

The Solution:

Managing your money is essential. Get into the details and let your budget guide you to smart financial decisions.

4. Investing Is Too Risky And Difficult

Investing is often shown as being loud, busy and time sensitive. You get shown all sorts of weird looking data analysis sheets and numbers that make no sense.

How many of you are put off of investing before even looking into it because of this?

Surprisingly the truth is investing can be very easy. There are collections of stocks known as funds, that can be bundled in lot’s of different ways. This takes out some of the challenge in trying to research and pick a stock worthy of your money.

For Example: The S&P 500 is a collection of the largest American companies.

Sure with investing you have the risk of losing money, so yes it’s ‘riskier’ than a savings account but the average return on the S&P over the last 30 years is over 10%.

Therefore given enough time historically we have seen the value bounce back higher from the dips.

There is a stigma of investing being difficult that I want to disrupt. I have automated my investments to be done monthly into a couple of selected funds and now I don’t do anything.

Unlike you may have thought, I don’t stare at graphs day and night wanting to sell or buy at the right time. I’m not looking to touch that money for a long time.

As for the risk, that’s something you will need to research and think about for yourself. You could chat to a financial advisor to get a more personalised plan.

5. My Credit Score Is Only Important For A Mortgage

Having a low credit score can have several consequences such as difficulty in getting approved for loans, higher interest rates on those loans and even difficulty in finding employment since some companies now run credit checks on potential employees. 

Therefore putting yourself at risk of delaying building wealth and potentially retiring.

Even if the implications of a bad credit score don’t put you off there are NO benefits. It usually goes hand in hand with negligence in your personal finance management too.

Accordingly if you end up in a good or bad financial situation you may not have the knowledge or finance skills to make smart money choices.

The Solution:

Educate yourself. Find ways to improve your money management and make a plan to improve your credit score and stop telling yourself these personal finance lies.

Other posts you might enjoy:

A Guide Of Some Of The Biggest Personal Finance Lessons I Have Learned

Ways To Save Energy And Reduce Utility Bills At Home