It was a crisp dark night of October 2017, when all of a sudden I had an epiphany that I am not wealthy rich. Why I am using both the terms wealthy and rich – just because neither i had many assets nor i had a ton of liquid green cash. Till then me and my lovely wife were leaving in a bubble of romance, care free life style with a flawed ideology that we don’t need a lot of greens in our life. After all we were young energetic couple renting a condo and have no plan what so ever to make it big in this scary world. In fact we were perfectly happy with our small little world, where I had a job, enough for both of us, and then have some savings for the rainy day.
The majority of this mindset came from our up bringing where we have never been taught about finance, and we have seen grown ups struggle their entire life yet happy. We thought that is the ideal way, we don’t need more money to be happy. Without any logical explanation, it is engraved in our brains that money is evil, all rich people are bad, and poor people have good heart, so on and so forth.
Coming back to epiphany, why all of a sudden in October- well that’s when two knuckle heads decided to have a baby- that means extend their bubble to take care of another tiny human being. We always wanted to be parents, but never thought it would cause any type of panic attack, I was 35 and my wife in her 30’s. So many things needed to be changed. Fast forward 2021, we managed to save more, have more income streams and re-wired our thinking. There are some myths which got debunked on this journey, In this post I will try to hi-light some of those which can change your lives too. I will write detailed post for each of them, but wanted to give all the readers a basic run down but in FAQ style.
Top-7 myths busted for common people
Myth-1
Don’t you need a lot of money to start saving?
This is a very common one. I was victimized by this the most. This myth is so dangerous that common working class people fall right into it very easily and voluntarily. I learned hard way that we don’t need a lot of money to realize the compound effect, we need more time. A famous example is if you give me a penny , i will give you a 1000$, and you have to double that penny every day for 30 days. Believe it or not, due to compound effect, at the end of the 30 days you will have more than 5 million dollars for an investment of $30000. The bigger the time frame is bigger the compound effect is. So start saving early even if that means a penny.
Myth-2
Isn’t the best way to grow your saving is by keeping that in a bank?
This is an age-old one, might get famous from the medieval times when people needed big safe to keep their cash money. So richer you are the bigger your safe needed to be. However time has changed, but people’s mindset is still the same. There is some logic behind it- that money is secure in a bank. Its FDIC insured, and grows in value, However, with internet revolutionized banking and finance industry, you should strive a little better than 0.4-0.5%. That is you are going to get 5 cents for a 100 dollars. You need to know what type of bank you are choosing for your cheeking and savings account – which suits best to your needs. For example there are online banks which are not traditionally brick and mortar which provides all the facilities of a regular bank with higher percentage APR.
Myth-3
Isn’t stock market is only for the richest?
There is no doubt that the subject stock is so taboo that, only 55% of the people on average in US owns stocks, with 89% of them having annual income more than $100,000. People think stock market is rich kid’s play ground, however this myth came due to lack of proper education and knowledge from a very early age. Common people shy away from stock market which gives more control to the rich people and they keep on earning more, investing more. The rich gets richer and the poor gets poorer- cycle continues.
Myth-4
Don’t you need to be highly educated to earn money?
Education has always been the only saving grace for the working class. They work life long to provide food, education and a roof to their keen, with a hope that, this generation might be able to break the cycle. However the gap is always the lack of finance lesson from a very early childhood. At this point, someone has to get an MBA degree to understand their own finance and how to mend it for better. Education is important to earn a skill. That skill may or may not earn you enough money. So either you can gain a lot of skills and hope to get a lot of money, or you can master in one skill and expand your horizons on other aspects of money making- like staring a business, playing in a stock market, investing, walking a dog or whatever. Point is – education is critical but not just for earning more money. Otherwise many rich billionaires would not be college dropouts.
Myth-5
Don’t I just need a 401K to retire comfortably?
This myth is cute and adorable. Any time I hear the term retirement, i envision beach side retirement with a pinna-colada with an umbrella straw in my hand on a sunny afternoon. But the fact is many people stay away from retirement is because of this unwritten rule of million. However, if you really want to retire you have to make smart choice- for example – automating your income, strategic investment, automating monthly spend, matching your employers 401k , purchasing good insurance etc etc. Its still possible , just need a lot of planning. If you are employed, and your employer offers matching 401(K)), you should take full advantage of it. It may result in thousands of dollars in extra income. Not only setting aside money from your paycheck into your 401(k) is a way to automate your savings, but if your employer matches each contribution, it’s literally free money!
Myth-6
Aren’t all debts bad ?
Well true and false. Many rich people, corporations, start ups, businesses are in debt and still grow rich. I am not talking about student loans debt. There are tax benefits, bail outs and bankruptcy which saved many companies and businesses in the past when their debt is unmanageable. So for example if you purchase a house, flip it and sell it again with 12% price appreciation you can still grow richer. But where would you get money to buy a house? Glad you asked. If you can show evidence of business planning and profitability many banks would love to give you loan. But if you take a loan to buy a car which loses value by 40% in 3 years, that debt is bad.
Myth-7
Reserve your cash.
I can not tell how many parents still believe in this myth, as that gives them a sense of security. However if you take average 3% depreciation per year you are losing money. That means your $100 after a year worth $97. Even after getting the interest rate from the banks, you need to calculate if your money is being utilized the best way possible. Let your money be like small workers and work for you day in and day out. You don’t want to pay them wage, sitting in a cozy bank locker for years – rotting away in worth. Well its over dramatic, but the point is you need to start investing your money to at least get its worth increase with time.
