We tend to act out what we believe. Once you believe a certain route to work is shorter or has less traffic, you will rarely deviate from it. Your financial status is also usually a mirror of your belief system on the money. Say you are in debt, which is an area I know many people want to tackle this year. There is a way of thinking or believing that got you into debt. You believed that you needed to impress so you borrowed. You believed that you could always save later so when you were in an emergency, you borrowed. You believed success depends on how you look, so you borrowed to play the part. Some beliefs we have are based on society and culture. Others are simply messages that have been drilled into us over time such as money does not grow on trees. If you want to create wealth you have to be ready to challenge the beliefs that no longer work for you (Click to Tweet this thought) just the same way you may need to change your route sometimes. Here are five common misconceptions about money that we need to challenge.
1. I will save or invest when I earn more.
Imagine your child telling you that they will start eating when they are bigger. It’s absurd, isn’t it? They won’t get any bigger unless they eat what they are capable of now. In the same way, your savings will not increase by earning more. The habit has to take root using what you have today whether it’s one hundred bob or one hundred thousand.
2. I will ask for a salary advance just this once.
No, you won’t. You will keep going back until it’s a routine. I know several companies that have to do payroll twice to cater for advances. You took a salary advance because at some point, your expenses exceeded income. The solution is rectifying this not continuously being on an advance or other form of debt such as credit cards, loan sharks, personal loans etc.
3. I am doing well because I have a big salary (or business income), live in a nice house or drive a big car.
This does not matter in the scheme of wealth. Granted, it’s nice to have but imagine you lost your income today. How long can you survive on your savings or other assets? That’s how wealthy you are. The rest are distractions. After all you won’t be able to pay for all this nice stuff anyway if you don’t have that income. This is a hard belief for us to grapple with because society throws the opposite message to us. We are made to believe the more stuff you have, the more successful you are. You’ve made it! It’s simply not true.
4. My home is my biggest investment.
The house you live in may be very nice but it’s not an investment. An investment earns you money. A separate house that you may be renting out is an investment because it gives you monthly income. Having your own home is a good thing and may be one of your goals. Just don’t mistake it for an investment until the day you are ready to rent it or sell it. Remember you need money to sustain the home and yourself in it. Whatever brings in that money is the investment.
5. A deal will come by.
My research to date tells me most people did not get wealthy on a one-time deal. In fact, those who made money e.g. gambling, competitions etc. tend to lose it just as quickly. We delay getting our act together on money because we think that at some unspecified point in time in the future, something equally unspecific will happen and cast us off into Financial Freedom. The bad news is that it is those unexciting regular activities like saving, learning, investing, spending wisely, pushing through hard times, being disciplined etc. are what enable you to meet your goals. The good news is that these habits develop your character, which is then able to grow and sustain wealth.
You may relate with some of these or as you take a hard look at yourself you realise there are others. For a long time, I never considered life without a monthly income so I didn’t save. Maybe you don’t think small amounts have value. Do the calculations. Some people have found themselves with false inheritance beliefs only to find nothing was left. Challenge the beliefs behind your spending. The reason we find ourselves in the same situations over and over is very likely because we have the same belief keeping us stuck. We are creatures of habit because we are creatures of beliefs.
Waceke runs programs on Personal Finance and Entrepreneurship. Get in touch with her on waceken@centonomy.com|Facebook/WacekeNduati| Twitter@cekenduati