Are you being untruthful? Don’t worry, we can all relate. Here are the lies about money I’m sure you’re still telling yourself.
1. Planned spending is savings
This is the biggest I know when it comes to lies about money. It feels good to have money in the bank, but if you’re planning to dump it all on a major purchase like a vacation or a car, it just doesn’t count. I’ve long abandoned the habit of counting my vacation fund in my net worth calculations, and you should too — because it doesn’t count.
If you’re going to dump your cash into something that’s going to eat it up, like a wedding or a car, it’s not an asset. Let’s all stop kidding ourselves and be honest about what’s really savings, and what’s just planned spending.
2. You get to spend your gross income
I’ve lamented about this one before, but I feel the need to say it again because we all seem reluctant to accept the truth: we do not take home our gross income. This is the worst of the lies about money you’re probably telling yourself!
If you’re using Gail Vaz Oxlade’s budget pie, you’re going to run out of money before you run out of slices. Next time you get excited that your housing costs are less than 35% of your income, make sure making this calculation with your net income, not your gross. You don’t get to spend your gross, you spend your net. Your gross income is purely for ego. The sooner you realize that, the better off you’ll be.
3. You don’t need to invest in tax-advantaged accounts
The TFSA (tax-free savings account) is the best retirement savings vehicle available. Yep, you read that right.
You should focus on maxing out your TFSA before you put any money into your RRSP. If your income is over $50,000, you might want to contribute to both, as RRSPs will give you a tax break at the end of the year. Saying you don’t have enough to save is one of the lies about money I hear over and over again.
4. You have to finance a car
I drive a vehicle you might be embarrassed to be seen in because the car is as old as I am. Thankfully, it only leaves the parking garage about once a week to go to the grocery store. The rest of the time, I make use of public transit or my own two legs to get where we need to be.
In a world where everyone thinks it’s normal to have a car payment, I am a total weirdo. But I’m going to let everyone in on a big secret: you don’t have to finance a car. You can save up a few thousand dollars and buy a car that costs that much!
If you want a nicer car, then save up more money, but this idea that there’s such thing as a “down payment on a car” needs to stop. If you can’t buy a vehicle outright, you can’t afford it. This is one of my most hated lies about money!
5. You don’t have to invest
Some of the saddest stories I’ve ever heard are people that have tens of thousands of dollars… sitting in a chequing or savings account earning nothing or next to nothing in interest. Young people are so wary of the stock market sometimes it’s hard to convince them, but the reality of the matter is you can’t afford to not invest.
If you’re keeping your money in a chequing or savings account, it’s not even keeping pace with inflation, which means rising prices are actually eroding what you’ve put away. You’d actually almost be better off spending your money than saving it this way because it will buy you more today than it will in the future. Wow isn’t that depressing! Don’t delay getting started investing, start now and set yourself up to be wealthy for the rest of your life.
Which of these likes about money have you been telling yourself? Anymore money lies I missed?