In order to manage money well, you need to develop the right mindset about it. Thinking negatively about money will likely lead you to be broke and leave you wondering why you constantly revert to a financial rut after getting out of it.
The psychology of money plays a huge role in improving your finances. Many people struggling financially harbour negative thoughts about money. The most common one is that money is the root of all evil. Thinking that is likely to make you avoid money so that you can stay away from nefarious activities.
I’ve discovered three misconceptions about money that many people have. Getting rid of them and viewing money as a valuable resource will help you to get out of debt and build savings.
Money isn’t linked to happiness
I don’t know about you, but I’m happier having money than being broke. When my finances weren’t in order and I was drowning in debt, I would get agitated by the smallest thing. My life seemed out of my control and unexpected expenses would always crop up.
Think about the last time it rained when you were outside. I’m sure it was nice to run inside your house to seek shelter and avoid getting wet. How about when your stomach rumbled and you put food in it? Even better, were you happy when you travelled to visit your family for the holidays?
What is the common resource that enabled you to seek shelter, to consume food and to see your family?
Money.
Money provides you with content, satisfaction and happiness to a certain degree every single day. It doesn’t seem like it because we take certain things for granted, and some of us refuse to acknowledge that money provides us with the basic essentials for survival.
Just think about the last time that you weren’t able to make a payment on a debt or an unexpected medical expense popped up and you had no money for it. Did that make you happy? I doubt it. But when you had the money to replace a car tire or send your child to a paediatrician, were you glad that you had the money for it? I sure hope so because your life would’ve been a lot more difficult had you not been able to fund those expenses.
There is nothing wrong with believing that money brings you a certain level of happiness.
I’m not saying that if you’re a completely miserable and ungrateful person that money will make you a pleasant and happy person. But money makes life a lot easier, and it’s a valuable resource that provides a certain level of content, satisfaction and happiness.
Money will make me a bad person
Don’t let movies fool you into believing that all rich people are bad people. Sure, there are some rich people who are jerks, but I’m willing to bet that they were unpleasant before they became rich. I discovered that money makes you more of what you already are. If you’re a mean person, the chances are high that you will be more arrogant and pompous after you receive money.
If you’re a nice person who enjoys helping others, money will provide you with more resources to help a bigger number of people. The more money you have, the more people you can help and to a higher degree than when your funds were limited.
I discovered that money magnifies who you already are.
For most people, the pendulum didn’t swing the other way once they received more money. It usually wasn’t the case that the nice person became a terrible person because of money. If that happened, other factors were involved that usually had very little to do with money.
Good debt exists
I couldn’t disagree more. I’m completely against debt because I had lots of it, and it was one of the reasons that I ended up homeless. Had I not had debt, I would’ve been able to dedicate the money for my monthly payments to my savings account. Then, once my income stopped, I would’ve had the savings account as a safety net. However, since I used most of my income to pay creditors, I didn’t have a savings account.
Debt is the number one enemy of financial freedom.
It is impossible to be financially free when you have debt. The Bible is correct when it says that the borrower is a slave to the lender. When you owe money, your primary motivation for going to work is to pay off debt. Once you pay off debt, your reason for going to work is different—it’s to increase your net worth.
After paying off your debt, you may even reconsider continuing to work a job you dislike. You’re no longer pressured to attend a job you don’t like because you have to pay creditors. And when you don’t have any loan payments, you have more money. That means a larger savings account.
But what if you have no savings and you want to buy a home? Is it a good idea to take out a loan instead of paying rent?
It took me six years to get out of debt and build up a big enough savings account to buy an apartment in a third-world country for cash. If I can do it, having started literally from the street, then you can also do it. Sure, it’s going to take you several years to save up money for a beginner home, but once you pay it with cash, you’ve got shelter for the rest of your life without worrying about the bank or any other institution taking it away from you. You’ll truly own it, and there’s no greater feeling than being a homeowner.
Remember, 50% of Americans are living paycheck to paycheck. They’re one month away from living on the street because they’re drowning in debt.
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