10 Money Myths to Unlearn (These Keep You BROKE)

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This is the digital nomad quest podcast with Sharon Tseung. teaching people how to build passive income, become financially free and design their best lives.

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Hey guys, Cheran from digital nomad quest and today we’re gonna go over 10 Money misconceptions to unlearn. So I think we all make mistakes when it comes to finances. A lot of people aren’t taught these things when they’re first starting out, right? Many people are taught that money is the root of all evil, so they don’t talk about it in their families, which honestly, if it was more normalized to talk about money, I think people’s financial situations would be dramatically different. So that’s kind of why I wanted to talk about these different things today. I think that people need to unlearn these money misconceptions in order to start building their wealth. Now, if you guys are guilty of any of these misconceptions, it’s okay, there’s no need to beat yourself up with any money mistakes, because I think that we’re all on our own journeys. And we’re all learning and growing. So it doesn’t matter what age you’re at, you can start improving your finances today. So the first money misconception is I can say without a goal, technically, yeah, you can say without a goal, but it’s just going to be a lot harder. People will set money goals, save at a faster rate than those who don’t. So write down your different goals, whether it’s buying a new home, saving money for your kids education, it’s really important to write it down and figure out the numbers you want to reach. And if you want to save $100,000, maybe you go backwards and say 50,000, or get out of debt. So those are like your first milestones before you can get to that 100k point. And by writing these different things out, it’s just a lot easier to get there, then you can start examining your spending habits and your income and figure out where your income is going. And then make adjustments in order to get to your savings goals. So create that goal and also put down a deadline and write it all down. Even if you don’t hit that deadline. It’s like shoot for the moon. And if you miss you’ll still land amongst the stars. Number two money misconception is credit cards are evil. Now, credit cards aren’t inherently bad, it’s just a matter of how you are managing your money. Because if you end up taking on credit card debt that can be really bad, the interest rate is super high. If you’re not paying off your bills on time and in full by paying off credit cards on time and in full, you can actually really build your credit score and reap a lot of benefits like travel rewards or cash rewards. So credit cards can actually be a really good thing if you are organized with your finances. When you are using a credit card, make sure you actually have that money instead of just spending what you don’t actually have. And if you’re organized, make sure you set up auto pay so you don’t miss those payments. Number three misconception is student debt is always good debt. Many people think student debt is okay they think just deal with it after you’re done with school. But even if you are borrowing money for such a good reason, like higher education, debt is ultimately a financial burden. So throughout your academic journey, make sure you stay on top of it. Maybe you’re going to take a part time job or something like that to help pay it down. It’s important to work on that debt if you can, there is a difference between good debt and bad debt. Good debt can improve your financial situation. It can be good if you’re leveraging your money to grow your wealth as long as you’re not over leveraging for example, with real estate investing a lot of times you are borrowing money to improve your financial situation. That’s why some people think student debt is good debt because it does improve your financial situation in a sense of if you get a high paying job but it’s still debt and it’s something you need to be aware of and see if it is worth it. Number four money misconception is it’s okay to skimp on your emergency fund. According to a report from Bankrate in 2018 34% of US households experienced a major unexpected expense in the past year. If you don’t have an emergency fund, it can be super detrimental to your financial situation. If you are not prepared for things like this, most experts recommend to have at least $1,000 in the bank to cover these unexpected expenses like car repairs or medical expenses. But honestly, a lot of times that’s not going to even be able to cover everything. And that means you can go into debt. Anytime you’re experiencing some big changes like this, I say aim to save at least three to six months worth of expenses to kind of relieve stress and have peace of mind. There are actually financial experts who recommend to grow your emergency fund before paying off your debt because if an emergency happens, then you’re gonna go into bigger debt. So that’s something to consider when you’re kind of planning your financials, but I’m not telling you what you should or shouldn’t do. It’s just something to keep in mind that a lot of people do recommend doing this. See what works for your risk tolerance and your personal situation. Number five money misconception is I don’t need to learn about taxes. No matter where you do, taxes are going to come but what you can do is figure out tax planning strategies to actually lower your taxes. I think there’s a misconception that taxes are extremely difficult. I don’t want to touch it. I don’t want to understand it all. But there are certain things that you can start doing like if you’re self employed, you can deduct things like your home office, your car expenses, your office equipment, tools that you use upgrades to the programs you use, stuff like that you can even hire family members to work for you. There’s a

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A lot of different tax strategies that you can implement to invest in real estate. And that can help because they have tax benefits. There’s a lot of things you can think about when kind of strategizing with this. So learn the basics and see how you can pay Uncle Sam a bit less with your taxes. If you’re doing some good tax planning, there was a book I really liked. It’s called the book on tax strategies for the savvy real estate investor. This is for real estate investors, but it has a lot of information that’s easy to digest. So it might be something you want to pick up number six money misconception is, I don’t need to track my money. I think a lot of people struggle with keeping track of their expenses and their finances. They’re thinking, Where did my money go after every single month, they’re paying paycheck to paycheck, how come I’m spending it all and they have no idea where the income is going to. So what I would do is start documenting your income and expenses. So if you’re in a financial right, you should possibly look into kind of calculating your net worth calculating the amount of expenses every single month that you have in your income and kind of categorize your spending. So you know, like which categories you’re spending more on. For example, if you are spending a lot on rent, maybe it’s time to downsize or find roommates, or even house hack with a 3.5% down payment FHA loan where you buy a house ran out that units around the rooms, and if you live in the property for at least a year, you can get an FHA loan, or maybe you have a large car loan, right, you can possibly get a used car instead. Maybe you have unused subscriptions like Hulu, Spotify, Netflix, I think it’s easy to end up subscribing to a lot of different things that you are not actually using and you’re wasting money every single month. So look at it, see how you can reduce that maybe you can even cancel your gym membership and workout at home, like these little steps can dramatically improve your financial situation. So it’s really important to get awareness and start making savings goals. Number seven money misconception is you only get rich through luck in reality, according to the national study of millionaires, only about 21% of millionaires inherited their fortunes, when in reality, according to the national study of millionaires, only about 21% of millionaires inherited their wealth while about 79% worked for it. And another reality is teachers made the list on top five professions of millionaires in the US. I feel like these stats prove that it’s not about luck. It’s not about inheritances. In reality, people who get inheritances and lottery winners, things like that people have high incomes, there are a lot of them who actually spend all their wealth and go back to nothing. They’re not building their wealth, they’re spending all their money. You know, if you aren’t managing your money, well, then it doesn’t matter how much you’re making, you could squander it all and go back to nothing. So it’s really about learning and taking consistent action. So save and invest regularly for the long haul, practice delayed gratification, and you can grow your wealth a lot whether you have a low salary, or you’re a high earner number eight is too hard to increase my credit score. Now as long as you’re making payments on time you’re building your credit history, you can improve your credit score, I’m going to go over the percentages. So five distinct factors matter when you’re trying to boost your score. First is payment history that’s 35%. Credit usage is 30%. Age of credit accounts is 15%. credit mix is 10%. And new credit inquiries is 10%. Honestly, just keep building good habits have different types of credit. And always make sure you’re paying back on time and in full. That is the most important thing. Don’t get into high interest debt, it’s going to be hard to dig yourself out of that hole. Keep building that credit history. Number nine is I don’t think about retirement because who knows how long I live. This one is crazy to me, because my friends have said that to me. And it kind of blows my mind. Because a lot of Americans think this way, I’ve seen it on Twitter a lot that people think I’m just going to enjoy, because I’m probably going to die soon. Like, that’s really a sad way to think about life, you never know how long you’re gonna live. So if you aren’t planning for that, then you’re gonna have to work for the rest of your life. Because when you get older, physically, it’s just gonna be a lot harder to work. This kind of mindset is going to affect you negatively with your money. I always talk about delayed gratification, because that’s a true way to build wealth. If you are doing consistent things to improve your finances. And not always just spend all your money all the time, you can dramatically build your net worth. So make sure you’re setting up your retirement accounts funding it using it to invest figure out what percentage of your money is going to want versus needs and how much of it are you actually saving and investing and see if you can build that number as much as you can. The wealth creation equation is income minus expenses, all that times your investment. So make sure you’re setting yourself up where you’re finding multiple income sources, maybe starting a side hustle, see how you can reduce your expenses and then investing that difference as much as you can. Number 10 Money misconception is cheaper is always better in the pursuit of savings. Like it’s really easy to think this way. But if you’re buying a lot of stuff that breaks easily, then you’re gonna have to keep replacing it and it might cost a lot more than actually just buying a high quality item cost is simply what is paid for the product while value is what the product is worth. So sometimes cheaper is better. It really depends

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On the product, but for things like my laptop, like I’m gonna get a MacBook, I’m gonna get a premium product, I get premium equipment for my business because it just makes my life easier. And I can run and grow my business a lot easier if I have the right tools. So in the past, I used to think that I wanted to save all the time, pay less for different software and programs where now I’m actually spending a lot more because when you invest in your business, for example, you can grow your income a lot easier, and you can free up your time a lot easier, because it might make things a lot more efficient. So that’s just on the business side. But in life in general, it’s a good idea to evaluate the value of things versus just the cost of things. So I hope you guys enjoyed this episode. Please make sure to rate review and subscribe. It really helps our podcast grow. And thanks again. I’ll see you guys in the next one.

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