5 Money Myths: Understand Them and Destroy Them

There are myths about money. Unfortunately, as with all fables, we unconsciously allow them to influence our behavior. Think about these five. How have they affected your spending decisions over the past three months? Do you see areas where you need to change? As you monitor your spending over the next month, ask the Lord to help you make adjustments.

Money Myth #1: Money is the root of all evil

This legend stems from a misinterpretation of 1 Timothy 6:10, which clearly states that the love of money is the culprit. Some Christians pretend that money is evil. They do not study and therefore do not learn effective stewardship. Unknowingly, they do not provide enough for their families. They believe that saving, planning for retirement, or accumulating money in any form is wrong. They overlook 1 Timothy 5:8, which tells us that a believer must provide for his family or he is worse than an unbeliever. They also disregard Matthew 6:21, which says where your treasure is, there your heart will be also.

money is neutral; You only need it to buy stuff. Learn to use it wisely because unconsciously it can become your idol, you become its slave, and you relegate and remain deep in debt. Notice the words of Matthew 6:21.

Money Myth #2. Money is manageable

Probably the most life-changing myth about money is that it’s manageable. We all use “money management”, “manage money” and similar terms. When we say them, we believe them.

Stop; Think about it. How do you deal with money? They want to buy a car, a house, clothes or pay for college tuition. Are these money management decisions? No! They are lifestyle choices that require money to execute.

If we develop the attitude that money is unmanageable, our behavior will change. Before you spend or commit to spending, think about needs and overall affordability rather than short-term payment options. Don’t buy a house just because the rent is less than the mortgage. Consider the full impact of home ownership on family finances, lifestyle, giving to the Lord, and overall budget versus the overall effects of renting.

When faced with a decision that involves money, you need to understand that these are lifestyle choices that can affect your family for decades. Where you live, the vehicle you buy, the college your children attend are lifestyle choices. Before you commit to spending, think about these essential questions and discuss them with relevant family members:

  1. Do I need it – the car, the clothes, the camera?
  2. How will I pay for this?
  3. Will the expenses increase my debt and interest costs?
  4. How will these costs affect my family budget and lifestyle?
  5. Will it prevent the family or family members from doing planned or unplanned events like family outings, dinners, camping trips or other activities?

Money Myth #3. We make rational decisions when we spend money

If you need examples to illustrate this point, examine buying behavior leading up to the Great Recession. The subprime fiasco is the poster child. People bought houses they knew they could never afford to buy. People took vacations they knew they couldn’t afford. People were spending what they didn’t need to buy what they didn’t need. Still, ask ten people whether the buying process they followed was rational and logical, and the majority will give you numerous reasons why they had to act the way they did.

This irrationality has been with us for a long time. In the 1970s, people bought pet stones, invisible dogs, and other strange items.

Retailers know we spend irrationally and capitalize on this through advertising, packaging and clever financing. Why else would a heavily indebted couple with a small fixed income take out a home equity loan to buy a big-screen TV? The ad grabbed her; it was captivating. you succumbed!

When we recognize and accept that we don’t make rational decisions before spending, the other four points in this article will have us wearing retailer-safe vests as we surf the Internet, walk through malls, and peruse retailer flyers.

Money Myth #4. We save when we spend in a sale

Over the past six months, how much have you spent on sales to “save”? If you spent $1,000 and the average selling price was 50% off, did you save $1,000 (half of $2,000)? Where did you put those savings? You have not saved anything; rather, you spent $1,000. You never save when you buy an item. The price you paid may have been 50% of the price originally listed, but you didn’t save. Nevertheless, you don’t save with a sale, but you benefit from a sale if the NAPPY principle exists:

  1. You necessary the item.
  2. You could afford it, and did not increase your debt to buy it.
  3. You planned to purchase the item.
  4. You paid less than the projected price you set prior to purchasing the item.
  5. You, The retailer didn’t decide to buy the item – the retailer didn’t force you to buy it.

When the DIAPER principle and the fact that you are managing your lifestyle become instinctive, your expenses will decrease and you will end up buying what you need or want. They will ignore seductive advertisements.

Money Myth #5. A budget or spending plan is a limiting tool

A budget or spending plan is a liberating tool. It is neither a panacea nor a straight jacket, but an early indicator of outcomes that are likely based on realistic assumptions. It’s about goals, plans, estimates. Once you’ve done that, over the course of the budget period, you need to compare your actions against the budget and make the necessary behavioral changes. Budgeting, making a budget, is part of an overall plan-do-execute-review cycle that I call PEACE budget control:

  1. Schedule a set period of time to achieve specific goals.
  2. Estimate and capture the spend needed to achieve those goals.
  3. Act on the plan and record results as you achieve your goals.
  4. Compare actual spend to estimated spend and progress towards your goals.
  5. Make necessary changes to stay on track and meet goals.

Would you like to have your finances under control? Try to work with a spending plan and a PEACE budget control. You will see a significant reduction in stress and a huge decrease in family arguments over money.

Copyright (c) Michel A Bell