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Saturday, September 7, 2013

Money Management Myths that Prevent us From Being Wealthy

Most people make grave mistake with money which they are poised to regret later.
Bellow is a list of disturbing myths which distract people from achieving financial stability:
1.      I am doing well: Merely owning a big car, having a good salary, a nice house or title does not mean you have joined the crusade of wealthy individuals. It is very common to hear people boast of doing well just because they have managed to purchase an SUV. However, it should always be remembered that a car is not an investment but an additional expense. In fact those of us driving big cars without sound investment to back it are cruising on the highway to poverty.
2.      I will take a salary advance just this once: Most people induce poverty among themselves by spending beyond their means. Taking a salary advance does not increase your monthly income but depletes your finances for the following month. If you have to borrow money or take a salary advance, it has to be a real emergency. Now, fueling your car or taking your girlfriend for lunch is not one of them.
3.      Taking a loan because you can afford to repay: Borrowing money isn’t bad. However, there are good debts and bad debts. Good debts are those invested or put in business to generate income. Bad debts include mortgage loans, car loans and those taken for own consumption. Avoid bad debts at all costs.
4.      My home is the biggest asset: A home is not an investment. Even though we need a descent home, a big home is only good if you have income generating investments.
5.      I will save when I earn: There is no magical figure which will appear in your bank account as a saving. Saving, as we all know, is an uncomfortable choice that we have to make. The more you earn, the more you spend and therefore you will not have extra money to save if you don’t make it an obligation. Whenever you are paid, pay yourself first by transferring some small amount to your savings account. Yes, save a little from your peanut income, you won’t die. The future is soon coming and you don’t want to be caught off guard.
6.      Investments are complicated: Don’t fall prey to greedy financial advisers and traders who complicate the whole investment thing for their own gain. Learn on various investment options available. Read financial blogs, books, business news, magazines and also put interest in stock market. Get help on technical things, but learn the basics.
7.      I can delegate wealth creation: Some of us believe that investment is so complicated that they put their fate of making any cash on the hands of financial service providers like insurance firms, asset management firms and stock brokerage companies. They do not decide where to put their cash. Be in control of your cash or else you will have a lot of people to blame for your downfall. Remember, it is your fault that you are not saving or investing as you would wish and therefore blaming your boss, your bank, or your government won’t help.

8.      I have no money to invest: You will never have enough money even for your own expenditure. The cost of living keeps rising due to inflation. Hence, the additional income you will get in future will be eaten up by inflation. So, start saving now.

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