Money Myths and Truth // Total MoneyMakeover // Dave Ramsey

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Last week we talked about debt, this week we will talk about income and money myths from total money makeover by Dave Ramsey

All of us want to be wealthy wise and healthy, but none of us want to put any effort. Most people do not want to take any risk and play it safe. Some of them are lazy to upgrade their skills, others settle for risk free rate of return, while other live in the illusion that everything will be taken care by itself. There is no easy way out. Living financially right may be tough, but it is not complicated.

You have to put effort to make it work

Myth no.1: Everything will be fine, when I retire, although I don't have any savings, and no plan for retirement. Truth of the matter it is not going to be fine and as per statistics most old people lead a miserable life. Don't be under the illusion that government will pay for you or your kids are going to take care of you. Get out of illusion and start planning.

Let's think through this, most people buy their first home when they are 30 years old and pay for next 20 years of their life, by that time, they are 50 years old. They just have 8 to 10 years to plan for retirement which is short time. In most of the cases, many people have their single greatest asset as their house, which will not pay after you retire

So plan early, start early, start investing right now

Myth no 2: Gold is a good investment. In reality, gold is not a good investment and it has a very bad track record. It does not pay any dividend or interest.

Let's think through this, gold only has perceived value and it does not have any use value. Gold is valuable because, all of us think it is valuable. When all of us think it is not valuable, it price will drop significantly, unlike water which has significant use value. Instead of investing in Gold, if you have used the same money and invested in an any other income generating fund, it would have yielded better returns compared to gold

Myth no.3: I don't have time to plan for budget or retirement. In reality, you have to plan for your budget and retirement as soon as possible.

Quoting John Maxwell, Budget is you telling money where to go rather than wondering where it went.

Many people today spend more time buying a pair of shoes and pair of jeans rather than picking up stocks, investments or mutual funds. They buy investment options just on impulse. It is so shocking many people buy real estate on impulse. They don't check the legality of the place, they don't check the value of the building, they just buy on impulse. They don't talk to people in the community to know, the quality of the building, the problems who already bought are facing. So instead of spending so much time on shopping list, spend time on your investment list. So that you can budget properly, so that you can plan for retirement effectively

Myth no 4:I cannot use cash. In reality people tend to spend less when they use cash. However, banks want us to spend more, they push for plastic cards. In case, if you are using a debit card. Follow this strategy.

Have multiple accounts, one operational account and one investment account. Put your monthly expenses in an operational account and use that only. For example, if you put 6000 Rupees for groceries and if it exceeds, take money from other items in operational account only, but don't touch investment account. In this way, you can save good on cash

Myth no 5: If I do a will, I might die. In reality, all of us are going to die, so better do a will. 70% of the people, don't do a will, when they are alive. Don't let your children fight over stuff, after you pass away. A will is a gift you give your family. So it makes management of the estate clear, after you pass away

Myth no 6: I can't afford insurance. In reality, you cannot be without insurance. Everybody should have a term life insurance and medical insurance. Don't live your life by keeping your head in the sand. But be prepared for it

Month after month, we pay premiums and it does not seem like an insurance plan, but it seems like insurance pain. However, in time of need, cash comes handy

Wealth just does not happen, it takes considerable effort and time. Don't succumb to peer pressure and try to appear wealthy, when you can't afford it. Millionaires are millionaires because, they focus on being rich, rather than looking rich. Be cash rich and debt free. Be Wise and Rich.

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Looking forward to talk to you, next week, same time, same place. Be wise and rich