The Financial Student

There’s a lot of misinformation out there about money. The following are statements or attitudes that I hear quite often. They’re all false. Or at least they should be!

1 – You’ll always have a car payment

I’ve heard this exact statement from an older adult. I was really surprised, because it seems to defy common sense. You’re only ALWAYS going to have a car payment if you upgrade to a new car every few years. The interesting thing is that people seem to forget that their first car didn’t require a payment. Think about it – when a typical 16 year old buys a car, it’s usually paid for in cash. No payments or interest required. If you can own a car at 16 free and clear, then it’s logical that you should be able to own a car free and clear at the age of 35.

2 – Everybody has credit card debt, so it’s not a big deal

Actually, not everyone has credit card debt. In fact, most people don’t. The reason why the number quoted when discussing average debt is so high is because those with extreme debt – like a mind blowing $60,000 scattered around 8 cards – drive up the average significantly. Even if everybody did have lots of debt, that doesn’t mean it’s a good thing. You’re still, essentially, paying “the Man”.

3 – Owning a home is always better than renting

All I need to mention is the housing bubble and you’ll see what I mean. I’m going to go ahead and assume (and probably make an a$$ out of myself) that MANY people who bought homes in the early 2000s grossly OVERPAID and would have been much better off RENTING. Even without the housing mess and recession, I caution everybody (especially recent college grads) to think long and hard about buying a house. It’s a gigantic purchase and there are lots of hidden expenses – and not all of them are financial.

4 – Stuff will make you happy

There’s no doubt that we all need certain things – shelter and clothes for example. There are also some luxuries that can make our lives easier and more convenient – like an iPod or microwave. But don’t let material objects run your life. How big of a house do we really need? How many DVDs are we really going to watch more than once?

5 – Online bank accounts are scams, unsafe, or inconvenient

No, they aren’t. All the ones I use and have heard of are FDIC insured, just like any other bank. Online banks encrypt your information and force you to make strong passwords. Finally, online banking is one of the most convenient things since sliced bread. Day or night, you can transfer money and it’ll be there either instantaneously or within 2 business days. ING Direct will even MAIL a check to someone for you!

6 – There will be time to save later, so go have fun now

This is simply an immature thing to say. You know what group of people want what they want right NOW? Children, that’s who. When exactly is “later”? After high school graduation? After college? After getting married? Life is always going to get in the way of better finances, so we need to stop making excuses and JUST FIX OUR PROBLEMS. I’m young and want to have fun, which requires money. I’m not against spending for fun, but I’m against sacrificing an awesome future for fun. Yes, I’m trying to have my cake AND eat it too. It’s going to be f’ing delicious.

7 – Having expensive and flashy stuff means you’re successful

It’s not too hard to create the appearance of having it all, without actually owning anything. At a nearby school (not mine), there is an Escalade in the parking lot every day of the school week. I’m assuming that it belongs to a teacher. Yet, when I see it, I don’t think “Wow, she must be doing well.” I think “Wow, she must have a huge loan. That sucks.” Granted, she could have budgeted it and can easily afford it. Or maybe her husband makes a good living and just bought it outright. But I don’t think either of those situations is likely.

8 – You can get rich quickly

No, you can’t. The amount of people who got incredible rich overnight is extremely slim. So slim that a diabetic has a better chance of being run over by a truck carrying insulin. Yes, I just made that up. But still, the majority of wealthy people got to where they are by working hard and not being dumb with their money. If you want to be like them, you need to make good decisions and read The Financial Student.

9 – Money is Evil

No, it’s not. You can do horrible things to get money or with money. But money itself is not the problem. Money can, and often does, enhance our lives. Don’t be afraid to become wealthy because money is “evil”.

10 – Money Does Buy Happiness

Yes, I’m sure all of the starving people in the world are thrilled they don’t have any money. They get by just fine as long they have what really matters in life: family and friends. Oh, and a dash of hopelessness. A certain amount of money is simply necessary to have our basic needs met. A certain amount more is “necessary” for luxuries. It is true however that after that point, more money isn’t going to increase the quality of your life much.