15 Financial Myths That Keep You From Getting Ahead

Summary

This video debunks 15 common financial myths that shape people’s behavior and beliefs about money. It covers misconceptions like turning down a raise to avoid higher taxes, waiting until the end of the month to save, and the belief that high risk always leads to higher rewards. It also addresses myths about real estate, credit cards, savings strategies, and financial security. The video encourages viewers to make smarter financial decisions by understanding these myths and offers practical advice to improve financial health, including using tax-free savings, avoiding unnecessary debt, and investing strategically.

Takeaways

• 😀 Progressive taxes don't penalize your entire salary. Only the portion that falls in a higher tax bracket is taxed at the new rate.
• 😀 Saving money at the end of the month often doesn't work. Instead, automate savings as soon as you get paid to avoid spending temptations.
• 😀 Carrying a balance on your credit card does not help your credit score. Paying off your balance in full every month is the best strategy.
• 😀 More risk doesn't automatically equal more reward. Smart investing is about calculated risks, not speculation.
• 😀 Tax-free savings accounts (TFSA) benefit everyone, not just the wealthy. Small contributions over time grow significantly due to tax-free compounding.
• 😀 Waiting for prices to drop before buying often leads to missed opportunities. Dollar-cost averaging, or consistent investing, is a safer strategy.
• 😀 Trying to protect assets after financial trouble is usually too late. Set up legal protections like trusts and insurance before problems arise.
• 😀 Wealth is often built through strategy, discipline, and time, not through cheating or exploiting others.
• 😀 It’s better to pay off high-interest debts first before building large savings. Interest on debt often exceeds the growth of savings.
• 😀 Real estate doesn’t always appreciate in value. It can stagnate or crash, as seen in past financial crises. Buy property based on market conditions, not assumptions.

Q & A

What is the myth about turning down a pay raise to save money on taxes?

The myth suggests that turning down a raise saves money because of the higher taxes you would pay. In reality, only the portion of your income that falls within the higher tax bracket is taxed at that higher rate. The rest of your salary is still taxed at the lower rate, meaning your take-home pay still increases even after the raise.

Why is it not a good strategy to save whatever is left over at the end of the month?

Waiting until the end of the month to save often leads to nothing being left to save. This is because people tend to spend whatever money is available. A better approach is to automate savings right when you get paid, treating it like any other deduction, ensuring that savings happen consistently.

Does carrying a small balance on your credit card help improve your credit score?

No, carrying a balance on your credit card does not help your credit score. In fact, it can hurt you because it leads to paying unnecessary interest. A better strategy is to make on-time payments and keep your credit usage low, which helps to improve your credit score without paying extra fees.

Is it true that more risk always equals more reward in investing?

No, more risk does not always lead to higher rewards. Smart investing involves calculated risks. Risky investments like meme stocks or crypto without research are more like gambling than investing, and often, they don’t provide compensated rewards.

How can a Tax-Free Savings Account (TFSA) benefit people who aren’t wealthy?

A TFSA can benefit anyone, not just the wealthy, because it allows for tax-free growth on your investments. Even small contributions over time benefit from compound growth and tax-free withdrawals. This can result in significant gains over time without losing any of the profits to taxes.

Why is trying to time the market to buy low or sell high not effective?

Trying to time the market is risky because market prices can stay high longer than expected or drop even lower than anticipated. The best strategy is consistent investing, known as dollar-cost averaging, where you invest regularly regardless of market prices, reducing the risk of bad timing.

Why is it too late to protect assets from creditors after a financial crisis begins?

Once a financial crisis is already looming, such as lawsuits or debt collection, attempting to protect assets through last-minute transfers is considered fraud. It’s important to set up legal protections and structures in place before any trouble arises to truly safeguard your wealth.

How does the myth that wealth is only for cheaters impact people’s financial growth?

Believing that only cheaters get rich discourages people from taking responsibility for their financial future. It creates an excuse to avoid learning how to build wealth through hard work, strategy, and time, and can prevent individuals from seizing opportunities and taking calculated risks.

What should be prioritized when building financial stability: saving or paying off debt?

Paying off high-interest debt should be prioritized over saving. High-interest debts, like credit card balances, drain your money faster than savings can grow. Building an emergency fund and eliminating high-interest debt first creates a strong foundation for building wealth.

Does real estate always guarantee a path to wealth?

No, real estate does not always guarantee wealth. While property values tend to rise over time, markets can crash or stagnate, and prices don’t always go up. Real estate success comes from buying at the right price and understanding local market conditions, not simply assuming property values will always increase.