Money, or trying to make money, is for many businesses a commodity that seems to be getting harder and harder to come by as the years roll on. So many things seem to be becoming more and more unaffordable, with no end in sight.
Furthermore, making an adequate salary, as a business owner, that will pay the bills while there is something left in the bank, can feel like an impossible task. If you want to make it in today’s cash-tight world, you’ll need to develop a clearer understanding of how money works.
As a small business coach, the ‘myths’ highlighted below often come up with clients and their feedback to me has always been that they need to change their mindset about some of their behaviours in order to turn their financial troubles around.
Here are the top five myths you should know about if you want to manage your money better.
1. Saving Money is Impossible
A lot of people think saving money is impossible for one reason or another. Most of the time they think it’s because they don’t make enough, or there’s too much to spend on. You may have taken the approach of simply saving whatever’s left at the end of the month, the problem is, there’s usually nothing left. There’s always something to spend on. If you want to save money, you need to make an active effort.
You don’t have to go big. Ideally, you’ll save 15-20 percent of your monthly earnings, but depending on your responsibilities, that may not be possible. Calculate your expenditures and see how much room you have to save, and commit to saving that amount. If you really have no headroom, you might (not easily) need to cut down on your monthly costs to make it work.
2. Being a Homeowner is always better than Renting
One of the biggest money myths is the idea that renting a home is strictly worse than buying one. However, in many cases that’s simply not true, at least not all the time. No surprises here, but owning a home comes with its own expenses, such as repair, maintenance, and taxes. When renting, often your only monthly expense is the rent itself. The landlord is responsible for the house itself.
Don’t assume you need to buy a house. Do the math. See if it’s right for you.
3. Emergency Funds are Unnecessary
One of the worst things you can do for yourself financially is to not have a safety net. You never know what problems will pop up, and it’s better to have a backup and not need it, than to need it and not have it. Additionally, the lack of a safety net can cost you more money in the long run. Late fees on your credit card, for example, can easily rack up and cost you a lot more than it would have had you paid it on time. It is sometimes easier said than done, but keep emergency funds – it does not need to be a large amount – on hand, and you’ll end up saving money.
4. One Bank Account is Enough
Many people go through life with a single bank account, and ‘survive’. However, if you’re looking to get the most out of your money, you should consider creating multiple accounts. Generally, you want two: one strictly for savings and one for expenditures. It seems like a small thing, but this will allow you to have a clearer idea of how much money you actually have. It also will help keep you from spending money that you’ve allotted for the future.
5. Investments are for Rich People
When money is tight, investing can seem like a dream. What looks like great investments often seem too expensive, and it feels like you should wait until you have more money before putting it down in what sometimes feels like a gamble. However, the fact is that unless you’re making ‘a move’ on certain (targeted) investments or opportunities, you won’t make enough money to make the perfect investment – the long term one that you really want – when it arrives.
You have to spend money, or at least some money, to make money. Not all of your investments will pay off in the manner you may want, and that’s ‘unpleasant’ but acceptable in many circumstances. It’s part of the investment game and its highly unlikely you will get to have the riches you want without taking some calculated risks.
Handling money is a skill and like all skills, you are unlikely to get it right the first time. It often also feels uncomfortable. To master any skill requires times, constant learning, analysis and the resilience to keep moving forward.
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