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4 Common Misconceptions About Personal Finance You Can Change

Personal finance is a topic that makes people uncomfortable, mostly because they don't know how to deal with it. Here are ways to improve it.

Personal finance is a serious topic yet different for every human. We can think of it as the money you earn and spend and nothing beyond that, but is that true? Also, when do you get “to use” terms such as “personal finance” pointing at yourself and your earnings? You would think it’s with your first paycheck, but it comes much earlier. The truth is, personal finance came into your life when you got your pocket money for doing chores, helping neighbours for small amounts of money that were big for you at the time, and nearly any type of work you put in for the sake of getting something in return. Savings are also personal finance, even though a different type. We already covered one misconception about what personal finance is. Let’s see what can hinder your path towards more stable income and having a sense of security when it comes to your budget.

“I can’t afford to save.”

People will usually say something like “I don’t earn enough money. How can I put something aside?” We’ve been there, as well. The truth is, when you put aside only 20 dollars, you will see how much of a difference it makes when you realise “it would be so good to buy a cup of coffee/whatever small thing you enjoy” if I had those 20 dollars in my pocket right now. It makes you rethink how much you spend and on what. Many don’t want to put aside even those 20 bucks, because “it won’t make a big change”. It does affect you in the previous example, though. As trivial as it sounds, you then get to experience the value of money, even if it’s for temporary satisfaction. Try it yourself, and see what happens.

“I don’t have time for money management. I’m barely keeping up.”

This is where we would like to continue the topic we started talking about above. Saying you don’t have time nor money to tackle a money management plan, essentially means you don’t respect your time nor money. It might come off as harsh, but it is the truth. Money management means you will sit one day, ideally when you are not swamped with work, and write down where your money goes. When writing this, we have in mind someone who doesn’t have much, and it’s hard to meet expectations every month. It applies both to struggling people and the ones who want to be more responsible with their finance. Sit down and write everything you spend on, from food, to commute and that coffee you grab on your way to work. Write down when you bought something small to feel some sense of fulfilment but regretted it a day later. Does it happen often? If not, do you think there is something else you can tackle differently money-wise? 

“I can’t save, I have a debt to pay off.”

That is why you should start saving! We are going back to the “20 dollar savings”, and write down the number you have to pay off. It doesn’t matter if you borrowed money from a friend or have a student loan that will take some time. In most cases, people are thinking about the money they have to pay off. They don’t stop and save money so they could do it. Or they remember to put something aside every couple of months. Maybe you took a bank loan to pay off something else, and now the fees are there, and you are scared and don’t want to think about it. If you’re going to lose the sense of unease, start now. Sounds cliche (we rolled our eyes when we heard anything when people say “start now!”), but it is true. And it works. If you did the money management run down, it would be easier to make a plan and stick to it. Taking care of personal finances includes taking care of debt as well. Little by little, you will lift that weight off your shoulders, rather than continually contemplating it and doing nothing. 

“I will start a retirement plan when I’m 40.”

It is the last, but biggest misconception ever. There is always a reason to save for retirement, aka your future. If you start saving when you are 20 (which nobody teaches us), you will have so much more when you are ready to retire. Google it a bit, and you will see what difference it makes. It’s insane! You could be a millionaire 60-year old if you started saving as early as you can. Seriously. There are programs banks offer, especially for retirement saving that will bring you lots of good things. It’s just that we started to realise it only a couple of years ago—especially young people. You will see many more 20-somethings talking about retirement plans nowadays, since they did their calculation, research, and saw how much there is to learn and how to benefit from it. Debunk your patterning around money, know where you are at, start with small steps and see how far it can take you, rather than doing nothing!