7 Lies We Believe About Money
Money changes things, it amplifies life. Find a jerk without cash get him a job making big bucks and you get a bigger jerk.
There is a tendency people have to think money solves problems, allows for more options, encourages generosity, and solves martial fights. It turns out money does change things but not how you might expect.
Here are the top misconceptions about money and affluence I’ve experienced and seen in the research.
Myth #1. If I had more money, I would act differently than I do now.
We tend to think that if we made more, we would save more. In reality, this is unlikely.
Have you ever heard of the frog in the pot analogy? A frog dropped in a pot of boiling water will try to jump out. But a frog put in cold water and slowly brought to a boil will stay in until it’s too late. So, if you increase in wealth little by little, chances are your expenses will increase too.
If you are up to your eyeballs in debt on $4,000 a month of income (the average American’s income and debt situation), you’ll most likely just have more significant debt if you get to $40,000 a month of income. The best indicator of future financial success is your current situation. There is no reason to think that your money-related behavior will change just because you earn or inherit more money.
Myth #2. If I had more money, I’d be more generous in my giving while spending about the same.
Well you might be the exception but the stats aren’t in your favor. Typically (expect for the very top) when you make more you give less of a percentage than you do now. So overall you are giving more money, but is less percentage. Statistically, those who make between $45,000 and $50,000 give 4 percent of their income. Yet those making between $200,000 and $250,000 give only 2.4 percent.
Parkinson’s law states, “work expands so as to fill the time available for its completion.” Here’s how it plays out financially: “As income rises, expenses rise.”
Myth #3. Having more money will make my problems go away.
This is only partially a myth. More money would remove certain problems. But it creates as many, if not more. All problems look simple from a distance. When far enough removed from any problem the solutions seem to rise up quick and fast. But when you are up close and feel the problems your view changes.
Money creates a host of new and exotic problems. Relational problems, entitled kids, more than enough changes your heart, everybody wanting some of the action, estate planning becomes a large dilemma, and the list could go on. There are upsides that you’ve read about but so many more that don’t make the press.
Myth #4. Just a little bit more is enough.
It’s amazing have this attitude of “just a little bit more” persists even to the highest amounts. Famously John D. Rockefeller was asked, “How much is enough?” His response? “Just a little bit more.” You may have heard that before, but did you know he said that at a time when his net worth at its height was a 1.5-2% of the national GDP?
Money creates so many appetites. Vacation is only one type of experience but it has a large appetite. Appetites grow as you use them. Spending is an appetite. Savings can be an appetite. Appetites are never fully and finally satisfied. There is no meal to end all meals, no purchase to end all purchases.
Appetites can be found in: clothing, prestige items like boats, fine dining, the zeros in your accounts, fast cars, and gadgets for your home. Until you start to spend money you didn’t even know there are so many ways and places to spend it. It’s amazing how many myriad of options kids offer for appetite spending. There is never enough.
Myth #5. I’d feel secure if I had more money, or money provides security.
If this is true then why is asset protection such a big issue for the wealthy? Security is not a financial issue, it’s an emotional, theological or psychological issue. There is no amount of money to make you feel bullet proof. You get used to whatever level of lifestyle and fear moving backwards.
Myth #6. Money provides happiness and contentment.
Satisfaction, happiness, and contentment can be found at any price point. More money typically leads away from contentment and satisfaction. Psychologist James Grubman argues happiness declines once you earn above $75,000/year. That number is coincidentally is about 150% the average American income.
Myth #7. We’d fight less about money if we had more.
There is more punch to the fight when the amounts rise. Pick a typical dollar amount that would cause you stress. What is the dollar amount that causes fights in your marriage? Now imagine how much money stress would come when the number is doubled.
Summary: The grass is not greener on the other side; it is simply different.