Some of the following PF Myths appear on the Your Credit Advisor blog page. He has a set of 25 Myths, all of them very good. I've chosen a few here to elaborate on because he hits on some common myths we all do every day. Hat tip again to the Your Credit Advisor blog, which you can access here[].
Those with obvious material wealth must be rich.
Experience suggests we humans get jealous or resentful for so many reasons, and witnessing someone's material wealth is often one of them. But don't be so sure that the neighbor with all the cool ATVs, skidoos, swimming pool, and latest car is actually wealthy (has liquid assets), or even happy. He/She could be deep in debt to maintain the facade.
Of course jealousy is an unfortunate by-product of success. And at some time in our lives, we have been on both ends of said success. We usually like to acquire as many (or more) possessions than The Folks Next Door or to improve your status among the opposite sex. In the end, it's a zero-sum game. Spend wisely and independently of your friends and neighbors, because you really don't know how they got what they have.
Working hard and saving your money makes you rich.
These are components of becoming wealthy, but not by themselves sufficient. Saving is linear; investing increases your wealth. Jesus said to "multiply talents." This has been interpreted to mean that you should multiply your wealth. Do more than save. Start by having a small sum automatically deducted from your paycheck each pay period and deposited into a 401(K) or Roth IRA.
As much as you see me play it up on this site, your ING (or other online savings accounts) aren't going to get you through to the end. Savings interest of 4.5% is not sufficient to retire on unless you're putting away $50,000/yr until you retire. So as mentioned above, sock away as much as you can to your company's retirement plan—even if they offer a pension.
Earning lots of money makes you rich.
Only if you actually save and invest it. If you spend it all, like some high-earning individuals, then you are not rich. Wealth is defined by liquid assets and investments, not how much you earn from a job…
Pretty obvious, but many "average Americans" don't realize it. I saw an article a few weeks back of a family earning 150,000/yr and was "scraping by" trying to make ends meet. Now before you turn up your nose and cue the violins, understand that this may be an "extreme case" of sorts. However, many two-income households could easily move into this bracket and because of the MPC factor (which pretty much states that you will spend the money you earn no matter how much you earn) you can easily find yourself in a similar situation.
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