Who doesn’t want financial success? But let’s face it, average Americans are not that good at handling finances.
According to a CNBC report in 2018, over 40% of Americans have less than $10,000 put away for retirement savings. And U.S. household saving rate is only a little above 6% in August 2018.
You would think $1,000 isn’t much. But guess what, close to 60% of Americans have less than that amount in savings…….
On the other hand, America is one of the richest countries with average salary levels in the top 5 list worldwide.
Clearly, something is wrong in people’s mentalities instead of in our earnings.
Click the image below to pin to Pinterest for later!
So, what went wrong? Let’s take a look at some of the top wrong beliefs preventing us from achieving financial success:
1. It’s a “win” if one dies owing debts
Believe it or not, there’s a “hidden” belief in some folks’ mind that it’s a good thing to owe money when the day comes to leave the earth.
I was shocked when a co-worker of mine mentioned this to me years ago hinting that he also holds this belief!
First of all, legally speaking, one’s financial obligations are not immediately canceled upon death. In general, the estate of the deceased individual will be responsible for settling any unpaid debts, depending on the types of accounts and properties involved.
Most importantly, it’s necessary to be aware of a “universal ledger book” for your life in the spirit realm. There are “debits” and “credits” in this ledger, similar to “T Accounts” in the accounting world.
The “debits” are money you owe, wrongs you’ve done to others, things and missions you should have carried out in this life-time but you didn’t……
The “credits” are generous gifts you’ve given others, donations, loving-kindness and lots of other good deeds you can think of.
Now you get the picture?
Well, you might be thinking I’m nuts. But I’ve known enough and heard enough about testimonies that would prove this system to be true. Some people call it “karma”. Some others call it “what goes around comes around.”
Regardless of your religious and spiritual beliefs, if you put yourself in the creditors’ shoes, wouldn’t you want to get your money back?
So, commit to repay every dollar you owe because that’s the right thing to do.
2. Filing bankruptcy is a “solution” to debt problems
This one goes hand-in-hand with the first misconception above.
Just because the law allows someone to declare bankruptcy to forgive all qualified debts, it doesn’t mean one should depend on that last resort without first attempting to clean up the financial mess with everything he or she has.
I know life happens and sometimes you can’t help it. But hey, who doesn’t want to avoid bankruptcy?
After all, your credit score and credit history would be ruined for the time being. You wouldn’t be able to open new credit accounts in the foreseeable future. And you can forget about getting a mortgage for a house you really wanted.
Just don’t accumulate unmanageable debts in the first place.
People who loaned you money wouldn’t want to see their debtors filing bankruptcy and their hard-earned money down the drain. Stockholders of a publicly traded company do not want to hear the news all of a sudden that the company decided to file either “chapter 7” or “chapter 11” bankruptcies.
See my story of “financial disaster” losing six figure gain from an irresponsible company that collected the money and then filed bankruptcy afterwards when the deal fell through (see section 6). Of course, there’s an on-going class action lawsuit about this case at the moment. More to come on that.
Remember, how you handle finances will get reflected in a detailed credit report and background check. A bankruptcy filing or even judgements against you will show up in employers’ pre-employment credit check. Read more about that in “In-depth guide to improving your credit score”.
It certainly would be in your best interest to take care of your finances responsibly, similar to how carefully you would be handling your eyes. We only have one set of eyes and we can’t afford to lose them. That’s how much care you need to give to handling money in order to avoid any drastic measures down the road.
Before you take the last resort of filing bankruptcy, try seeking help from trusted professionals like American Debt Enders to straighten out your debts and get a fresh start on life.
3. It’s okay to buy a $30K car on a $30K annual salary
In general, lenders want to see debt-to-income ratio of less than 40%. That means, you don’t want to borrow more than 40% of your pre-tax income.
But if you ask me, that criterion is too generous and risky for both borrowers and lenders.
If you make $30K a year, forget about buying a new car and getting a car loan. Your number one priority in life, when it comes to finances, is to increase your earnings potential first.
Related must-read post: How to double your salary in 5 years
However, if you really really have to drive that dream car that’s sitting in the dealer’s lot, then buying a used version might be the way to go.
It’s all about practicing self-discipline.
Carrying debt at high level in relation to your income will make you live from paycheck to paycheck leaving no room for any meaningful monthly savings. It is not something you should do if you want to steer clear of any financial distress and anxiety down the road.
4. Live for today is living life to the fullest
We heard some billionaires spend money like there’s no tomorrow. They may have reasons for doing that.
Most people have a budget and fixed salary so burning cash isn’t an option.
That doesn’t mean some folks won’t go out there and max out their credit cards, borrowing more with home equity line of credit, dining out on a regular basis, leasing or buying the latest trendy vehicles…….
Some say “life is short, it’s better to live for today.”
Yes, life is short. And that’s exactly why we all need to live responsibly because we’ll have to account for everything we did in this temporary journey on earth at the end of our life.
Do you want to be considered a good custodian of the financial resources and responsibilities placed in your hands? Or, do you want to look back at your life and regret some of the decisions you made about money that put your loved ones’ lives, including yourself, at a compromised position?
Every step we take matters to ourselves and to people associated with us. Think twice before pulling out the credit cards again and see if it’s a purchase that’s really necessary.
Hope I didn’t sound too harsh here in this article, but these are definitely some of the most harmful wrong mentalities and impediments that you’ll want to get out of your system if you want to be successful financially.
Leave a comment below to let me know your thoughts or share your experiences and valuable insights with everyone here.
I do manually approve blog comments before posting to ward off spammers. Please check the boxes below to receive follow-up comments and new posts in email so that you don’t miss the responses to your questions or comments!
Subscribe to the blog in the sidebar (desktop mode) or scroll down (on mobile) for more in-depth articles about managing finances, starting your own online businesses, etc.