Knowledge on effective financial management has become almost quintessential in our current economy. But with running after wealth, being the top priority, not many of us find time to sit down and actually acquire that knowledge from the experts. Instead we turn to our ever friendly knowledge database – the internet – to find answers to serious financial questions such as liquidating mortgage loans, handling the credit card escalation matrix, solving the NPA problem, and so on. Since the internet, instead of being a reliable resource, is actually an ocean of completely irrelevant but highly convincing answers, we mostly end up believing in wildly ridiculous myths. Here we look at such common myths about financial management and find the logical way to debunk them.
1. A change in lifestyle changes everything
We often think about changing the way we spend and highlight exotic expenses on the credit card bill, and try to wonder how changing things like job, location, bank accounts will make such expenses manageable. But the truth is, our financial problems will follow us around no matter what we do, unless we seek out an internal change. According to National Debt Relief, our habits and practices are the main reason for most of our financial trouble. So regardless of the raise you may get or city you may live in, if you have the habit of overspending, then you will ultimately end up facing debt problems. So forget advices about moving to a better paying city or a new career path for solving your financial problems and focus on changing the habits that impact your bank balance the most.
2. Believing is actually not everything
The latest trend created by self-help gurus is convincing people that they can achieve anything by just mentally visualizing it and believing that they can. But the truth about money is, you can’t earn even a single penny just by dreaming about it. Though visualizing the future goals and the wealth you may acquire with constant hard work can prove quite helpful in motivating a person, continuing to live in there will only cause regret. Significant financial change will occur when you write down your long term financial goals, make a blueprint of the practical ways that can be made possible, and the step by step way in which you can achieve it. This technique will give you clear a picture of where you stand in reality, rather than make you dream all day about luxury villas and expensive cars when you have thousands of dollars in credit card loans.
3. Forget the negativities in life
While it’s true, being negative all the time can be detrimental to both health and social life, suppressing negative emotions is not actually the best way to be positive. A number of so-called financial management gurus of the internet will advise you to forget the negativity and delete the dark financial past of your life and lead a new one. But just trying to forget or forcefully suppressing such memories is only going to cause more hurt than good. The negative thoughts will keep surfacing every now and then interfering with even the best laid financial plans. So the best way to solve it once and for all is to confront it. Instead of ignoring to even look at credit card bills, loan repayment notices to remain happy, make a note of how you have swerved off track and plan how you’re going to solve this for the long term. Though it may cause frustration initially, it is assured to provide a long term solution.
4. Follow a role model
It’s common for most of us to follow role models, and we have been doing this ever since we were kids. So no wonder we search for role models for better financial management, and actually there is no wrong in it. The problem is only with the role models we pick. For instance, someone working at a grocery store would be doing a gross mistake if he chose someone financially stable but completely incomparable with his life, like say Warren Buffet. The key to selecting role models is choosing a person who you can compare with on a number of levels such as career wise, family wise, talent wise, etc.
5. Worst-case scenarios don’t actually make your perform better
The common myth concocted by internet advisors is that, imagining worst case financial scenarios will make a person much more effective. But the truth is, when you keep thinking about all the ways in which you can fail, it not just affects current performance but can actually make things worse as well. Instead the smarter thing to do would be to think of the prospect you will get by putting in some extra effort on your current performance. But of course that doesn’t mean you should never think about negative scenarios in life, it just helps when you don’t do it all the time.
Kidal Delonix is a contributor to Mr. Hoffman's blog. The views and opinions are entirely his/her own and may not reflect Mr Hoffman's views.
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