Myths abound about money. Sadly, like all fables, unconsciously we allow them to influence our behavior. Reflect on these five. In the past three months, how have they affected your spending decisions? Do you see areas you need to change? As you monitor your spending during the next month, ask the Lord to help you to implement adjustments.
Money Myth #1: Money is the Root of All Evil
This legend comes from misinterpreting 1 Timothy 6:10, which states clearly that the love of money is the culprit. Some Christians behave as if money is evil. They do not study, and so, do not learn effective stewardship. Unwittingly, they do not provide adequately for their families. They believe it is wrong to save, plan for retirement, or to accumulate money in any form. They overlook 1 Timothy 5:8 that tells us that a believer must provide for his family, or he is worse than an unbeliever. As well, they disregard Matthew 6:21 that asserts, where your treasure is, there your heart will be also.
Money is neutral; you need it only to buy stuff. Learn to use it wisely, because unconsciously, it can become your idol, you become its slave, and you descend and stay in deep debt. Heed the words of Matthew 6:21.
Money Myth #2. Money is Manageable
Probably, the most life-impacting myth about money is that it is manageable. All of us use “money management,” “manage money,” and similar terms. When we say them, we believe them.
Stop; think about this. How do you manage money? You want to buy a car, a house, clothes, or pay university fees. Are these money management decisions? No! They are lifestyle decisions that require money to execute.
When we develop the attitude that money is unmanageable, our behavior will change. Before spending or committing to spending, contemplate needs and overall affordability, instead of short-term payment options. Do not buy a house merely because the rent is less than the mortgage. Consider the full effects on family finances, lifestyle, giving to the Lord, and overall budget, of home ownership compared with the total effect of renting.
Faced with a decision involving money, understand that it is about lifestyle choices that could affect your family for decades. Where you live, the vehicle you buy, the university your children attend, are lifestyle choices. Before committing to spending, mull over these essential questions, and discuss them with relevant family members:
- Do I need it–the car, clothes, camera?
- How will I pay for it?
- Will spending increase my debt and interest costs?
- How will this cost affect my family budget, and my family’s lifestyle?
- Will it prevent the family or family members from doing planned or unplanned events, such as family outings, dinners, camping trips, or other activities?
Money Myth #3. We Make Rational Choices When We Spend
If you need examples to illustrate this point, examine buying patterns leading up to the Great Recession. The sub-prime fiasco is the poster child. People bought homes they knew they could never afford to buy. People took vacations they knew they could not afford. People spent what they did not have to buy what they did not need. Nevertheless, ask ten individuals if the buying procedure they followed was rational and logical, and the majority will give you numerous reasons why they had to act as they did.
This irrationality has been with us a long time. In the 1970s, people bought pet rocks, invisible dogs, and other weird items.
Merchants know we spend irrationally, and take advantage of this using advertising, packaging, and clever financing. Why else would a couple deep in debt, on a small fixed income, take a home-equity loan to buy a big-screen TV? The advertising grabbed them; it was captivating. They succumbed!
When we realize and accept that we do not make rational choices before spending, with the other four items in this article, we will be wearing merchant-proof vests as we surf the Internet, walk the malls, and look through merchants’ flyers.
Money Myth #4. We Save When We Spend in a Sale
In the past six months, how much did you spend in sales, so you could “save”? If you spent $1,000 and the average sale price was 50% off, did you save $1000 (half of $2,000)? Where did you put those savings? You saved nothing; rather, you spent $1,000. You never save when you buy an item. The price you paid might have been 50% of the original listed price, but you did not save. Still, although you do not save in a sale, you benefit from a sale when the NAPPY principle exists:
- You needed the item.
- You could afford it, and did not increase your debts to buy it.
- You planned to buy the item.
- You paid less than the planned price you set before buying the item.
- You, not the merchant, decided to buy the item–the merchant did not coerce you to buy it.
When the NAPPY principle, and the fact that you manage your lifestyle, become instinctive, your spending level will fall, and you will end up buying what you decide you need or want. You will ignore seductive advertising.
Money Myth #5. A Budget or Spending Plan is a Constraining Tool
A budget or spending plan is a freeing tool. It is neither a panacea nor straitjacket, but an early indicator of results likely from realistic assumptions. It involves goals, plans, estimates. After you do it, as you progress in the budget period, you must compare your actions with the budget and execute needed behavior changes. Budgeting, the act of preparing a budget, is part of a total plan-do-execute-review cycle that I call PEACE budgetary control:
- Plan for a set period to do specific goals.
- Estimate and record expenses needed to do these goals.
- Act on the plan and record results as you progress to your goals.
- Compare actual spending with estimated expenses and progress to doing your goals.
- Execute needed changes to remain on course to do the goals.
Do you want to be on top of your finances? Try working with a spending plan and PEACE budgetary control. You will notice a major reduction in stress and a huge drop in family arguments about money.
Copyright (c) Michel A. Bell