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Most Common Misconceptions About Money

Author Greg Davis

As I approach my 65th birthday later this year, I have arrived at a common conclusion that getting older stinks with more aches and pains each year. 

But there is one good thing that comes with age: the wisdom that comes from experience. Experience helps you understand how life works, and how remarkably different life is from what you so often see portrayed in commercials, movies, and our daydreams.

Let’s take money, for example. The myths surrounding money are numerous and widely held, especially among the younger folks. It is a shame, because pursuing myths will lead you astray, waste your time and taken to extremes, ruin your life.

Let’s discuss ten popular misconceptions about money that experience has taught me are more often fiction than fact. Here is what I have learned about money that you should too.


1. The more money I make and have, the happier I will be

Yes, there is a link between money and happiness, but it is not necessarily all that strong. People who make more money tend to be happier overall, but research reveals that millionaires are not extremely happy. Having more money does not insulate you from illness, relationship issues, worries about politics and the environment, and other challenges. 

Quite honestly, some of the greatest stress in my life was experienced while my wife and I were making the most money! It took the death of a good friend at age 48 to lead us to a reset of our busy lives. Within several years of that milestone, we gave up our big salaries and entered a pre-retirement phase of our lives where I changed my career from business to academia. 

Despite facing many obstacles in my career change at age fifty-three, I persevered and fulfilled my dream of teaching at the college level while increasing our happiness as a couple. I had no idea I would teach at the prestigious University of Illinois for the next seven years and have the most rewarding experiences of my forty-year career.


2. It is normal to have lots of debt

It is scary to think that almost 80% of American households have some kind consumer debt. But keep in mind, not all debt is created equal. Some debt is considered good debt, such as a mortgage. It is typically a fairly low-interest loan that builds your credit report (if managed responsibly) and allows you to build equity in the home and therefore, increases your wealth.

Bad debt, on the other hand, is high-interest debt, such as credit card debt, where interest rates are high (currently around 20%), and you do not build any equity. Just because a lot of people may have this kind of debt does not mean you should. 

It can snowball and keep you spending a chunk of money monthly that could otherwise be saved or invested. Most financial experts urge people to work hard to avoid this kind of bad debt 

My best advice is do not charge any more to your credit card than you can afford to pay off each month. In other words, do NOT carry a credit card balance and pay those ridiculously high interest rates. 


3. Millionaires drive fancy cars, wear fancy clothes and live in fancy houses

If you watch reality TV or follow luxury influencers on social media (e.g., the Kardashians), you might believe that the signs of having “made it” and being rich is all about living large. But the reality is that many rich people do not live in mansions, nor do they have a fleet of nice cars. Media imagery might make you believe that rich people spend extravagantly, but many millionaires respect their money and live a modest lifestyle. They know that the more you spend, the more difficult it will be to accumulate wealth.

If you have not read it yet, I strongly suggest the book, The Millionaire Next Door, by Thomas Stanley and William Danko. This book teaches us that frugality is a common trait among many rich folks. Millionaires learn how to be efficient and responsible with their money.


4. The more money I have, the fewer worries I will have

Money does not end your anxiety level. In my experience, money gives you something else to be anxious about: losing your money. Granted, those without enough money to eat or keep a roof over their heads have lots to worry about. But once you have enough money for all your needs and a reasonable number of your desires, the excess will add to your concerns, not reduce or eliminate them.


5. I’ll have more fun if I have more money

When I was younger, I did not have much money, but I had a ton of fun. For example, when I graduated from college, I accepted my first job offer at a public accounting firm located in Harrisburg, PA. My annual salary was $15,000 and since I was living at home without any real expenses, I thought I was a MILLIONAIRE as I lived a remarkably simple, albeit fun, life!

There is no doubt that money can help provide the elements of an enjoyable time. But if you need money to have fun, you are bored. After a 40-year career, I am a retiree with a healthy retirement portfolio who enjoys the simple pleasures of life: spending time with my wife and family. My favorite activities include bicycling, playing ping pong and chess…. all things that I did as a young adult with NO money!


6. Money means security

One of the biggest money myths is that more cash brings additional security. Having financial security is less a measure of how much you have than it is of how well you save and invest. If you win the lottery and spend it all on, say, traveling around the world on a private plane, you may well have less security than the person who earns a modest income but consistently contributes to their employer’s 401(k) plan and maximizes the company match.

Again, this points to the value of setting up a financial plan (ideally with a financial advisor) and saving wisely. Being mindful with money in these ways is a critical aspect of financial security.


7. Money will get me more friends

Some people believe that having more money would make their personal lives fall into place, like something out of a movie. But think about it, faithful friends and partners are not with you for your money as they truly value who you are as a person.

If you tend to think that money could solve your relationship problems, challenge that belief. Look for other ways to improve that area of your life, like building your personal networks and working to enhance communication.


8. I do not need to save for retirement now

This is an extremely dangerous myth to believe. If you are young and are investing for your retirement, you have time on your side. Your invested money can grow thanks to the wonderful impact of compound interest until you reach retirement age. Here is an example to prove my point: If a 25-year-old invests $200 a month and earns a 6% return, they’ll have $393,700 by age 65. If that same person only starts saving at age 35, that same money at the same rate nets them $201,100, or about half of what they would have if they started a decade earlier. This is why Einstein called compound interest the “8th wonder of the world”!

I learned one of the most powerful personal finance lessons early in my career, compound interest, which is earning interest on top of interest. From the start of my career at Hershey, I contributed to the company 401(k) plan and took a minimum of 6 percent from my paycheck to maximize the Company match. My 401(k) balance and wealth grew substantially over the 23 years because of this compounding impact. 


9. I need at least 3 months in my Emergency Savings

It’s typically recommended to keep three to six months’ worth of living expenses in an emergency savings account. This can provide a cushion if you were to experience a job loss (e.g., worldwide pandemic), receive an unexpected medical bill or encounter a surprise home repair (e.g., I just replaced a HVAC unit in a rental property). Some experts recommend that people have still more money stashed aside, but there are plenty who can’t even muster one month’s worth of expenses in savings. Sadly, a recent survey found that 49% of Americans said they couldn’t afford a surprise bill of $400.

I listened to a TEDx Talk by Wendy De La Rosa, a Wharton assistant professor and cocreator and host of the TED series “Your Money and Your Mind.” In her TEDx Talk, I learned it may make sense to take a “Financial Health Day to get your financial life in order” . I learned from Wendy’s TEDx Talk that it is also “very important to create a savings goal or plan including an emergency savings reserve of three to six months, and the best way to achieve this goal is to set up automatic savings from a paycheck.”


10. I need to be rich in order to invest

You do not need to be rich to invest: Let’s bust that myth right away. You can start investing with as little as $10 as investing is often a path to greater wealth. While it has its risks, it is likely to give you a healthy return over an extended period of time. 

You do not need to be a market expert before you dive in. With today’s robo advisors and investing apps, investing has become easily accessible and convenient. Of course, you might prefer to work with a human advisor, which I strongly recommend. Whatever you are comfortable with, investigate fees before you begin investing so you are prepared for any costs you will need to cover.


Myths about money can stand in the way of your making the most of your finances. By avoiding these misconceptions, you will be better able to take control of your cash, budget, save, and invest wisely. These moves can not only increase your wealth and help you achieve your retirement goals, but they can also enhance your peace of mind, too.

Feel free to share any of your money misconceptions in the comments!


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7 thoughts on “Most Common Misconceptions About Money”

    • Thanks Drbob for sharing this interesting article on income vs happiness levels. My favorite quote is from co-author & Wharton fellow Matthew Killingsworth at the end of the article:
      “Money is just one of the many determinants of happiness,” he said in the statement. “Money is not the secret to happiness, but it can probably help a bit.”

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  2. Says someone who probably has a lot of money! Some good points here but disagree with #1, #4, #5, #6 based on my own life experiences. In fact, some of these points are so off base that they are literally inversions of reality.

    • You have to be both rich and poor at some points in your life to make these assessments; you are entitled to disagree of course, but if you do so without that experience I suspect you will not be accurate.

      • Well I grew up poor by US standards and am quite comfortable now, so I guess I meet your criteria to have a valid opinion.

        • Thanks Anthony as the great feature of this forum is that everyone is entitled to share their opinion. As I learned from writing a book, there will be folks who feel my opinions and statements are incorrect. Like you, I grew up in a poor family but after 37 years together of hard work by both my wife and I (she was a busy Pathologist), we have a comfortable (but not lavish) life in retirement. I truly hope you enjoy your retirement in comfort!

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