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10 Money Myths.

by Natalie Pace.

If you feel like you got suckered over the past few years, you're probably right. Getting even (as in back to even), however, requires getting the financial education you should have received in high school. Having Money Wisdom makes it easier to do the math on successful investments, and to surround yourself with other financially literate team players. A winning team scores.

As long as you still believe in the 10 Money Myths I list below, you are vulnerable to being the prey of unscrupulous salesmen, relentless debt collectors, scam artists, phishers, myth-mistaken friends/relatives, banksters and other financial predators. And sticking your head in the sand, and focusing on something you feel you have control over -- your job -- isn't a good solution either.

Being a super income earner is great.  However, that investment of your time will not outlive your job.  On the other hand, if you save 10% and that 10% earns 10% (what stocks and bonds have done for the past 30 years), then you will have more money than you earn in seven short years and your money will make more than you do within 25 years. Teens who start investing wisely with their first job could retire before they are 50.

It's easy to think that you don't have the time or money to do this. Today's professional also wears the stethoscope of Dr. Mom, the whistle of soccer coach and wields a mean Garden Weasel. S/he works out on her lunch hour and looks hot in swimsuits! However, a beautiful bottom line is just as desirable and once you set your budgeting and investing plan up right it is far less time and money than you are currently spending.

So how do you set it up right? You replace Money Myths with Money Wisdom.

10 Money Myths

  1. I'll start investing when I pay down my debt.
  2. My To Do List is too long.
  3. It's too hard to navigate a global economy.
  4. I'll need a PhD in economics before I can do it right.
  5. Wall Street is corrupt.
  6. I've got too many bills to invest.
  7. Who's got the time to read the business section daily and watch CNBC 24/7?
  8. Gold is where it's at.
  9. Someone manages my money for me.
  10. I'm doing great.

And here's the Money Wisdom you need to adopt in place of those Money Myths.

  1. Compound Your Gains, Not Your Debt. At the end of 7 years of paying off debt, you will still be in debt and you'll have nothing to show for it. If you lose your job, you're in trouble. After 7 years of investing wisely, your assets equal more than your annual salary and you are on your way to financial freedom. As Martin Luther King says, "Darkness cannot drive out darkness, only light can do that." Similarly debt cannot drive out debt, only compounding gains can do that. Your retirement accounts allow you to negotiate better terms for your debt, to compound your gains tax-free (if they are in a tax-free retirement account) and the money is yours to keep no matter what (no debt collector can take your retirement money). In short, if you're in debt, it's your budget that needs trimming, not your investing.

  2. A Good Plan Saves Time. A plan that is set up right (according to Modern Portfolio Theory) is stress-free, works great and requires rebalancing only once or twice a year. Imagine how much less time you'll spend arguing over money, when your money is making money for you -- while you sleep…

  3. The ABCs of Money. Writing is easy once you know the ABCs. Did you ever learn the ABCs of financial literacy? Do you understand Modern Portfolio Theory? What the average annualized returns of stocks, bonds, real estate and gold are? How to evaluate the fiscal health and debt of companies you are invested in? Knowing these basic facts will make it easier to do the math on successful investments, and to surround yourself with other financially literate team players. There are always good investments, in any economy.

  4. Easy-as-a-Pie-Chart. Modern Portfolio Theory is easy-as-a-pie-chart and makes annual rebalancing simple, too. MPT with annual rebalancing works wonderfully through bull and bear markets because your safe side wins when stocks wane, your equities outperform when Wall Street rises and your annual rebalancing means you have a strategy for capturing your gains.
  5. Main Street Owns Wall Street. For every Enron, there are 95 companies that are making the products we love. However, headlines focus on the shenanigans of the few corrupt companies and CEOs more than the Good Guys and Women of Wall Street. How many times have you heard about the losses at Merrill Lynch and other bailed out companies, as opposed to the healthy balance sheets that Schwab and TD AMERITRADE maintained before, during and after the Great Recession?

  6. Incorporate the Thrive Budget. If you are buried alive in bills it is because you are overspending on basic needs. Get the big ticket spending under control and you'll have a lot more time and money for fun, charity, education and investing. Cutting out café lattes will only make you cranky. It will not make you rich.

  7. Money While You Sleep. If you're investing on headlines, you'll always be late, which translates into buying high and selling low -- a losing strategy. A diversified plan protects you from bear markets and maximizes gains in bull markets. Since both stocks and bonds have earned more than 10% annualized for the past 30 years, if you are invested, you are meeting your goal of financial freedom.
  8. Buy Low; Sell High. Gold has been the top performer for the last decade. However, it is the worst performer over a 30-year period. If you purchased gold at $850/ounce in 1980, you had to wait a quarter of a century for the value of your investment to return. If you purchased gold ten years ago, you've earned almost 5X return on investment!

  9. Brokers are Salesmen. Unfortunately, the reason so many Americans are stuck trying to pay off homes they can't afford or other real estate that they purchased at the top of the market is that someone was selling them into that dream, using selective data to convince them that it was a great idea. That same tactic was used at Goldline to sell gold bugs into buying coins that would need to go up 55% for the customer to break even. Once you know what a reasonable price and rate of return for an investment are, you're more likely to make a timely, rewarding purchase and to take profits at the most advantageous moment. Also, as TD AMERITRADE Joe Moglia reminds us, "The typical financial consultant covers 400-500 accounts. They get paid on the ones that have the greatest assets. They realistically can’t get to the majority of their client base."

  10. Consumer Debt is $2.5 Trillion (source: FederalReserve.gov). If you're drowning in debt or buried alive in bills, you're not doing great. Debt compounds, meaning you sink further into the quick sand the longer you wait. The sooner you face and identify the source of the problem, the sooner you can start on your way to financial freedom. So, be bold and brave and honest with yourself, and seek the wisdom of tried and true systems that have a history of performing well over time. Be wary of anyone who promises the moon, any salesman, any guru, anyone who demands a fee up front or of betting your future on a "Hail Mary" solution (like Vegas, the lottery or options trading). Trust results.

If you think of all the time you spend worrying about money, you know that getting smart about investing is actually going to take less time. Money while you sleep is the best remedy for anyone weighed down with the responsibilities of today's demanding world.

To learn more about Modern Portfolio Theory, the Thrive Budget™, Stock Report Cards™ and the Billionaire Game™, read You Vs. Wall Street (published by the Vanguard Press, a division of Perseus Books). I have activated links to each of these 10 Money Wisdom tips, where you can learn more about them as well.

 

About Natalie Pace:
Natalie Pace is the author of You Vs. Wall Street and Put Your Money Where Your Heart Is. She is the founder and CEO of the Women’s Investment Network, LLC (a global financial news, information and education site), where she has been adding a splash of green to Wall Street and transforming lives on Main Street for more than a decade. Natalie is a blogger on HuffingtonPost.com
and a repeat guest on national television and radio shows such as Good Morning America, Fox News, CNBC, ABC-TV, Forbes.com, NPR and more. As a strong believer in giving back, she has been instrumental in raising tens of millions for public schools, financial literacy, the arts and underserved women and girls worldwide. Follow her on Facebook.com/NWPace. For more information please visit NataliePace.com.

Please note: NataliePace.com does not act or operate like a broker. We report on financial news, and are one of the most trusted independently owned and operated financial news corporations in North America. This article is intended to educate and inform individual investors, and, thus, to give investors a competitive edge in their personal decision-making. The publicly traded companies mentioned in this article are not intended to be buy or sell recommendations.

ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies.   Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect a long, safe strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience.  

Information has been obtained from sources believed to be reliable however NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.

 

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