financial literacy

Money Myths vs Realities

by Khatapana

Dec 13, 2022 - 5 min read

Money Myths vs Realities

There are many myths and misconceptions about money, including the belief that money is the root of all evil, that we should not aspire to earn more money, and that it is impossible to become wealthy without inheriting money or winning the lottery or without using any illegal or unethical means. Whenever we come across a rich person, we have a preconceived notion that the person either should have been born with a silver spoon or there is something shady about his business or even he may be using unfair means. 

Another common myth is that saving money is always a good idea, regardless of the interest rate or the state of the economy. Nobody seems to care about inflation and rising cost of living. In reality, the decision to save money or invest it depends on a number of factors, including the individual's financial goals, risk tolerance, and the current state of the economy. If your money is not earning more than the inflation, then actually the value of your money is depreciating. Take for example, what you could buy with Rs. 100 a few years back and what you can now. Look at the petrol prices or even the prices of groceries. 

It is also a myth that debt is always bad. Another misconception is that people cannot get out of debt without sacrificing their lifestyle or going without necessities. While it may require some effort and discipline, it is possible to manage and pay off debt while still maintaining a reasonable standard of living. Lets discuss some more money myths and try to bust those myths:

Myth No. 1: You need to be rich to invest.

Reality: Anyone can start investing with a small amount of money.

There are many investment options available that can be accessible to people with a wide range of income levels. Some investment options, such as purchasing individual stocks, may require a larger initial investment, but there are also many other options available, such as mutual funds and exchange-traded funds, that can be more affordable and accessible to people with limited financial resources. You can apply for shares of any company through an Initial Public Offering (IPO) for as low as Rs. 1000!

Myth No. 2: Debt is always bad.

Reality: While excessive debt can be harmful, some forms of debt, such as student loans or a home loan, can help you achieve your financial goals.

Whether or not personal debt is "bad" can depend on the individual and their circumstances. In general, having some personal debt, such as a home loan or a loan to pay for education or starting a business, can be a normal part of life and can even help individuals achieve their financial goals. However, having too much debt or being unable to manage debt responsibly can be a cause for concern. High levels of personal debt can put individuals at risk of financial difficulties, such as being unable to make monthly loan payments or having to pay high interest rates on their debt. It is important for individuals to carefully consider their own financial situation and to manage their debt responsibly in order to avoid financial difficulties. The main issue is you should not live on debts and just borrow money to show off. That used to be a trend in our Nepali society where people borrowed money to celebrate festivals with pomp and grandeur without considering their financial position. Why do you think they often say: दशैं कसैको पनि दशा नबनोस् ! (meaning: May Dashain not be a curse to anyone!)

Myth No. 3: You need to be an expert to manage your own finances.

Reality: With some basic knowledge and resources, anyone can manage their own finances effectively.

Myth No. 4: You need to earn a high income to save money.

Reality: In fact, the key to saving money is to spend less than you earn, regardless of your income level.

Yes, this seems to be the one of the biggest misconception in Nepal. While most of us start working and earning at an young age, we mostly put off saving and investing for later i.e. when we will earn enough! But how much is enough? Whatever you earn right now is enough. If we all can spend what is left after saving and investing, may be then we will see a change. We are yet to learn and see the magical effects of compounding. We can very well take the example of Warren Buffet who started investing as early as age 11 and here is what he had to say:

“I made my first investment at age eleven. I was wasting my life until then.”

What were we doing at age 11? Worrying about our homework or would there be any holiday anytime soon so that we could play all day? The problem is our school did not impart any practical education. If only we learnt about managing money and investing while we were in our school! Just imagine. 

Myth No. 5: Saving for retirement is only for older people.

Reality: The earlier you start saving for retirement, the more time your money has to grow. 

Myth No. 6: Only wealthy people need a financial advisor.

Reality: Anyone can benefit from professional financial advice, regardless of their income or net worth.

Myth No. 7: You need to choose between saving money and enjoying life.

Reality: You can save money and still have a fulfilling and enjoyable life by setting financial goals and prioritizing your spending.

Myth No. 8: Budgeting is restrictive and boring.

Reality: Creating a budget can give you greater control over your finances and help you achieve your financial goals.

Try Khatapana and you will know how easy and fun budgeting and record keeping is!

Myth No. 9: You need to be perfect to manage your finances effectively.

Reality: Managing your finances is a lifelong learning process, and it is okay to make mistakes and learn from them.

And if you think you cannot manage your finances, then don't worry. You are not alone. Join Khatapana community today and take the first step. You just need to know how to use your mobile phone and that's all. Without any prior accounting or book keeping knowledge or even without knowing financial concepts, you can start by tracking your money flow in Khatapana. Just record your transactions. If you pay money to buy anything, just record it as a payment or an expense. If you lend money to someone, you just need to specify whom and for what purpose you lent the money. Khatapana will do all the calculations and provide you with real time position of your finances. 

These are just a few examples of the many myths and misconceptions about money that exist. It is important to be aware of these myths and to base financial decisions on sound principles and reliable information, rather than on common misconceptions. Why not share this and help remove these myths and misconceptions?

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