For those who don’t know, my background was not originally in finance. I actually went to school to become an educator. While I no longer teach social studies as I once did, I still have the heart of a teacher. Because of that, I jump on every opportunity I can get to transfer knowledge I have obtained to those around me. One of the ways I do that is by participating in the longstanding relationship Stewardship Capital has had with local schools. I am currently working with the ISD Academies program to mentor a Truman senior several days a week, and was also recently honored to speak before multiple classrooms on the topic of personal finance.
My presentation for these students was titled the “truth about money”, and after presenting it I realized the information I shared is not only good for kids to hear, but for everyone to be reminded of. So this week, I thought I would share a portion of that presentation and hopefully disprove some of the most commonly held myths about money.
Myth #1 Most wealthy Americans are born into money. This might be the most commonly held false belief. According to a recent study from Fidelity investments 88% of American millionaires are self-made and only 12% inherited a significant portion of their wealth from someone else. The old saying “the rich get richer and the poor get poorer” may sound valid but the reality is in America if you’re hard working, responsible and wise the likelihood of becoming a millionaire is very high regardless of your socioeconomic background.
In his book everyday millionaires Chris Hogan echoes this viewpoint using the fact that the top five millionaire creating careers are teacher, accountant, attorney, manager and engineer. While being respected professions most of these are not viewed as extremely high paying occupations.
Even the vast majority of the richest people on the planet created most of what they have. Name like Jeff Bezos, Elan Musk, Bill Gates and Warren Buffett were not born into wealth, but produced it through drive, innovation and the American spirit. In fact, of the ten richest people in the world, only French fashion magnate Bernard Arnault, was born into his fortune.
Myth #2 Obtaining money will solve one’s financial problems. This statement at first glance may seem true, but the numbers show that without a firm foundation in how to use money properly and responsibly individuals are likely to struggle regardless of whether their annual income is $30,000 or $30,000,000. If you don’t believe me just ask individuals like Nicholas Cage, Mike Tyson, or Johnny Depp, all of whom have made hundreds of millions of dollars in their careers and went broke. For them, their income was never able to keep up with their irresponsible spending.
It’s not just rich celebrities that experience this however. The vast majority of everyday people who receive large financial windfalls go bankrupt in just a few years according to the National Endowment for Financial Education.
Myth #3 Money will make you happy. In a landmark study on the correlation between wealth and happiness Purdue University found that the ideal income for life satisfaction is $75,000 annually. It also found that the farther away from this mean an individual goes, in either direction the more likely they are to identify as unhappy. The study found that those making less than $50,000 or more than $105,000 are most likely to report feelings of unhappiness.
Having accurate information is one of the biggest keys to making good decisions. I hope today I have shared some perspectives that might cause you to reconsider some of the things you have always believed about money.