6 Lies You're Told About Money

🔍 Deep Dive: 6 Lies We’re Told About Money

💸 Lie #1: You Need a Larger Emergency Fund

I recall a conversation in which a friend told me they had $250k sitting in a standard checking account 👀. That’s an excessive amount to keep in a checking account, and over time it actually loses value from inflation.

Yet, some people say you can never have a large enough emergency fund.

Why It’s a Lie: You should keep 6-12 months of expenses in cash. If you’re young, you should very rarely keep excess cash beyond this amount—which is reserved for emergency situations like:

• A large and unexpected medical bill

• Losing your job

• Natural disasters

Yet, many people feel the need to continue stockpiling cash beyond their emergency fund. This is typically done out of fear they’ll never have enough, or that it’s not safe in the market. But the truth is that once you have an emergency fund saved, your excess cash should be directed to places where it will make you money—for example, a high yield savings account or broad market index funds.

If you have $50,000 in cash sitting in a 0.01% interest savings account, you’re losing around $1,200 per year due to inflation alone. That same amount invested in index funds historically averages an 8% return over the long term, or $4,000 per year.

That difference is massive: losing $1,200 per year or making $4,000 per year. Having $50,000 in a checking account might be realistic for your emergency fund, which is fine. But beyond that? Invest it.

Key takeaways:

• Keep 6-12 months of essential expenses in cash, and no more.

• Once you hit your target, it’s okay to save for very specific goals, or possibly more if you’re in or nearing retirement.

• Invest your excess cash into index funds or high yield savings accounts.

🏡 Lie #2: Buying a House is an Investment

Conventional wisdom says:

• Real estate always goes up.

• Buy a home as soon as you can.

• You’re building equity instead of throwing away cash.

Why It’s a Lie: Your primary residence is a lifestyle choice, not an investment vehicle. Can you make money under the right market conditions? Possibly. But after you factor in property taxes, insurance, maintenance and upkeep, and opportunity costs—homes often underperform other investments.

This doesn’t mean you shouldn’t buy a house. It’s a fantastic choice for many people, but do it when it makes sense for your lifestyle and circumstances. Not because you think it’s a long term investment.

I broke down the numbers on my X account, but here’s the overview. If you subtract the total sunk costs from the ending home value, you’re only in the green by ~$300k.

Key takeaways:

• Buy a home when it makes sense for your lifestyle, not your portfolio.

• Calculate the true total cost of ownership (not just mortgage payments).

• Investing is for building wealth. Homes provide stability, environment, and lifestyle.

• Renting is a great alternative when buying doesn’t make sense for your lifestyle.

🗑️ Lie #3: Renting is Throwing Away Money

You’ve probably heard people say renting an apartment (or house) is throwing away money. The truth is that it’s no more “throwing away money” than owning a house is.

First let’s look at lifestyle comparisons. Renting provides benefits that home ownership doesn’t, like:

• Better flexibility to move for better opportunities

• No responsibility for maintenance or repairs

• No risk of losing a large asset due to fire, floods, or natural disasters

Now let’s take a look at the financial comparison.

Why It’s a Lie: Homeowners “throw away” just as much money as renters do—it just goes toward other sunk costs like:

• Mortgage interest

• Property taxes

• Insurance

• Maintenance and upkeep

• Condo or HOA fees

It’s true that owning a home builds equity, and it’s also true that your home equity can appreciate in value over time. But this appreciation rarely offsets your other costs of home ownership over the long term.

Here’s a great calculator for running the numbers on this:

Key takeaways:

• Before buying a house, calculate the difference between renting and the true cost of owning that house.

• If you prefer renting, that’s perfectly fine. Don’t feel guilted into purchasing a house because you think you’re throwing away money otherwise.

• Rent in expensive housing markets. Buy in affordable housing markets.

• Make your choice based on your lifestyle and situation, not social pressure.

💳 Lie #4: Always Pay Off Debt Before Investing

Certain financial experts will say you should eliminate all debt before investing anything in the market.

This is true if you have a lot of high-interest debt, like credit cards. But if you have low-interest debt (like a mortgage), then waiting to invest could significantly delay your retirement.

Why It’s a Lie: This advice shouldn’t be used as a blanket statement. Investing while paying off low-interest debt is often the smartest financial decision.

For example, let’s say you have a $10,000 student loan at 4.5% interest over 7 years. You’ll pay:

• $139 per month

• $11,676.14 in interest over the loan term

Let’s say you have an extra $250 per month you could either put towards your student loan, or you could invest it in an index fund. Here’s what would happen in each scenario:

• Paying an extra $250 per month towards your loan saves you $1,140.97 in interest and reduces your total loan term to 28 months.

• But investing the extra $250 per month over 28 months will turn into $7,718.32!

Investing your extra money in this case is the clear answer. For most forms of low interest debt, you’re better off making minimum payments and investing the rest of your money.

Key takeaways:

• Make minimum payments on debt under 5% interest.

• Aggressively eliminate high-interest debt (credit cards, personal loans).

• Invest the difference in low-cost index funds.

• Consider the emotional versus mathematical trade-offs.

🎓 Lie #5: College is Always Worth It

This is another blanket statement that isn’t always true.

Why It’s a Lie: The return on investment for higher education has declined rapidly in the last decade or so. The cost of a degree has skyrocketed during the same time.

What you see today is that many graduates carry enormous amounts of debt for degrees with poor job prospects.

Here are some quick facts from Indeed to back this up:

• A majority (52%) of US job postings on Indeed don’t mention any formal education requirement.

• Employers are increasingly adopting skill-first hiring approaches.

• 87% of sectors have lower bachelor’s degree or above requirements than they did five years ago.

As artificial intelligence continues to advance, you may even see traditional “safe” jobs such as medical and legal professionals become “less sure” long term prospects.

Key takeaways:

• Consider the “debt-to-expected-income” ratio for your major before enrolling. If you’re a parent, run the numbers with your child so they’re aware.

• Research community college options for general education requirements.

• Explore trade schools, certifications, and apprenticeships.

• Pick degree programs based on employment outcomes, not prestige.

😃 Lie #6: Money Will Make You Happier

More money increases your freedom and comfort in life. More freedom and comfort often makes us happier. But does that means that more money will make you happier? Not always.

Why It’s a Lie: Research shows happiness increases with income, up to a certain point. Additional wealth provides security and freedom, but happiness doesn’t increase linearly with an increase in money.

The truth is this:

• Money eliminates some sources of stress. But your old problems will be replaced with new ones.

• Lifestyle inflation often follows increases in come, keeping many people at the same life satisfaction level.

• People always want more, regardless of their current wealth level.

• Non-financial factors (health, relationships, purpose) have a larger impact on your overall happiness and satisfaction in life.

Key takeaways:

• Focus on have “enough” rather than having “more.”

• Prioritize experiences and relationships over material accumulation.

• Balance financial goals with other life priorities.

💡 Put It Into Practice

Which one of these money lies have you believed before today? This week, take a close look at your money beliefs and examine them for truth.

💵 Budget Breakdown: Full-Time Side Hustling for Debt Payoff

This is Amber from Instagram. She shared a video breaking down her May income as a full-time side hustler paying off $200k in debt.

Here’s the breakdown of her income:

• Plasma Donation: $410

• Uber Eats: $105.95

• Focus Groups: $320

• Freelancing: $3,024 (one client at $24/hour; roughly 31 hours per week)

• Total: $3,859 (before tax)

The caption explains that she doesn’t have a “real job” (which we can assume means a full-time role). Instead, she’s side hustling with multiple streams of income to make up her “full-time” salary.

The question is: Is this a smart approach or is a full-time role a better option?

Here are my thoughts:

• Amber lives in Minnesota where the average full-time salary is $52,043 (roughly $25 an hour).

• That’s $4,336 per month pre-tax, which isn’t far off from her side hustle earnings.

• Self employment taxes need to be factored in.

• Having the majority of your income sourced from one freelance client carries a lot of risk.

I don’t think her approach is a bad idea necessarily, but it’s highly unlikely that this lifestyle is sustainable or fulfilling long-term. If you’re having trouble finding full time work, this can be a great alternative in the meantime. Otherwise, keep your side hustle a side hustle, and focus on building a fulfilling career and lifestyle.

🔗 Quick Links

🏠 When mortgage rates will drop.

😅 FICO scores will now include Buy Now, Pay Later data.

💰 This change could force rent prices down.