Money myths that you need to ditch

It never ceases to amaze me the long held beliefs of many people who don’t actually question whether there is any truth to them. This isn’t just in relation to money and investing, this is in relation to anything and everything. If we believed everything that was told to us, we would still believe that the world was flat.

Today I want to challenge your money myths, and below are the 4 that I come up against nearly every single week.

Property will double every 10 years – Contrary to popular belief, the real estate market is not always predictable. There have been times in the past where property has substantially increased, but just like any investment, it is not a guaranteed thing.

Property can have periods of great return, but it also can (and does) go down. Investing in property may be a great investment strategy for you, but if you are banking on a 10 year turn around to double your investment, you might want to think again.

Only the rich can afford to invest – Most everyday type people think that you need to have a large amount of money to invest. To be honest, the way you are going to get a large amount of money in most circumstances is to start small, and consistently build over time. If you have a little bit of excess income on a monthly basis, you are able to start your investment portfolio now.

I’ve worked my whole life, the age pension will look after me – Sorry, it doesn’t work that way. The age pension is not enough money to live on, and there is no saying where it is going to go from here. Most people who have a substantial super balance still have to rely on the aged pension to subsidise their retirement income anyway. Imagine living on $20,000 per year, because that is all the aged pension is (right now anyway). Add up all your living expenses and see if you fall short. You need to take responsibility for your twilight years and start putting money into super and saving for your retirement.

Buying an investment property will reduce my tax – I have previously written about negative gearing and the fact that if you have a negatively geared property it will reduce your taxable income. Yep, it sure will. In order to get that tax deduction however, you need to be making a loss on your investment. That means your investment property costs more to run, than the income you are making from it. Suddenly it doesn’t sound as good anymore does it?

There are some general investing rules to follow when building your wealth, but following blindly what your neighbour told you at the BBQ on the weekend might see you making silly money choices.

The post is from our resident Financial Planner Cara Brett, check out her details in the About Us section.

Posted in: Cara Brett, and Financial Planning