These Dated Beliefs Hold People Back from Finding Financial Freedom

Sometimes, you are the one holding yourself back from achieving your financial goals and maximizing your resources. Many commonly held beliefs people pick up throughout their lives don’t help them reach financial independence.

Many people hold the belief that to make money, you first need to have money. They take this belief and apply it to their attitudes about investing. You don’t need to be wealthy to start an investment portfolio, and the sooner you start trying to build your wealth the better.

Debt can be a crippling and scary thing for someone trying to claw their way out of an excessive amount of it. Indeed, debt is a problem for the average middle-class American. Fortune reported recently that credit card debt in America is expected to reach over $1 trillion for the first time on record.

One potential pitfall many people fall into is getting comfortable with a standard day job. While a day job can certainly provide financial security for a time, you are losing your competitive edge by relying solely on it. What happens when that job gets eliminated or your company goes under?

Many people don’t track their expenses as much as they should. Some blame stress in their lives, while others prefer to balance their budget their own way. These people have a variety of beliefs and excuses for why they don’t, but in the end, this attitude is holding them back financially. A survey by Inuit found that as many as 65 percent of Americans have no idea how much they spent the previous month.

A common blindspot people have with their own finances is thinking they don’t have enough money to start saving. People will procrastinate their finances, thinking they will start saving when they are in a better position. However, that kind of thinking should be avoided. There’s an old saying that goes, “Perfect is the enemy of good.”

You may notice that a common trope among these dated beliefs is many are inherent to flaws of human psychology. People will make excuses why they can take it easy and push something out of their mind, but that is an unhealthy attitude.

While this phrase has some truth to it, the reality is that just keeping your money in a bank or other institution where it isn’t significantly appreciating in value may do more harm than good. Because of the effects of inflation, the currency you are saving is slowly depreciating in value.

A common attitude that people develop over their lives is to start avoiding risks after they get burned. If someone has experience losing money when taking a risk, they may be likely to avoid risks altogether in the future. Don’t let your past experience with risk color your assumptions for the future.

On the other side of the coin, some people have difficulty understanding risk and probability in their investments. People can get saddled with the burden called the sunken-cost fallacy. This mindset keeps people making the same bad financial decisions because they feel like they have invested so much time and resources already and want to see it to the end.

No matter what your financial situation is, you can always benefit from professional financial advice. Shlomo Benartizi, a behavioral economist, asserts that solid financial advice can be equal to an income boost of more than 7% for a person. (via CNBC)

At the end of the day, you are the one who has to live with your financial decisions. It is essential to remain flexible and open to advice from others, but you should be making investments and decisions you are happy with.