Home » 6 Money Beliefs That Might Be Keeping You Poor

6 Money Beliefs That Might Be Keeping You Poor

Today’s post is a guest post from Jon over at Money Smart Guides. Enjoy!

You think you know your way around money, huh?

Then how come you still have credit card debt, or how come you don’t have an emergency fund and a $10,000 car note?

There are some very commonly held beliefs about money that have permeated our culture and our way of life over the last 30 or 40 years. But if you step back and think about it, the beliefs that we seem to have been conditioned to learn did not come from a high-school or college-level personal-finance course. Chances are they came from the marketing-heavy credit-card companies.

Are Your Beliefs Keeping You Poor?

What’s in your wallet? Perhaps a bunch of myths about money that are keeping you poor, or broke, or at least in debt to someone?

Yes, it is noteworthy that the word “beliefs” is in the headline of this article, and not the word “facts” or “truths.” What we may believe about money may not be the actual truth about money.

And not knowing the truth is partly why we so easily get ourselves into credit-card debt, stay in debt and yet always pay attention to our credit scores.

Let’s take a look at some of the most common beliefs about money and debunk these myths once and for all so you understand how to get rich when you are re-educated.

Belief #1: Build a credit score with debt so you can buy a car or house later.

Reality #1: A credit score is actually a more positive-sounding name that what it really is. A credit score is actually a debt score. And to be frank, you don’t need to “train” your credit score by getting a credit card and making payments on it every month to build up credit so you can get that car loan or mortgage later.

A debt score is not a muscle to be trained and worked. You do not need credit (or debt, to be more accurate) in order to finance a car or a home. All you need is a zero credit score and a right-sized down payment (at least 20 percent; more is better).

Having no debt might force the loan officer to generate different forms and terms for the loan, but you should never be rejected due to a zero credit score. If you are, then that’s a company or lender you shouldn’t be dealing with anyway, because it means it’s incompetent and would likely try to shaft you at the end of the day.

Belief #2: Saving is too hard to do when you are living month to month.

Reality #2: Saving is only hard when you put it last on your list every month. When you make a monthly budget (which you should do anyway), you should always have any tithes or charitable donations and saving plans up front before you take care of any expenses.

Related:  How to Pay off Debt: Beating the Broke Mindset

And any amount will do. Even if you really only have about $50 left every month, if you take $25 and save it and give $25 to a charitable organization or your church, you will benefit.  And whether you save in an investment account or build up your emergency fund, any interest is helpful and will grow upon itself. Saving does not have to be hard if you make it the No. 1 priority every month.

Recommended Reading: The Power of Broke: How Empty Pockets, a Tight Budget, and a Hunger for Success Can Become Your Greatest Competitive Advantage

Belief #3: I have to have a big emergency fund, and I can’t do that on my current income.

Reality #3: You will eventually need a savings account that holds three to six months of expenses (not income). But the bottom line is not so much the amount you need to start with, but it’s about that you actually have something as a buffer to protect you from having to go into debt.

Do what you can to scrape together at least $500 as quickly as you can. Sell things, get a quick extra job, dig out extra dollars from your budget and get that basic starter emergency fund established. If you need to, work to earn some extra money by doing some side hustles.

You might want to get a second job, or doing something more convenient like getting paid to take surveys through a legit survey company like Survey Junkie.

Most legit survey companies allow you to take surveys whenever it’s convenient for you, from any device which might be easier for you than taking the time to work a second job.

With a little ingenuity you can save money. And if you have an emergency fund while you are working on your budget and debt, it can be a security blanket.

Related: 6 Lies That Broke People Believe

As you pay off debts, you may find your budget with more money in it to put toward growing that emergency fund little by little. Especially if you are putting something aside every month, as mentioned in Reality #2 above.

Belief #4:  Investing is only for those with some money.

Reality #4: You can invest in lots of things with very little up-front. Many mutual funds, for example, may require as little as $100 or $500 to invest initially, but then any future contributions can be as little as $10 or $20. And over the long-term, with the stock market posting annual returns of about 8 percent over 10 or 20 or 30 years, every contribution you can make will add up quickly.

Recommended Reading: The Behavior Gap: Simple Ways to Stop Doing Dumb Things with Money

You may only be able to contribute $500 or $1,000 a year, but over that time that can easily grow into a high-six-figure or seven–figure nest egg with some consistent effort (even quarterly if not monthly).

Belief #5: Credit cards now give you great rewards that offset the use of cash.

Reality #5: Oh sure, it might be very tempting to get a credit card because you can get points to get cash back or free airline tickets around the world. But if you actually sat down and did the math, the amount of money you would have to spend to get that airline ticket may be more than what you would pay in cash, including the ticket.

And studies have shown that those who use credit cards instead of cash end up spending significantly more than those who use cash or debit cards. One fast-food chain noted that when it started accepting credit cards for purchases, customers were spending 40-percent more than those customers who used cash or debit cards.

Why? Cash has a certain painful sting to it when we spend it, so when we part with actual cash rather than credit, we tend to feel the loss of cash more and thus we tend to spend less.

Related: Six Mistakes Broke People Make

Chances are good, in other words, that you may spend a lot of money to get that free plane ticket with that credit card, but it may end up being more than you would spend just paying cash for everything – and paying full price for the ticket included.

And if you are a cash-only person, you won’t pay the highest retail price for that ticket either. You will always shop for a better deal.

Plus, if you do end up spending more with a credit card, you could spend yourself out of being able to pay the credit card bill in full every month, and that means carrying a balance and thus paying interest. Doing that long enough will pay for the airline ticket itself.

Belief #6: Don’t pay off your mortgage too soon. You could always use the interest deduction on your taxes.

Reality #6: This is a belief in poor math skills. My favorite way of having this explained is this: Let’s say you have a mortgage on your home and you paid $5,000 in interest on that mortgage last year. If you are in a 20-percent tax bracket, that interest translates into a $1,000 deduction off your taxes. So you are paying $5,000 to a bank to keep $1,000 from the government.

What if you have no mortgage? You paid nothing in interest, but now you pay $1,000 to the government. So you pay out $5,000 in interest with a mortgage, or you pay out $1,000 in taxes without it. I see how this math adds up. Don’t you? If you don’t, and your accountant doesn’t, it’s time to get a new accountant.

Bottom line is that in the long run, having as small a mortgage as possible is better for you in terms of money leaving your house. You will pay less in taxes each year that you don’t have a mortgage than you will pay in mortgage interest every year, because the interest deduction is not 100 percent of what you pay in interest.

Money beliefs like these will keep you poor rather than help you reach your financial goals. The sooner you stop believing the myths, the sooner you can take control of your financial future.

BONUS TIP/Belief #7: Having Lots of Stuff Equals Being Wealthy

This is one money belief that kept us poor for years. Because we saw supposedly wealthy people with new and shiny stuff, we assumed that wealth was about having the money to buy whatever you want.

Well, we were half right. Being wealth is about having the money to buy whatever you want. But it’s also about choosing the freedom of having F-U money over buying whatever you want. It’s about understanding that buying whatever you want, whenever you want, will keep you poor every time.

Why? Because if you refused to practice the discipline that keeps rich people rich, you’ll never get ahead of the monthly payments it takes to pay for the stuff you are buying.

Related: 7 Steps to Success that Most People Aren’t Willing to Learn and Utilize

Many times when broke people are viewing the wealthy from the outside looking in, they don’t see all of the work, sacrifice and other steps to success that made them wealthy in the first place. Instead, they just see the final result: a boatload of money.

Truly wealthy people spend many years choosing “saving and investing via a lack of spending” over buying what they want. And while this might sound really disappointing, I can assure you that it’s worth the effort.

When we first started our journey out of debt, it was disappointing not going out to eat, or spending money on entertainment, or going on vacations. There were many times we sat feeling sorry for ourselves that we couldn’t do A, B or C.

However, as our debt balances started to drop and our savings balances started to increase, we started reaping a new benefit: peace.

And that peace was worth foregoing expenditures such as eating out that would only bring us short term joy. In fact, just the other day I was telling one of our kids how much we currently had in our emergency savings account.

“HOW much?” she asked in disbelief. She was shocked, not because we have that much in our savings account; she was shocked because in the past we never had anything in savings. In fact, we were regularly having trouble paying the bills each month.

She knew this because we started to be transparent with our kids about our money situation as a step toward financial responsibility. We came clean with them about our hefty debt situation so that they would better understand the money decisions we were going to make going forward.

And, like Rick and I have found, the kids now feel much more at peace knowing that we have some money in savings and that we can pay our bills on time and without having the checking account go into the negative.

Before, when we thought that one’s ability to buy and spend was an indicator of having wealth, we were constantly stressed about money. Now, as our debt balances continue to drop, our stress level decreases and our peace level increases. It’s a bonus that is well worth skipping restaurants out and trips to the movies or to buy that new “whatever”.

Don’t let the appearance of wealth lure you. Instead, go for REAL wealth by spending less and saving more.

Do you have any other money beliefs you would like to put forth and see if it’s myth or reality?

Author Bio: Jon writes at Money Smart Guides, a personal finance blog that helps readers to get out of debt and start saving for their future.


  1. Those stats on credit card spending vs cash are interesting! Anecdotally I feel like this is pretty accurate.

    My wife and I switched to a cash only grocery budget when we first entered “hardcore saving mode” and our grocery budgets were night & day. We went down to around $200/month. Now we use a cash back credit card that gives 2% back. We’ve got a good routine for meal planning and grocery budgets but I wonder if we’re still overspending a bit because of it.

    • Olivia says:

      One thing we do that helps us, we only use the credit card for things we’ve already saved for. For example. We use it to buy gas. Once home, we write the expenditure down in our budget book and subtract it from the amount already set aside. We do the same for clothing purchases. We don’t spend if it’s not in the household budget. We also use the card for already budgeted larger expenses. Insurance premiums, tires, etc. That way we truly get the 1-2% back free and clear. In our case it’s a UPromise card, so we can’t just fritter the cash back. Once our youngest finishes school, we’ll consider another card and use the cash back to fund a different goal.

    • Laurie says:

      Yeah, those rewards card can be a double-edged sword. We still stay pretty frugal even while using them, but we do find ourselves tempted on occasion. 🙂

      • Laurie says:

        I know it can really help people keep things under control. For me it tends to have the opposite effect, so I stick mostly with the debit card.

    • Jon says:

      We use a cash back card for groceries and I know there are times when we buy things that we wouldn’t if we were using cash only. But those times are few and far between.

    • Jon says:

      Totally agree. I was trying to play the game to go on our honeymoon for free. It took so much work just to figure out what cards offer what rewards and which ones work with what loyalty programs. Plus with the spending requirements, I was nervous we would quickly amass a mountain of debt.

      I gave up and now just use a cash back card for certain stores.

    • Laurie says:

      Me too. When I was in the mortgage biz, and people came to me with that reasoning, I’d always advise them to pay off the mortgage and get their tax deductions via charitable giving. Makes SO much more sense, and a better impact on the world when done right.

    • Jon says:

      The mortgage gets so many people. Same idea applies to student loans. We think the deduction of $2,500 a year is great, but most don’t realize it is based on your tax bracket. So in most cases, you are only “saving” a couple hundred bucks by paying more interest.

  2. Mrs. Groovy says:

    Love this post! Many people in the personal finance community agree with 1, 5, and 6. Thanks for showing the other side. My favorite line is “A credit score is actually a debt score.”

      • I agree with a lot of this stuff, but I’ve gone in to get an auto loan with 20%+ down and a zero credit score. I was given a loan, but I had to get a cosigner. That loan in turn built my credit score.

        I guess my question is, can this be done without a cosignatory and if not, are there higher standards placed on the cosigner than would be placed on the borrower with a solid score?

        • Laurie says:

          Great question. You could have probably gotten a loan without a co-signer, but the interest rate likely would have been astronomical. Generally, when looking for a co-signer, lenders do look for pretty spotless credit and they also insist that the debt-to-income ratio for the co-signer is still acceptable even including the co-signed car payment, just in case the co-signer did have to start taking over payments.

          We’ve personally taken car loans before when we could get them for 0% interest. I likely wouldn’t do that again unless I had the cash in the bank to pay for it, or unless I could pay it off pretty quickly. We’ve gotten pretty risk averse these days. 🙂

          As far as for building credit, I personally think it is necessary these days, just because other companies such as employers and insurance companies will look at your credit score. But avoiding the accumulation of a large amount of debt is imperative. Thanks, FF!

          • It’s a shame, but a reality that we live in, that credit scores impact so many things. Things outside the realm of credit really… like insurance and employment as you mentioned Laurie. We need a total overhaul of the current FICO system.

          • There’s been an increase in and landlords that require a good one, too. I was thinking if you couldn’t get a reasonable mortgage rate or weren’t blessed enough to pay for a home in cash, the rental market is always a solution in the interim, but I guess even that’s getting harder without a good number.
            Thank you for making me think on this one! I think I’m still in the “you should build your score” camp, but only if you’re doing it responsibly. Paying cards off in full r every billing cycle is probably best financially, but at 18, I wasn’t confident I could handle them. Even though I paid interest on the (notably small) loan, it was still probably safer in my youth.

          • Laurie says:

            Great comment, FF! It’s amazing what one can learn and how they can learn from financial mistakes if they’re willing to take the time.

    • Jon says:

      It’s funny to read all of the articles about how you go about getting a great credit score. It’s almost like it’s become a status symbol.

  3. I’ve always thought it was crazy to continue paying mortgage interest rates for tax deductions. Many times the simplest solution is the best solution.

    I do use a credit card for the rewards, but it’s never been a temptation for me, most likely because of how I was raised. We were always told that credit was bad (my parents didn’t even have credit cards), so when I did get one, I never bought anything more than what we were already buying. I’d say that credit cards should be considered bad by default, unless you learn to handle your spending. As my wife and I just pay for food, gas, clothes, and rent, the credit card rewards aren’t a bad option.

    • Laurie says:

      I think it’s terrific that you understand the potential dangers of debt. We’re pretty good at keeping our spending under control with the credit cards too. But it can get tempting at times. If one doesn’t have their spending under control I’d definitely recommend a cash only budget.

    • Jon says:

      Same thing here Matt. We use our cash back card for gas and groceries. It ensures we can pay the bill in full each month and we get a little discount by using the card.

  4. Master Duke says:

    Thanks for the semantics of belief vs fact. I definitely think that #2 can always hold people back from what they really want in their life.

    I relate this to people who want to travel, but never end up traveling, yet they drive expensive cars or spend money on alcohol every weekend. Saving is sacrificing, find what you can sacrifice to reach a better future :).

    • Laurie says:

      The very best thing we started doing for our money (next to getting the debt paid off) was to start putting a percentage of every paycheck into a savings account. We started with a super small percentage (1%) because we couldn’t say that we didn’t waste at least 1% a month on stupid stuff, and worked up from there. We now have a nice chunk of change sitting in the bank thanks to automation and time – money we wouldn’t have set aside had we continued to believe that we don’t make enough to save.

    • Jon says:

      Many times, they never take the time to figure out what they really value. So they just buy things to try to feel good. If they would take the time to figure things out, they would be much better off. And it would be easier to pass on a luxury car knowing it won’t add value to your life. But saving and then taking that exotic vacation will.

  5. Josh says:

    One reason I stuck with the investment brokerage I still have was for their low mutual fund requirements. I started a Roth IRA in college from a few hundred dollar windfall. With a $100 minimum initial investment and $1 subsequent investment, it was a great option to start investing for an 18-year-old.

    • Jon says:

      Sounds like my experience Josh. I was investing the huge sum of $30 a month for a few years until I started working and could afford to invest more. Looking back, it was the best decision I made. $30 a month doesn’t sound like much, but it adds up thanks to compounding.

  6. I haven’t read “The Power of Broke” but it’s really interesting to me how people can become hyper-motivated through adversity. If it wasn’t for my student loan debt there’s a good chance I would not have pushed myself so hard the past five years from a side hustle perspective. But because of that hard work I feel like I’m much better positioned to succeed the next 5-10 years!

    • Laurie says:

      That is an awesome example of the Power of Broke concept, DC. We have found the same thing. When we were tempted to spend on going out to eat or whatever, one remembrance of how god-awful tight our money situation was, and we were suddenly very happy to eat rice and beans at home.

  7. Awesome post!!! Too many people are convinced that they’ll lose the tax benefits of paying off the mortgage. I think people need to wake up and understand that this is definitely a myth. Think based on your example of all the things they could do with their money if it was being consumed by interest being paid to the bank 🙂

  8. These are great points, Jon. Another very harmful money belief that I held for a long, long time – without even being aware of it – was that money is the root of all evil. Because of that misquote, I felt that a focus on money was beneath me – and my finances were a constant disaster. The real scripture is that “the love of money is the root of all kinds of evil” – but managing money well is not the same as “loving” money. So as I manage money better – without idolizing it – my finances are improving : )

    • Laurie says:

      Thanks so much for pointing that out! I think that one affected me too for many years. I was afraid of money and of having money for a lot of reasons. Now I try to focus on how it can be a blessing to others if we use it properly.

  9. Debt is used as an excuse too often… That can’t be good!
    Also, we’ve managed to save (some) money while I was unemployed and had only my boyfriend’s income coming in. It seemed impossible, but if we could do it, anyone can!

Comments are closed.