5 Common Myths About Money

Myth #1 Investing in the Stock Market is the Same as Gambling

Thirty-six percent of the self-made millionaires in my study were what I like to call Home Depot Investors. These individuals made most of their wealth by investing in stocks in individual publicly-held companies.

Many believe that stock investing is no different than gambling.

My millionaires would disagree. You see, before these millionaires purchased any stock, they would pour over the financials of each potential investment, looking for strengths and weaknesses:

• Was the company over-leveraged (too much debt compared to assets) – this could negatively affect cash flow, hampering growth. Cash flow which must be used to pay off the debt and the interest, can’t be re-invested back into the company?
• Were company their profits increasing consistently over time – increasing profits is a good indicator of good management – management has control over costs.
• Are company sales growing? This is an indicator that the products or services offered are in demand and the company’s sales force is doing a good job.

Once Home Depot Investors complete their due diligence, or homework, that is when they would confer with their financial advisor for feedback regarding their financial assessment.

And their homework did not end after they purchased a stock. These millionaires continued to monitor the financials of each company they invested in. If the financials got better, they invested more money. If the financials got worse, they sold their stock.

Sounds a lot like Warren Buffet, doesn’t it? As far as my self-made millionaires were concerned, doing your homework takes the gambling out of investing.

Myth #2 All Debt is Bad

Fifty-one percent of the self-made millionaires in my study were entrepreneurs. They started up companies and then ran them as if their life depended on it. They took risks that would make most cower in fear.

And they did not shy away from debt. In fact, many took on enormous debt to start, grow or expand their businesses. They used debt to create a business asset that would eventually generate significant profits and make them rich.

That’s called good debt.

Bad debt is debt that is used to finance ongoing losses in a business long after the start-up period has ended. Losses mean you’re not running your business correctly or you’re in a business sector that is in decline, due to external factors, such as technological or innovations negatively affecting your industry.

Using debt to finance an unprofitable business is bad debt.

Myth #3 The Rich Are Just Lucky

There is a difference between random luck and Opportunity Luck. To the rich haters out there, random luck is why the rich are rich.

Not true.

Opportunity Luck is why the rich are rich. Opportunity Luck is a unique type of luck the rich create as a result of having good daily habits, proven processes, positive thinking and laser-like focus on their goals and dreams.

When you have these success traits, you they become a magnet opportunity luck.

Myth #4 Those Who Pursue Wealth Are Greedy

Ninety-three percent of the wealthy in my study either liked or loved what they did for a living, long before wealth and success came along.

It took the average millionaire in my study thirty-two years to accumulate their wealth. Ninety-seven percent of the wealthy in my study said greed was not a motivating factor in their pursuit of success and wealth. They did what they did because they liked or loved it, not because they were on some mission to become a millionaire.

Myth #5 A Penny Saved is a Penny Earned

A penny invested is ten pennies earned. The rich in my study invested their money in one or more of these three places: their own business, stock in other companies (see Myth #1 above), or real estate. If you really want to be rich, you must invest your money – you must make your money work for you.

Tom Corley

Tom Corley is an accountant, financial planner, public speaker, and author of the books “Effort-Less Wealth: Smart Money Habits At Every Stage of Your Life” and “RichKids: How to Raise Our Children to Be Happy and Successful in Life“.  Corley’s work has appeared on CNN, USA Today, The Huffington Post, SUCCESS Magazine, and many other media outlets and podcasts in the U.S. and 27 other countries. Tom is a frequent contributor to Business Insider and CNBC.