Becoming Your Own Banker, Part 26: Top 7 Money Myths, Lies That Are Costing You Money

What if what you think about money turned out not to be true? Even worse, what if you’re believing lies that are costing you money?

Embark on a journey as we unravel the twisted web of money myths holding you back from true wealth. Inspired by Nelson Nash and flavored with insights from David Stearns, our discussion breaks down seven misconceptions that have snaked their way into your financial beliefs. From the debated need for dual incomes to the complex dance around tax deferral, we’re here to challenge the status quo and guide your finances out of the fog and into the clear.

Tune in as we continue our series through Nelson Nash’s book, Becoming Your Own Banker, where we discuss increasing income, future taxes, banking, retirement plans, the stock market, paying cash, and life insurance needs analysis. And this is one place that the final points to consider might just be the most important part of the book.

If you want to keep more money, have more future income, and live with more peace of mind along the way, join us to for down-to-earth real talk about money that you’ll wish you already knew.

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Rethink Your Thinking

If you want the same results you’ve been getting, you’ve got to keep doing what you’ve been doing. But if you want different results in life, you have to do something different. If the run-of-the-mill financial advice worked for people, we’d see proof of that. And yet many people who stay stuck in this way of thinking are only just keeping their heads above the water.

For massive, powerful financial transformation, you have got to rethink your thinking. Stop clinging to what doesn’t work (or only marginally works) because it’s what you hear most often. Instead, look to the successful few and follow their cues. 

To help, we’ve compiled a list of money myths people commonly believe, and how to rethink your thinking around these topics. 

The Top Money Myths

The dangerous thing about money myths is that they’re so prominent in our society. These are not just individual beliefs that are myths, but widely accepted cultural beliefs about money that are holding people back from true wealth.

So let’s explore what these myths are, and how you can rethink your thinking about them. Below, you’ll find the first three of seven money myths discussed in Becoming Your Own Banker.

1. You Need Two Incomes

This is one of the trickier myths to combat because there are plenty of good reasons for families to have two incomes. Especially now, with high inflation, many families are feeling that pinch. 

However, thanks to Parkinson’s Law, we know that what we THINK we need and what we actually need are not the same. This means that the more money people make, the more their spending rises to meet that income. Unless, of course, that person gets a handle on that spending and turns it into a habit of saving instead.

Another reason the “two-income” mindset holds us back is because it’s a limited perspective. While more money is more money, viewing income as a product of labor means that you’re always stuck trading time and work for money. If, instead, you shift your understanding of money and income as something that can be scaled and is based on your value, then it doesn’t matter whether you have one or two incomes. You may have ten sources of income! And even that may give you more time in your week to spend time raising your household, making family memories, and more.

[08:10] “There’s a different way to think about it, and it’s not going to be perfectly black and white. It’s not like there’s one right way to do things. But [Nelson] just encourages us to think about [how] there are two different sources of income: people at work, and money at work. And often we just go to the quickest path, which is people at work.”

Don’t fall into the trap of thinking that you need two incomes to build wealth. While it may be one of the paths you can take, there are many other valid paths that can lead to wealth. 

The Economic Value of Homemaking 

There’s also a misunderstanding that if a spouse stays home to manage the household and raise children, there’s no economic value there. However, you may be interested to know that the insurance companies DON’T see it this way. 

If you were to apply for life insurance as a homemaker, the insurance company would take the economic value of your workload into consideration when determining how much insurance you could get. After all, running a household is many jobs combined—personal chef, housekeeper, scheduling assistant, chauffeur, daycare, teacher, and more. 

It’s Better to Take the Tax Deferral

People love tax-deferred products now because it’s an immediate reward that seems beneficial. After all, taxes erode our wealth, right? However, there’s actually a time and a place to go tax-deferred, and it’s not always better. 

Consider this, would you rather pay your taxes on the seed or the harvest? When you put money into a tax-deferred asset, like a 401k, you’re agreeing to pay your taxes on the harvest of your money. On top of that, retirement is when you need that money most, if you don’t have another income source.

[28”08] “You can have the pain now, the challenge now, for the reward in the future or you can take the great thing now and you pay for it with pain in the future.”

Interestingly, this applies to many things in life, like our health, our work-life balance, and more. These are choices we’re all called to make. When it comes to the tax discussion, if you can handle the tax today, there are great benefits to your future self, in the form of tax-free wealth. Especially knowing that you have certainty today, and everything after is uncertain, it’s often better to deal with problems as they arise. 

[29:04] “I’m not saying that there’s never a time when investing in the stock market and tax deferring does not come out better in the long run. I’m not saying that there are. But I am saying that you have to actually analyze it.”

Marginal Tax Brackets

The advice to defer taxes through 401k contributions is usually first given to very young people who are just entering the workforce. The problem is that these young people are most likely in the lowest tax bracket they’ll ever be in. And so deferring taxes is not doing them that much good. 

So what’s happening is that these young people are locking their dollars away when they may only be paying 12% on it anyway. Then when they reach age 59 and a half, they’ve worked their way up the totem pole, and they need much more money for retirement. So when they pull income out, they’re in a much higher tax bracket. It’s completely backward. 

Instead, if those young folks put money away with their after-tax dollars into a different type of account, that money can grow indefinitely, and they won’t have to pay taxes on the harvest at all, no matter what tax bracket they’re in. A little pain now for a great reward. 

2. You Should Be the Customer of the Bank

Because of how ingrained the banks are in our financial system, there’s a pervasive myth that we’re always meant to be the customers of the banks. However, the basis of Infinite Banking is that you can take control of the banking function for yourself. While you still have to store your money somewhere–like the life insurance company–you can take control of the banking FUNCTION yourself. 

Controlling the banking function means raising and managing capital within your own banking system. 

Naturally, banks exist because there is a need for them. People have to have somewhere to put money, and banks make cash flow simple. However, that doesn’t mean you can only be a customer of the bank. If you are only ever a bank customer, and never a banker yourself, then the control is always in someone else’s hands. 

By becoming your own banker, you maintain control of the loans and are not dependent on an application process to access funds. 

[46:00] “The problem is when we just look at the ease of transactions and we think about how to make things as simple and as easy as possible… we can be blind to the ways it is not serving us.”

Come Back for Part 2

In our next installment of reviewing Becoming Your Own Banker, we’ll be going over money myths 4- 7. Be sure to join us to learn even more ways you could be losing money.

Book A Strategy Call

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