Financial myths you no longer believe

soupkitchen96 · 01-05-2008, 03:27 AM

I used to believe that if I moved up on the tax bracket, the new tax rate applies to my entire income. So whenenver I don't get a raise, I tell myself that at least I'm saving a bundle on taxes.

I actually believed this until my second year in college. Talk about ignorance! OK, now you've had a good laugh at my expense. What are some financial myths you no longer believe?

Beignet · 01-05-2008, 07:37 AM

Real Estate always goes up!

Rebecca · 01-05-2008, 08:28 AM

Quote:

Originally Posted by soupkitchen96

I used to believe that if I moved up on the tax bracket, the new tax rate applies to my entire income. So whenenver I don't get a raise, I tell myself that at least I'm saving a bundle on taxes.

I actually believed this until my second year in college. Talk about ignorance! OK, now you've had a good laugh at my expense. What are some financial myths you no longer believe?

Uh....it doesn't?...heh heh (blushes). ahem (hides face)

Gootsy · 01-05-2008, 02:42 PM

Haha, I remember a few years back my dad (who was about 40 at the time), thought the exact same thing you did! He was like, "Getting a raise can be such a scam sometimes, if I get a 40 dollar a month raise this year, I will LOSE MONEY!!!". I looked at him with a puzzled expression, since I had just learned in school how the income tax system works (basics).

After I told him how it really is, his face was deep red

.

I used to think that all investment profits would be taxed based on your income.

The Honest Dollar · 01-05-2008, 08:31 PM

I always thought it was better to get a company match for a 401(k) than to pay off debt. I think most PF experts in the mass media tell people this. Then I made an Excel model which showed for most people who have limited amounts to save, this isn't always true. My model could totally be wrong, and it's completely counter-intuitive to me. I need to go back and check for errors, I guess. But one thing I've learned: it's not as clear-cut as many experts make it out to be.

Sophie · 01-05-2008, 10:42 PM

Diamond jewellery is an investment.

The Honest Dollar · 01-06-2008, 07:02 PM

Hey, I just figured this out for the first time today by (oh I'm a dork) reading the IRS website.

IRA doesn't stand for Individual Retirement Account, but for Individual Retirement Arrangement. Thus, it's not redundant to say "IRA account."

My world is crashing down!

Julie Rains · 01-07-2008, 09:51 AM

Quote:

Originally Posted by The Honest Dollar

Hey, I just figured this out for the first time today by (oh I'm a dork) reading the IRS website.

IRA doesn't stand for Individual Retirement Account, but for Individual Retirement Arrangement. Thus, it's not redundant to say "IRA account."

My world is crashing down!

I think the IRS is making that up or rather changing the name to make it more inclusive now that there are different plans; when the IRA was originally introduced, it was an Individual Retirement Account. You can probably find other sources but it started during the Reagan Administration (I only know this b/c I was around then).

WB Philip Brewer wrote about 401(k)s and mentioned the very thing you did; sometimes PF writers (not us of course) simplify things so much they become misleading. I think they want to encourage people to save but I think people should be able to think for themselves, given accurate information and maybe a few tools.

rolltimer · 01-07-2008, 10:36 AM

Once I believed rich people could be identified by their extravagant lifestyles, huge mansions, fancy clothes and racy cars. Now I'm more inclined to see people with these items as living beyond their means, slaves to debt, and devoted to flash rather than to substance. I'm not sure being rich can be objectively defined. One person's idea of rich is another's idea of just getting by. Perhaps those who are truly rich have fewer examples of outward wealth but all the evidence of inner peace.

amandajane · 01-07-2008, 01:24 PM

Quote:

Originally Posted by rolltimer

Once I believed rich people could be identified by their extravagant lifestyles, huge mansions, fancy clothes and racy cars. Now I'm more inclined to see people with these items as living beyond their means, slaves to debt, and devoted to flash rather than to substance. I'm not sure being rich can be objectively defined. One person's idea of rich is another's idea of just getting by. Perhaps those who are truly rich have fewer examples of outward wealth but all the evidence of inner peace.

I've posted this in another thread but it's relevant to this one too:

Your valuables don't make you more valuable, and your net worth is not the basis of your self-worth.

So true don't you think?

01-05-2008, 03:27 AM	#1
soupkitchen96 Member Join Date: Dec 2007 Posts: 51 Reputation: (11)	Financial myths you no longer believe I used to believe that if I moved up on the tax bracket, the new tax rate applies to my entire income. So whenenver I don't get a raise, I tell myself that at least I'm saving a bundle on taxes. I actually believed this until my second year in college. Talk about ignorance! OK, now you've had a good laugh at my expense. What are some financial myths you no longer believe?

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01-05-2008, 07:37 AM	#2
Beignet Junior Member Join Date: Dec 2007 Posts: 28 Reputation: (10)	Real Estate always goes up!

01-05-2008, 02:42 PM	#4
Gootsy Senior Member Join Date: Jan 2008 Posts: 234 Reputation: (19)	Haha, I remember a few years back my dad (who was about 40 at the time), thought the exact same thing you did! He was like, "Getting a raise can be such a scam sometimes, if I get a 40 dollar a month raise this year, I will LOSE MONEY!!!". I looked at him with a puzzled expression, since I had just learned in school how the income tax system works (basics). After I told him how it really is, his face was deep red . I used to think that all investment profits would be taxed based on your income.

01-05-2008, 08:31 PM	#5
The Honest Dollar Member Join Date: Dec 2007 Location: New York Posts: 90 Reputation: (63)	I always thought it was better to get a company match for a 401(k) than to pay off debt. I think most PF experts in the mass media tell people this. Then I made an Excel model which showed for most people who have limited amounts to save, this isn't always true. My model could totally be wrong, and it's completely counter-intuitive to me. I need to go back and check for errors, I guess. But one thing I've learned: it's not as clear-cut as many experts make it out to be.

01-05-2008, 10:42 PM	#6
Sophie Junior Member Join Date: Dec 2007 Location: Sydney, Oz Posts: 19 Reputation: (10)	Diamond jewellery is an investment.

01-06-2008, 07:02 PM	#7
The Honest Dollar Member Join Date: Dec 2007 Location: New York Posts: 90 Reputation: (63)	Hey, I just figured this out for the first time today by (oh I'm a dork) reading the IRS website. IRA doesn't stand for Individual Retirement Account, but for Individual Retirement Arrangement. Thus, it's not redundant to say "IRA account." My world is crashing down!

01-07-2008, 10:36 AM	#9
rolltimer Senior Member Join Date: Dec 2007 Location: Alabama Posts: 127 Reputation: (24)	Once I believed rich people could be identified by their extravagant lifestyles, huge mansions, fancy clothes and racy cars. Now I'm more inclined to see people with these items as living beyond their means, slaves to debt, and devoted to flash rather than to substance. I'm not sure being rich can be objectively defined. One person's idea of rich is another's idea of just getting by. Perhaps those who are truly rich have fewer examples of outward wealth but all the evidence of inner peace.