According to Dave Ramsey’s State of Personal Finance report, 56% of Americans worry about their financial situation every day, including many people earning over $100,000. While it might sound surprising, it’s possible to struggle and have little wealth even if you make a decent salary, control your expenses and don’t rack up credit card debt.
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In a recent YouTube video, financial expert Jaspreet Singh explained that many Americans remain poor because they believe five money lies. Learn why these popular beliefs aren’t true and what you can do to avoid mistakes that hurt your financial security.
Buying a home is often more appealing than renting since each monthly mortgage payment helps you build equity. While Singh encouraged homeownership, he cautioned against viewing your property as an investment, partly due to how banks amortize the loans.
“They do something called front-loading mortgages, which means in the beginning, the majority of your mortgage payment is going directly into your banker’s pocket with interest, and a little bit is going to actually build equity in your house,” Singh explained.
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He said it can take 20 years before the point where half of each payment goes toward growing your equity. He also explained that homes are like liabilities because you’ll always have ongoing costs, like taxes, insurance and maintenance, even after the final mortgage payment.
Singh suggested carefully considering all the upfront and ongoing costs before buying a home and not relying on the property as your only investment for building wealth. Other income sources will be especially important during retirement.
While a job provides you with money for your needs, it’s unlikely that your work-related income alone will make you rich. Singh explained employees are really in the business of helping companies and their shareholders become wealthier. Plus, there’s the fact that you need to put the time and effort into working to get your paycheck.
Singh said that investing is a better path to becoming wealthy than relying on your salary, as you’ll be able to benefit from companies’ profits as a shareholder. Whether you receive dividends, interest or gains, that passive income won’t require working like your job. This makes growing your wealth more sustainable.
