You’re struggling to save for your first home and taking home-cooked lunches to work.  And some smart alec economist invents another trite phrase to help you save. Smashed avocado, anyone? 

Remember Bernard Salt, a baby boomer lecturing millennials about how their $22 breakfasts would prevent them from ever getting a mortgage? Or how about those guys who keep telling us that if we gave up our lattes we’d be rolling in dough?

Makes you steam with anger, right?  Smashed avo now has its own meme and hashtag, and Salt got to dine out on it while you and I remain at the bottom of the housing ladder.  Except without our breakfast.

Here are ten money myths you can slap down next time you get seated next to an amateur adviser at dinner.

1) It’s the avocado’s fault

The idea behind the latte factor is that foregoing little indulgences along the way will make us rich. A brilliant piece on this subject –  avocado economics for first home buyers – shows that even if you saved $66 a week on brunch for 10 years, it would get you almost nowhere. That’s only $34, 320 – hardly enough for the cab fare to the auction, these days. In reality, you’d have to put aside 45% of your pay packet to reach a 20% deposit. And how about this – this author breaks that 20% down into how many yoga classes, flights to Bali or bananas you’d have to skip. Is anyone out there taking the housing affordability crisis seriously?

2) I have to cut back on everything

Embarking on a frugal budget-friendly lifestyle can be difficult to stick to and leave you at home in front of the telly while everyone else is out for dinner. But every nutritionist knows that a diet involving no food at all will lead to weight loss…and disaster. Instead of cutting back on everything, look at your areas of habitual overspending by using a budget app. Equally, see what happens if you hold off on making a purchase instead of whacking it on the credit card. You may find you don’t want or need it.

Cutting back is only meaningful if you have a goal. Otherwise, you’ll never know when to stop.

3) The only path to financial freedom is to be my own boss

Only one in six of us is made of entrepreneurial stuff, says Vince Scully. You will work seven days a week, possibly mortgaging your house (if you have one) to get the business going, all the while earning less than if you were salaried.  And you lose your hair with worry and have to deal with so-called “clients”.  If you don’t want the headaches that will follow you to the boss’s chair, think about getting a raise or a second job, or finding other ways to earn more money. 

4) Money doesn’t buy happiness so why worry about it?

Author and Nobel Laureate Daniel Kahnemann and economic Angus Deaton found that earnings of up to $75,000 made people more satisfied with their lives, but only up to $100,000, but after that there was no noticeable change.

You may also subscribe to the idea of attracting abundance through positive thinking and the laws of attraction, also known as “she’ll be right”. Generally, this only works for the abundance-theorists themselves, who have made a tidy profit writing about it and selling positive affirmation cards.

5) I don’t earn enough money to save it, let alone invest it.

If you pay yourself first rather than waiting until the end of the month to see what’s left, this could be true. But no amount is too small to save or even invest. The Acorns AU app lets you invest the spare change from your everyday purchases into a simple portfolio. Fees are only $1.25 a month.

6) Investing is too risky

Investment always carries an element of risk but you can invest based on your risk profile. It’s safer to diversify than stick to a single asset. It’s a myth that gold is a safe bet. And when you consider that savings account interest rates are now lower than inflation, you cannot avoid investing Otherwise, you’ll need to chase the introductory ‘bonus rates’ the online banks offer to new customers and then switch banks every three months.

7) I absolutely have to buy a property, for the following reasons

Rent is dead money – you give it to that fat cat landlord (usually a boomer) and you get nothing back except a roof over your head. And he gets heaps from capital gains and takes his time replacing that ancient dishwasher.

The truth:  There are plenty of other things to do with the capital you haven’t tied up in bricks and mortar – like buy shares! And you don’t have to do repairs, pay stamp duty or shell out for lenders protection insurance (because you couldn’t wait 25 years to reach a 20% deposit). 

I’m missing out –property is going gang busters and all my mates are already millionaires!

The truth: The property bubble has been threatening to burst for a very long. It’s hovering around like an ungainly guest at the bottom of the garden, and no one knows what it’s going to do. There is plenty of flip-flopping in the media about whether property really is a good investment.

8) Cash is always better than credit

Some credit is best avoided, like finance for a car or a personal loan.  A home loan is inevitable. But if you can manage and pay off a credit card every month you can benefit from travel insurance, extended warranties and protection if your wallet is stolen. You can also get reward points although as our recent article has shown, the benefits don’t add up.

9) Two incomes are better than one

Not necessarily. With two incomes you double the risk of unemployment and the cost of commuting. Maybe one stay at home parent is going to back to work, and this introduces the prohibitive cost of childcare. Financial advisers often recommend you rely on one, not both, incomes for your living expenses.

10) Everybody needs life insurance

During the rent scandals, the commission on life insurance policies was shown to be 120% in some cases – and 80% in trailing commissions.  So,  your insurance is really worth 20% of the premium price. For some, just putting a sum aside is enough.  After all, how much does the worst operation you can think of cost?

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