Financial misconceptions that you need to drop immediately

Financial misconceptions that you need to drop immediately

Financial management is to manage your wealth and achieve the goal of value-added preservation. When the principal is insufficient, the income from financial management is tiny, so only financial management will not make you rich. I find that many people have wrong perceptions of financial management, which can lead to wrong actions. To sum up, there are three kinds of financial misconceptions that are common to many people around.

1. Financial management will make you rich

Many people mistake financial management for making a lot of money, but this is not the case. Finance management can make money and generate some income, but financial management is more important in planning and managing your own assets. We keep saving money, which can be used as tourism funds, pension, and children’s education funds, etc, but these plans are not available now, and this money will decrease in value due to inflation in the future, so we manage our finances so that it can have the same value in the future, money is generated to maintain the value of the money itself, and value-added secondly. And income can be divided into passive income and active income. Passive income is to use your own assets to invest. The reason for mistakenly equating wealth management with making big money is that some people think that wealth management can generate huge passive income.

2. The principal is too tiny to manage

When you know that financial management cannot make money, I think many people are discouraged, and some people think that since there is so little money, there is no need to manage it. This is another extreme. I even want to say that financial management should start at a young age. First of all, financial management is a very important ability that cannot be grasped at once. Learning financial management always requires costs, and you need to devote energy, time, funds, etc. to learn and accumulate corresponding experience. Even if you have the money to hire a dedicated financial consultant to help you, you also need to know what products your money is invested in and what the risks are, at least learn how to calculate your own return. Secondly, financial management can give you another perspective to plan your life.

3. Consider the ROI only

As mentioned above, the return on investment is meaningless without considering risk, but someone blindly pursues the return on investment and uses the rate of return as the ultimate goal. This concept of only considering the benefits and not the risks is another big mistake. Even banks have the risk of going bankrupt.

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Michael Aniston

Michael started with a master's degree in finance before he went into technology and coding. He is now a freelance journalist and video producer living in Berlin, Germany. When he doesn't write, he will travel many countries.