3 Common Money Myths You Probably Believe
Surprise! Some of the money "facts" people have counted on for years when making important financial decisions are really just myths. Time to separate fact from fiction.

If you want to build your wealth, it’s never been easier to learn how to do that, thanks to the Internet.
Anyone with an Internet connection can find the answers to just about any question in a matter of seconds. You can teach yourself almost anything, which is an amazing advantage, because knowledge truly is power.
But there are some huge downsides to all this freely available information. For one, anyone can publish whatever they want on the Internet, whether it’s factual or not. And much of this information, factual or otherwise, comes without a lot of context. Without context, you might find yourself buying into some myths that just aren’t true.

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And not being able to separate fact from fiction when it comes to money myths can cost you, both in terms of opportunity and tangible wealth.
To help you avoid that, let’s look at three extremely common misconceptions that even people who are pretty good with money tend to believe — and then, we’ll bust these money myths once and for all.
Does Renting Mean Throwing Away Money?
“I’m tired of paying rent and just throwing money away!”
That’s one of the most common things I hear from my clients, and in many cases it’s more than just a myth: It’s a firmly entrenched belief that they interpret as a fact. In some cases, yes, it’s true that buying is cheaper than renting over the long term.
But it all depends on where you live, what your financial situation looks like, and how long you stay in a home. There are other factors involved, too, and in almost every case we need to run a complete, thorough comparison of all the numbers in both scenarios to get to a definitive answer.
It’s a complete myth to think renting always means you’re somehow wasting your money. Rather than forking over a six-figure down payment, paying a monthly mortgage bill and handling all the costs associated with homeownership, like maintenance and upkeep, renting allows you to leverage your cash flow to grow wealth in actual investments (which single-family homes rarely are, especially if you are not renting to a tenant).
According to Nerdwallet, homeowners in all 50 states pay from 33% to 93% more for housing each month than renters do. How does that happen? Because the most you’ll ever need to pay each month when you rent is your rent. When you’re a homeowner, the least you’ll ever pay is your monthly mortgage payment — because you’re the one who’s financially on the hook when things break, get damaged or need replacing.
Depending on the real estate market in which you want to buy and the timing of your purchase, renting might actually be the cheaper move. But the bottom line is that every situation is unique based on all the factors involved, so running your own numbers — and not simply assuming buying is better — is key to making an informed decision.
Is the S&P 500 Truly Diversified?
Somewhere down the line, people with a basic grasp of investing, but not a sophisticated understanding of financial markets, started spreading this idea that all you need to do to succeed is dump all your cash into the S&P 500. Just set it and forget it.
There are worse ideas out there, and this belief has a degree of solid footing underneath it. Investing in the S&P 500 for the long run will serve you better than trying to time the market, pick stocks or panic when the market drops. But if you want to build serious wealth, this strategy won’t cut it.
Investing in a fund that represents the S&P 500 index is fine as a piece of your overall portfolio, but it shouldn’t be your only investment. Believing you're diversified this way is just that: your belief, but not a fact.
The S&P 500 is filled with U.S. large-cap stocks. That’s one type of stock from one country. There’s a much wider array of stocks, like mid-cap and small-cap, but you won’t find a single one of those in this index. And the U.S. stock market is only 54% of the entire global market. Where's the diversification in that?
You can invest (passively) in index funds, of which the S&P 500 is one, but you need to make sure your asset allocation is truly diversified when you do this. Otherwise, you expose all your wealth to more market volatility than is necessary. Consider investing in other funds that represent different asset classes rather than just a single segment of a single market.
The specific diversification and asset allocation that should show up in your portfolio depends on your goals, risk tolerance and capacity, and other factors specific to your financial situation. A fee-only financial planner who works as your fiduciary 100% of the time can help you craft a comprehensive financial plan that can inform a sound investment strategy.
Is Your Financial Adviser Really an Adviser (or Just a Salesperson)?
Speaking of financial advisers and planners brings up the money myth that could cost you the most. You might be operating under the belief that all “financial advisers” or all “financial planners” are the same. They carry the same title on their business cards, after all — doesn’t that mean they do the same job?
Unfortunately, no. The financial advice industry has done a terrible job of making it easy for investors to understand how many different types of financial professionals are out there, what each type does, and the standards or legal regulations (or lack thereof) they need to follow.
Let’s start with the fact that titles like “financial adviser” don’t actually mean anything. These titles aren’t regulated or backed by any governing body. In fact, you could go put up a sign on your desk that says “financial adviser” today and it would be perfectly legal for you to do so. The SEC literally defines these titles as no more than “marketing tools.”
That’s why employees at life insurance and various “investment” companies can call themselves advisers — in reality, their job is not to provide comprehensive financial planning advice and investment management that is in your best interest. It’s to sell products.
To truly understand what a financial professional does, you need to go past the title. There are three ways of doing this:
- Ask if they’re a CFP®. The CFP®, or CERTIFIED FINANCIAL PLANNER™ designation, requires years of education and training. Those with the CFP® designation also must uphold a code of ethics and go through continuing education on an annual basis.
- Ask how they get paid. Some advisers are little more than salespeople who earn kickbacks and commissions for recommending specific investments or selling you products like life insurance policies and annuities. If someone is commission-based or fee-based, they may receive incentives from third parties, which creates a conflict of interest. Fee-only financial advisers only receive payments directly from clients, do not earn commissions, and are not incentivized to push specific products.
- Ask if they act as fiduciaries 100% of the time. There are two types of standards in the financial advisory world: suitability and fiduciary. Anyone held to the suitability standard only needs to recommend what’s “suitable” for you. Fiduciaries, on the other hand, are legally and ethically bound to do what is best for you and always put your interests ahead of all others.
Choosing the wrong financial adviser can cost you hundreds of thousands of dollars, so this is one myth you don’t want to buy into. Do your research and your due diligence to make sure any financial professional you work with checks out — and works in your best interest, not their own or their company’s.
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Eric Roberge, CFP®, is the founder of Beyond Your Hammock, a financial planning firm working in Boston, Massachusetts and virtually across the country. BYH specializes in helping professionals in their 30s and 40s use their money as a tool to enjoy life today while planning responsibly for tomorrow. Eric has been named one of Investopedia's Top 100 most influential financial advisers since 2017 and is a member of Investment News' 40 Under 40 class of 2016 and Think Advisor's Luminaries class of 2021.
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