Jessica Irvine debunks the money myths that are holding you back


I want you to start by really focusing on that word for a moment: MONEY. Say it out loud with me: MONEY.

Or if you're in a public place (and you haven't already embarrassed yourself), just really stare at that word on the page for a moment: MONEY.

What emotion do you feel in your body when you see that word or hear it spoken? Don't worry. If you're anything like I was, you may struggle with this exercise.

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Truth is, unless you've been taught how, it can be difficult to recognise what emotion, or what combination of emotions (there can be many!), you are feeling at any point in time.

Yet it is so very important. Because emotions drive our behaviours and it's our behaviours that produce our outcomes.

Now, I can almost hear you thinking, "But Jess, I am a very evolved person. I always put reason ahead of passion. I am not driven by my emotions!"

To which I say, "Bless you. Yes, you are. You just don't realise it - yet."

When you are "stressed", you spend quite a bit of time - and money - running around trying to distract yourself from that sensation with alcohol, comfort food, internet dating - or whatever your distraction of choice is. Been there, tried that.

Until you do the work to identify and label the root emotions you are feeling - sadness, fear, loneliness - you're just running on a treadmill (and not the good kind that gets you fit!).

I have found this simple act of naming my emotions to be an incredibly powerful tool for helping to dissipate the very emotions I'm feeling.

"But Jess, what's all this got to do with money? I've read several pages of your book now and I still don't feel rich. What gives?'

Okay, let me come to the point.

What if I told you there was also another way to feel about money other than scared, anxious, overwhelmed or ashamed? What if I told you it is possible, instead, to feel peaceful, hopeful, optimistic, courageous, confident, proud and liberated?

What we choose to think about a given situation matters because the emotional state it creates will, ultimately, drive our behaviour. If you feel scared, you will likely run away, if possible.

If you feel guilty, you will seek to hide. If you feel rejected, you might sit on the couch all night ordering Uber Eats.

This brings me to some of the most common money myths I see, along with better thoughts to replace them with so you can begin building a healthier mindset around money.

Money myth 1: Money is too complex to understand

I make a pretty decent living out of this false belief by getting paid to explain topics such as interest rates, house prices and inflation.

But let me let you in on a little secret: at its heart, money is dead simple.

Ultimately, money is just a medium for exchange. You give up your time and skills to your employer and, in exchange, they give you money.

You then take this money and exchange it for all the goods and services you need and want, to live a happy life.

There it is: money explained in a few easy sentences.

Many personal finance books get you to start out by dreaming up your individual "money goals". But I reckon there's really only one goal that people need, and that is to generate enough lifetime income to fund their lifetime wants and needs.

This means spending less than you earn during your working life and saving to help fund the spending needs and desires of your future caravan-hauling retired self (the version of you who gets to spend all the money - yay!).

So, if I had to summarise personal finance (for non-retired people) in just one sentence, it would be this: spend less than you earn; invest the rest.

Money myth 2: Some people are just bad at money (and I'm one of them!)

Do you know the answer to 10 minus 8? Yes? Congratulations! You have all the essential skills you need to manage money.

As humans, we desire instant gratification, placing a much higher value on the pleasure we might experience today over the even greater pleasure we might enjoy tomorrow from delaying our consumption (a process known as "hyperbolic discounting").

We also fear potential losses much more than we value potential gains ("loss aversion").

On any given day, we can oscillate between being overconfident or too hesitant, depending on the circumstances. Sometimes we jump the gun; other times we procrastinate.

We make different decisions depending on the number of choices we confront ("choice overload") or the particular time of the day ("decision fatigue"). We have trouble juggling our conflicting internal desires (we want to both eat the cake and lose weight).

In recent decades, a new field called behavioural economics has drawn insights from psychology and human behaviour to look more closely at the way we make decisions.

Turns out, we're all a bit crap at this, really.

For now, just know that you aren't the only one who has struggled a bit with money and that it doesn't always have to be that way.

Money myth 3: Spending money is bad and I'm not supposed to spend

Boy, do I have some good news for you! Some people think being good at money is all about permanent deprivation and eating baked beans your whole life.

But, according to economics, spending money is pretty much the whole point of life! We are here to spend money on the things we need and want.

The point is not just to save but, ultimately, to spend. In fact, pretty much the only point of saving money is that you will, in fact, get to spend it one day.

As a generation, I'm less worried about my fellow millennials inhaling too many smashed avocados, and more worried they're living in a perpetual state of fear that they're never going to be financially comfortable.

So, I don't know who needs to hear this today but: it's okay to spend some of your money.

Win Money with Jess by Jessica Irvine!

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Jessica Irvine is a personal finance expert with Commonwealth Bank. She is a former senior economics writer with The Sydney Morning Herald and The Age, and is the author of several books including Money With Jess. She holds a Bachelor's degree (Honours) from the University of Sydney.