6 Lies Women Believe About Money

Women have been fed a lot of lies about money. We’re gonna wreck that right now.

Sometimes we believe things about money not because we put critical thought into them, but because it’s what we’ve heard over and over again throughout our lives.

Through time and repetition, it’s what we’ve come to know as “true”.

Perhaps, your parents told you “renting is a waste of money”.

Or maybe… “how you should ‘grow up’ and buy a home.”

Maybe you grew up thinking going to college was the only way to have a successful career. It must be true, right? It’s what all your teachers, parents, and friends drilled into your head for as long as you could remember.

There are many things people believe about money simply because it’s what they’ve come to know as true. No facts. No research. Just unquestioning belief.

Let’s take a look at 6 fundamental money truths that have turned out to be lies:

1. “Buy a house for the tax deduction”



We’ve all heard how buying a home is a great investment because you get a big, fat tax deduction for it. If you focus only on the tax deduction, this sounds like a good idea. After all, you do get a significant tax deduction when buying a home.

However, if you inspect this a bit further, you stumble upon an inconvenient truth: you need to “spend a dollar to save a quarter.”

Let’s frame it a different way.

Say, I came to you and said, “hey, I’ve got a great deal for you. If you spend $100, I’ll give you $25 back and you get to keep the item. So, in the end, it’ll only cost you $75.

Isn’t that a great deal? You get $100 of merch for only $75. What a great country!”

Of course, to get this “great deal,” you have to cough up $75. If you can afford the $75, then no problem. But, that’s not what usually happens. People often use the “tax deduction” as justification for buying more home than they can afford.

You can see how people can get sucked into thinking this is a good deal. But, as this example shows, the reality is you’re not “saving” $25 but “spending” $75.

Truth: Spending a dollar to save a quarter is not a sound financial strategy.

2. “Renting is a waste of money”



This debate has been raging forever and shows no signs of stopping. Despite the many stories you read on the net or have had drilled into your heads since you were little, “renting is a waste of money” is simply not true. At least not for everyone.

Choosing to buy or rent comes down to a number of financial calculations and lifestyle choices. Based on these choices, there’s no doubt that renting is by far the superior decision to buying.

Do you plan to stay in your home for a long time? Do you like to move around? Do you want to take on the risk and responsibilities that come with homeownership? Do you have enough money saved for a legitimate downpayment? Can you afford all of the extra costs associated with homeownership (maintenance, property taxes, utilities)? What is the housing market like – are you buying at the top of the market?

How you answer these questions will determine which route is best for you. For example, if you barely have enough money to cover a 10% down payment, is it “smart” to lock yourself into an unforgiving, 30-year financial obligation? If you have one major financial setback, you could lose your house and what little equity you have in it. Perhaps, it’s better to rent until you’re on more solid financial footing.

The next time someone tells you you’re wasting money by renting, ask them if they will step in and pay your mortgage if you run into financial difficulties. Ask them if they will “make you whole” if the housing market is down when you need to sell? Be prepared to hear crickets.

Truth: Blanket statements like “renting is a waste of money” are dangerous and often wrong. There’s a time and place for everything. Sometimes, and more often than you think, renting is the right thing to do.

3. “I don’t want to make more money because it’ll put me into a higher tax bracket”



Without getting into a much longer (and more boring) discussion on how the marginal tax system works, know this: it almost never makes sense to earn less money just because “you’ll get bumped up to a higher tax bracket”.*

This is true because, in the U.S., we have a progressive tax system. This means as we make more money, we’re taxed at progressively higher rates. As you move up the rate scale, and this is the important part, the higher tax bracket doesn’t affect all of your earnings. It only affects the portion of your income that has moved into the higher bracket.

Yes, you’ll pay more in taxes on that portion, but you’ll still bring home more cash than if you turned down the extra money.

Truth: Go ahead and make that money! Moving into a higher tax bracket should be celebrated not vilified (it means you’re doing well for yourself).

*Note: “almost never”, not “never.” For example, if you’re a super high income earner, there may be situations where “making more money” proves counterproductive.

**Note: this is not to be construed as tax advice. Consult with your accountant about your specific situation.

4. “A college education is always worth the money”



Obtaining a college education is often an important step in finding a good career. In fact, many companies require a degree just to get a foot in the door. However, things are a-changin’.

Today, many leading tech companies, like Google and Apple, don’t require employees to have a college degree. Instead of looking for “credentials,” these companies are focused on whether or not you can do the job.

Additionally, many of the trades don’t require a college degree and offer high starting wages, union-quality benefits, and higher job security. In fact, the trades can’t find enough young talent to take these quality jobs.

In contrast, the business machine that is college education, and the high price tag that comes with it, is running on all cylinders. Student loan debt in America sits at $1.68 trillion. The average federal student loan debt is $36,520. Student loan debt is growing at a rate 6 times faster than the national economy!

It’s not uncommon for today’s students to come out of undergrad with student loans of $50k, $70k, even $100k! Do you know how much money you need to earn per year to make a $100k student loan debt a wise investment?

Hint: it’s a lot more than most recent college graduates will earn in their first, second, or even third jobs. And if you live in a high cost city like New York or Seattle, there’s an even worse return on investment.

College is a wonderful thing for many, but not all. It’s not always worth the money, and it’s not always worth the debt.

Truth: A college degree isn’t always a wise investment. The cost of obtaining the degree cannot be greater than the earnings potential of the graduate.

5. “To determine your stock allocation, subtract your age from 100”



It can be challenging to figure out how much of your long-term investments should be allocated to stocks. To help with this decision, a simple rule of thumb grew popular in the 1970s and ‘80s and persists to this day.

The rule: subtract your age from 100 to determine your stock allocation.

For example, if you’re 40 years old, subtract your age (40) from 100 (100-40) and that tells you how much to contribute to stocks (60). This means 60% of your money should be allocated in stocks and 40% in bonds.

But, is this reasonable? Should anyone who is 40 years old invest 60% of her money in stocks? Many professionals would argue this is too conservative given the longer lifespans of today particularly if you’re a woman. However, it could also be argued you could be more conservative because your income needs are low relative to the size of your portfolio.

A formula that can’t be followed without a bunch of extra work is pretty much useless.

Despite its obvious flaws, this rule of thumb has stuck around because it provides a simple answer to a complicated question. And, given the choice between a simple, coherent, less accurate answer and a complicated, nuanced, more accurate answer, we often choose the simpler answer even if it’s not correct.

Truth: determining how you should invest your money is far more involved than following an arbitrary rule of thumb.

6. “You should have 5 times your current income in life insurance”



Here we go again with using the simplest of solutions for a complex problem.

People like rules of thumb and heuristics (mental shortcuts) because it means we don’t have to think so hard. The math of “5x your income” is a lot easier than working through an actual financial analysis.

How much life insurance you need is a function of what you want your life insurance to cover.

Here are a few questions to consider:

  • How many years of income do you want to replace? One, five, ten, twenty years?
  • What debts do you want to pay off? The house? The cars? Any and all debt?
  • Will your spouse continue/go back to work? How much income can he/she expect to make? Does he want to take time off to be with the kids?


You can see why people are quick to latch onto an answer like “buy 5x your income.” It’s simple and you’re doing something. But, you’d have to get awfully lucky for it to be the right amount. Odds are you’re either overinsured and paying for something you don’t need or you’re underinsured and unknowingly putting your family at risk. Neither are ideal options.

It treats everyone the same. It doesn’t account for marital status and number of dependents which is ridiculous. Should my business partner who is single and has no dependents have the same amount of life insurance as me who has 6 dependents?

Truth: not all families should be treated the same. A family of seven has a greater life insurance need than a family of two. If you followed the “5x” income rule of thumb, the family of seven would be underinsured and the family of two would be over insured. That’s a lose-lose.

Remember, personal finance is personal

When you hear people say things like, “You should always do this” or “You should never do that,” take it with a grain of salt.



Everyone’s situation is different. One person’s ideal financial decision could be another person’s worst decision. Rules of thumb sound reasonable on the surface, but quickly fall apart when under increased scrutiny.

You work too hard for your money to leave things to chance. Be inquisitive and don’t be afraid to challenge long-held beliefs even if you feel out of your element in the process. Chances are you’re on the right track.

Which of these lies have you come to believe? How have they impacted your financial life?

Please comment on the lies about money you’ve believed and the impact they have on you.

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