Superstitions are real.
Or, put another way, our belief in superstitions can create real financial outcomes. That is why Friday the 13th could cost the economy something like $800 million as people avoid investments, traveling or making other purchases on this star-crossed date. Spookily, that’s roughly the same as the $738.2 million (adjusted for inflation) that the 12 films in “Friday the 13th” horror series have collected in total domestic box office since its launch in 1980.
And that’s superstitions in a nutshell: creating connections to make sense of otherwise unrelated events. Humans are pattern-seeking junkies—we are hard-wired to look for causes to explain effects. But it is worth remembering that there’s really no “there” there.
Here, then, NerdWallet examines 13 common myths people hold about money:
Myth #1: Don’t invest on Friday the 13th
Friday the 13th may seem like a bad day to make any big trades, but the history of the date shows no real back luck in trading on this date. In fact, 81 of the past 144 Friday the 13ths have been positive days for trades, according to an analysis by the Financial Times last year. Make that 82—markets finished higher on Sept. 13, 2013.
Myth #2: Money can’t buy happiness …
Buying homes, cars and gadgets brings quickly diminishing returns in the happiness department. But purchasing experiences and giving to charity have a much longer shelf life for our well-being, research suggests. “Even something small, like going out for a meal or little shifts in how you spend $5 or $10 can bring more happiness to people … because experiences are more emotionally involving” than simply buying “stuff,” Harvard University researcher Michael Norton told Boston magazine.
Myth #3: … but more money can
Nope. According to a 2010 study by Nobel Laureate Daniel Kahneman and Angus Deaton found that emotional satisfaction in life rises with wealth until income hits $75,000 per year. That mirrors something financial planner and author Arun Abey told me years before. Abey said there is a sweet spot on the earning continuum where you’re earning enough for your mortgage, your retirement and your children’s education but don’t have to deal with thorny tax and investment issues, family tensions over inheritance or the pressure to maintain affluence.
Myth #4: Keeping a balance on your credit card helps your credit rating
No, it doesn’t. The main thing that improves your credit rating is paying on time and not borrowing too much. Period.
Myth #5: Savings are the key to financial security
To be sure, paying yourself first is an essential first step toward financial well-being. But there are three ways to get cash (other than theft or lottery wins)—inheritance, investments and income—and out of the three, income is where you have most direct control. Yes, spend time making sure that income goes far. But if you’re not spending enough time on how to earn more of the stuff—be it on education to improve your career options or finding new income streams—your pace of growth is limited to whatever raise you can eke out of your employer. Penny-pinching only gets you so far.
Myth #6: Money doesn’t grow on trees
Sure, the aphorism speaks to being frugal with cash, but it also suggests that money is a scarce commodity, which can be a dangerous mindset when negotiating for a better salary or looking for other ways to build income. Better to view money as a river that is coursing around you, and to focus on how to capture that flow. Until he was 35, prolific wealth author Marc Allen “had confused beliefs about money. Money was hard to come by. Money was scarce; money doesn’t grow on trees,” he wrote. “Our beliefs about money are self-fulfilling, like all other beliefs.”
Myth #7: A will is the best way to ensure how your property is divvied up
Signatures on your financial accounts supersede wills. “If there’s a discrepancy between beneficiaries named on your financial accounts and those named in your will, your financial accounts will prevail,” Carrie Schwab Pomerantz, of the Charles Schwab Foundation, writes. “So while a will is an important part of your estate plan, you also need to update your beneficiary designations to make sure you don’t inadvertently leave something to an unintended recipient, such as an ex-spouse.”
Myth #8: Superstitions don’t work
While superstitions may hold no rational truth, there are several studies that suggest some hold therapeutic—even performance-enhancing—value. Rituals like crossing your fingers, rubbing a rabbit’s foot or telling someone to “break a leg” improved performance in “golfing, motor dexterity, memory, and anagram games,” a 2010 study found. In one experiment, a subject group was told a golf ball was lucky. “Remarkably, the mere suggestion that the ball was lucky significantly influenced performance, causing participants to make almost two more putts on average,” Scientific American wrote.
Myth #9: Paying with cash is always better than credit
If you can keep the lid on your credit use and religiously pay off your monthly balance, credit cards are an excellent way to get better deals on gas, discounts on shopping and earn great rewards. Paying with credit or debit also helps you keep track of your spending habits online.
Myth #10: Don’t carry large bills in your wallet
That may be good advice to minimize loss if you should get mugged, but when it comes to slowing your spending habits, the larger the bills, the better. Simply put, we are more reluctant to break large bills. So a $5 bill lasts longer in your wallet than $1, a $20 bill lingers more than a $10, and a $100 bill is the most reluctant to escape your grasp.
Myth #11: Retirees shouldn’t be in the stock market
A survey by Charles Schwab found that 38% of people believe that by the time you’re retired, you should be divested from the stock market—after all, it’s not like you have a lot of time left to wait out the rise and fall of markets. That’s not true anymore. “For somebody in retirement, we say you should have at least 20% of your savings in stocks because you could have easily a 30-year retirement,” Carrie Schwab-Pomerantz told Forbes. “That’s more than a generation. Inflation risk is higher for somebody like that than the stock market risk assuming they’re diversified.”
Myth #12: Buying a home is better than renting
Since the 2008 financial crisis, consumers are more cautious about whether to buy or rent. “Have you noticed the similarity between the words ‘owning’ and ‘owing’?” writes financial planner Laura Tanner. The key is to compare costs between the two where you live, estimate how long you plan to live in the area and know your marginal tax bracket (the higher the bracket, the greater the savings on mortgage interest and property tax), Tanner says. It often it makes better financial sense to own—but not always.
Myth #13: There’s no such thing as luck
Hard work and luck are the twin strands of DNA on which career and personal wealth is built. Consider this example: Bill Miller was long considered the best investor on the planet after a 15-year run of beating the market. That came to a dramatic end in 2008. Although his winning streak was unmatched, an analysis by physicist and author Leonard Mlodinow shows that there was a 75% chance that somebody would have a 15-year streak. “If the press understood this, the headlines shouldn’t be ‘The Greatest Money Manager of Our Time,’ but ‘Expected 15-year Run Finally Occurs—Bill Miller Lucky Beneficiary!'” Mlodinow said.
Illustration by Brian Yee.