Misconception #4: Cash Value life insurance (i.e. Whole Life) will help me retire wealthy.
Although over 70 percent of the life insurance policies sold in this country today are Cash Value, they are one of the worst retirement products available. In case you are not familiar with this type, it is an insurance product that packages insurance and savings together. Don't believe the magical projections shown by the sales person. Statistics show that none of these policies perform as projected.
Based on statistics from Consumer Reports, the Consumer Federation of America, Kiplinger's Personal Finance, and Fortune magazine; let me give you an example.
A thirty-year-old man can purchase an average of $125,000 in a Cash Value insurance policy for his family for $100 a month. The pitch is that he can build up savings for retirement. But, this same guy can buy twenty-year level term life insurance of $125,000 for only $7 a month. Quite a difference. Does the extra $93 go into savings? Not quite. For the first three years, it goes to pay the expenses and commissions. After that, the return will only average between 2.6 percent per year to 7.4 per year, depending on the type of policy you purchase. Don't fall for this hype.
Misconception #5: Playing the Lotto and other forms of gambling will make you rich.
The Lotto and Power Ball have become a tax on the poor and people who can't do math. I'm not trying to take a moral stand; it is just a mathematical, statistical fact. Studies have shown that the zip codes from lower-income parts of town spend four times what anyone else does on lottery tickets. Gambling of any kind offers false hope to those looking for a shortcut. If it were a real wealth-building tool, you would see the rich people lined up around the corner. You don't.
Misconception #6: Owning a mobile home, instead of renting, will help me become wealthy.
Remember how a car lost 60 percent of its value in the first four years? Well, mobile or 'manufactured houses' are even worse. Ad $25,000 double-wide home will only be worth $8,000 in five years. Now, I'm not saying you shouldn't own or live in a mobile home or trailer. I did for a couple years of my life. I still remember the heat in the summer and the chill in the winter. I bought it used and sold it used. It served its purpose at the time. The point I'm making is to not consider it an investment like you would a house build on a piece of land that you own.