The most common money phrases we hear tend to get ingrained as truth over time. But are all these phrases actually good, timeless, money advice?
If you hear something consistently enough it takes root in your psyche. That’s often part of the goal of advertising. To get you to associate positive feelings with a brand so that you “grab a Coke” when you’re feeling thirsty (even though Coke doesn’t actually quench your thirst!)
We want to make sure we’re not accidentally falling into that trick with personal finance. Because basing our money beliefs on a bunch of half-truths can be disastrous!
Common Money Phrases:
Below we’ve listed out some of the most common money phrases and sayings. We’ll share our thoughts and dissect the truthfulness of them all.
“Throwing good money after bad”
This is a phrase you’ve certainly heard before that speaks to spending money on something problematic, in hopes that you can fix the issue.
This phrase rings very true. And there’s a fancy behavioral economics concept for why we do this. It’s called the sunk cost fallacy, which basically occurs when you continue a behavior because you’ve already invested time, effort, or money into it. Humans have a tendency to not know when we should cut our losses and move on. Our emotions trick us into believing that if we put more money into a problem that we can fix it. But that’s not always the case.
Instead of making a choice based on the desire not to see your past investment go to waste, make it based on the outcome you’d most like to see moving forward.
But you could also potentially use this “throwing good money after bad” phrase to buy something new without giving thought to how you can fix or repurpose that item.
For example, buying a new battery for a watch isn’t throwing good money after bad. You’re spending $5 to keep that $30 watch running. And fixing the AC on your 5 year old car isn’t throwing good money after bad either. If it’s been a great car you spend the $500, fix it, and keep on driving.
So throwing good money after bad is something you might be tempted to do from time to time. But it’s also possible to use that as an excuse to scrap something that is well worth repairing and keeping around. Run the numbers in order to figure out when it makes sense to invest some additional dollars into an item and when it’s time to retire it.
“Money is the root of all evil”
You’ve certainly heard this common money phrase. And depending on how religious you are you might have heard it WAY too much.
This phrase comes from the New Testament, and often gets misconstrued and taken out of context.
The actual (full) quote is: “The love of money is the root of all evil.” Adding those important first few words clears things up because money certainly isn’t the root of all evil. It’s the obsession and love of money that can be evil.
It’s easy to see how the love of money produces serious issues in our world and in our own hearts. That’s why we try to talk about how to use money as a tool while simultaneously trying to avoid the Pinky & the Brain take over the world mentality. When money gets out of place in our lives and becomes something that we love and cling to instead of a helpful tool, it will have corrosive effects in our lives.
If folks are going around thinking that all money is inherently evil, that will have a HUGE negative effect on their perceptions of money. It’ll also hurt how it is that they view those who have a lot of money as well. They’ll think rich people are evil (or have evil motives.)
So when you hear this said, try to remember the actual, correct phrase. And at the very least, regardless of your religious beliefs, remember that loving money is a detriment to our ability to live a good life. Money is a tool. Not the end goal.
“A penny saved is a penny earned”
Founding father Benjamin Franklin is famous for this phrase. He was fascinated by money and wrote a lot of great maxims about its role in our lives. But how accurate is this common money phrase that we’ve heard our whole lives? Pretty accurate!!! Actually, we might even agree that a penny saved is more than a penny earned. Because earning comes hand in hand with effort and, of course, taxes. Being more frugal, keeping more of what you make, is pure goodness.
This quote is really all about living frugally, which we’re all about! The money we earn that we don’t spend creates meaningful margin in our lives.
And while these are definitely wise words, it’s important to point out that frugality alone won’t get you to where you want to be financially. It’s also important to utilize your human capital, increase your earning potential, and invest for the future. Frugality should be praised! But we shouldn’t take that path to the exclusion of making other wise financial choices.
“Money changes people”
The truth is that money does often change people. Dickens’ classic A Christmas Carol is a perfect example of a person that gets so consumed by wealth accumulation that he treats others poorly and loses sight of all the things that really matter in his life.
No doubt many of us can point to a person who came into some money and changed as a result. Some research has found that, as wealth levels grow, people become more narcissistic and that less wealthy folks are more empathetic, compassionate, and give more.
But on the other hand, does money actually change that person? Or does it just amplify who they already are at their core? It might come down to the individual. Some of the richest folks in the world are giving massive amounts of wealth, time, and energy to worthy people and projects. Gates, Buffet, MacKenzie Scott are a few examples – check out the giving pledge.
We think the perfect antidote to staying the same when your net worth increases is giving large portions away to meaningful causes. Also, maintaining relationships with lifelong friends. So sometimes this saying is true, but we’d modify it to say money might possibly change people. But hopefully you’re able to prevent it from changing you for the worse.
“Money can’t buy happiness”
We’re going to give this one a 7 out of 10 on the truth scale. That’s because money and happiness aren’t synonymous, but a lack of money can lead to some truly harsh conditions.
We just talked about how money changes people. Many folks with loads of money are leading miserable lives. In fact, research shows that “making over $105k tended to be associated with reduced life satisfaction and a lower level of well-being.” Part of the reason is that really rich people tend to live more isolated lives. And “am I doing better than other people” becomes the question that isolated people ask. Money and possessions become the easiest measuring stick, leading to a lack of happiness in the areas that really matter.
But for 10% of the world that is living in poverty (and for many others who aren’t too far above that threshold), more money would certainly contribute to an increased level of health and wellness. Which in turn, will impact their overall wellbeing and happiness levels. Studies have shown that once you achieve the $75k income level that happiness doesn’t increase in tandem with each additional dollar you earn.
But it’s also true that human beings are resilient. So much of our happiness comes from an internal state of being, not how high our income is or how fat our savings account has grown.
Making enough to get by and not stress about money is really important. But having a ton of excess won’t necessarily lead to enjoying your life more either.
“Cash is king”
This is one of those common money phrases that people with a lot of cash LOVE to throw around. And there’s definitely some truth to it. Having cash in the bank not only reduces stress but it also allows you the freedom & ability to make moves that those with lesser cash reserves couldn’t.
When you begin building an emergency fund your stress levels start to decline because you have more margin in your life. Having cash built up gives you peace out money ✌️ which can allow you to ditch a crappy job, take a sabbatical, or start your own business!
But on the flip side of the coin, hoarding too much cash can be the move of a fearful investor. It’s one of the most common money mistakes people make. That’s because inflation eats away the value of your money if you aren’t intentional about growing it!
All in all, we’ll say “cash is king” is true ~50% of the time!
“Penny-wise & pound foolish”
Ever been called penny-wise & pound foolish? I have. This used to be more of a struggle for me personally. I’d pinch pennies on the little stuff and go a little too big on things I should have been more careful about spending money on.
So this saying is definitely true and accurate for some folks. You might be careful in the small matters of keeping your AC set to 78 in the Summer but not put the money into insulating your attic well. Or you might be intentional about saving on your groceries and investing those dollars, but not pay attention to those annoying fees that will cost you tens of thousands over your investing lifetime. You might always drink your coffee at home, avoiding $5 lattes, yet choose to rent an apartment at a budget-busting price.
It’s important to pay attention to both the small and big financial decisions in our lives. Getting the small things right is great. But getting the big things right makes a bigger difference in your financial life.
“Money doesn’t grow on trees”
This is definitely one of the most common money phrases we’ve all heard from our parents. And it’s literally true, because there’s no such thing as a real money tree. (although superstition has it that the “pachira aquatica” tree can bring you good fortune. And we have one of these at the HTM office, just in case it’s true 😉)
But even though this phrase is true, it’s important to know that passive income (aka money for nothing) is mostly a myth. If you want to grow a money tree, you’ve gotta plant the seeds and put in the work! Over the years and decades though, when you’ve been able to invest in appreciating assets that compound and pay dividends, you can grow a generous little money tree for yourself.
Having your “money make money” is the end goal in all our wealth building journeys. That hypothetical money tree is real and attainable if you’re diligent.
Related: If you’re new to investing, start with our beginners guide on how to invest.
“It takes money to make money”
Let’s start by referring to what we just said in the point above. Money can (and will) provide compounding returns if invested well! Investing in the overall stock market, for example, will ensure that the money you have is making money for you.
In that sense, it takes money to make money. And the more you have, the larger returns you are going to see. This is a true phrase from an investing perspective.
But there’s also a major disconnect here. If you weren’t a trust fund baby, that’s ok! You too can still make some real money – even if you’re starting from scratch. We live in the land of opportunity, and building wealth can be done by starting with nothing. You don’t have to have loads of cash (or any, really) to get started.
Starting a business is a way to make money from nothing. (If you’re interested in this, go back and listen to our episode with Alan Donegan where he gives tons of practical examples for starting your business with zero dollars. And dollar cost averaging (investing with every paycheck) is a legit way to become a millionaire over the long haul too. No massive inheritance needed!
“Money burning a hole in your pocket”
This is one of those common money phrases that you hear people say on pay day! Anyone who comes across unexpected large chunks of money is liable to have this experience where they are itching to spend it!
It can be a conundrum to have too much money in your pocket or in your bank account that isn’t there for a specific purpose. You don’t want to touch your emergency fund, of course, unless you encounter a real emergency. But any extra money on top of that can be easy to rationalize spending.
It’s important to find ways to earmark that money for future purposes. This way it doesn’t burn a hole in your pocket causing you to spend in frivolous ways. Saving for a trip? Great! Make sure that money has a name so you don’t spend it in the heat of the moment on something else.
Also, if you’ve got too much cash, make sure you are investing some of it. It helps prevent the temptation to spend that money needlessly and helps you grow it for your future.
“Time is money”
Actually, we believe that time is more important than money. Money might feel finite, but it isn’t. Time, on the other hand, we are never guaranteed. We’ve all got an expiration date, we just don’t know when it’ll be.
Equating the two will make you think of them both equally. And it might make you more apt to trade your vastly more important time for more money than you should. We all have to work for a living and work shouldn’t be demonized. But equating time & money can cause us to live like beings that were only created to work. That’s just not true! We were created for so much more than that – for deep connection, meaningful relationships, to explore, and to just be! We’re called human beings for a reason.
The Bottom Line:
Not all common money phrases are true. And not all old school wealth building advice has stood the test of time. There’s a lot of gray area, so you have to be selective and mindful about what you accept as truth.
Having the wrong information can taint how we view our money, friends, and careers. So continue to educate yourself, keep increasing your financial literacy, and be open to challenging ‘the norm.’ Your money beliefs can make or break your financial future.
Beer tasting notes:
While discussing these common money phrases we enjoyed an Aliens on Moonshine by Torched Hop! And as we’ve kicked the year off with a bang, we could really use your help. Hit the share button, subscribe if you’re not already a regular, and give us a quick review in Apple Podcasts or wherever you get your podcasts. Help us to spread the word to get more people doing smart things with their money in these difficult times!
Best friends out!
