Replacing Financial Fantasies with Financial Realities

August 17, 2009

Replacing Financial Fantasies with Financial Realities

In my Investopedia article, 4 Fatal Financial Fantasies, I write about some of the common dreams some people have about money that are likely to do them more harm than good, such as receiving a large inheritance or winning the lottery, and how they can replace those myths with actions that can actually help them improve their financial situations, like starting a business or learning how to invest. Here are two more examples that I didn't have room for in the article:

Myth: I’ll find undervalued items and resell them on eBay. The truth is that the popularity of eBay has driven down the price of many once-valuable collectibles, antiques, and designer items, and the website’s ease of use has added more sellers to the market. That means more people scouring garage sales, thrift stores, and seemingly underpriced eBay auctions in the hope of picking up cheap loot to resell. It’s not that you can’t make good money doing this—there are people who make a living doing it. But if you don’t already have a background in the subject, you’re likely to waste lots of money buying the wrong things and lots of time trying to sell them. And if you’re not passionate about the items you're selling, or about selling things in general, you’ll probably get bored. For most people, there are better ways to make money. (Personally, I tried this out for a few months and, while the thrill of a good sale was exciting for a while and I seemed to have some great beginner's luck, ultimately I felt like it was a waste of time since I ended up averaging only about $6 an hour doing it.)

Reality: I’ll live below my means. Instead of scrounging for supplemental income in piles of garage sale castoffs, why not look for ways to reduce your expenses? This can be a more effective way to put more money in your pocket than making more money because any additional money you earn will be taxed at your marginal rate. In other words, if you want to end up with an extra $100 at the end of the month, you have two choices: earn an extra $200, or decrease your spending by $100 (these numbers are simplified, but you get the idea). For many people, the latter is an easier option.

Another option is to look around your own home for stuff to resell--it's a lot faster than rummaging around garage sales and thrift stores looking for other people's stuff to sell, and there are no startup costs. This exercise might also make you more aware of how much stuff you've bought that you shouldn't have wasted your money on and help guide you toward more thoughtful purchasing decisions in the future.

For the rest of my ideas, read 4 Fatal Financial Fantasies over at Investopedia. Also check out my many other posts on trying to make decent money via eBay:
Experiment: Turning a Profit on Ebay
Self Employment via eBay
Self Employment via Ebay: Update
Self Employment via eBay: Yet Another Update