Hard truths about money every adult should learn to accept

• Libby Kane and Kathleen Elkins
• 
  

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Money is serious business.

That's never more apparent than when you see taxes come out of your paycheck, or calculate the price tag on the European vacation you want so badly, or watch your credit card payment get deducted from your checking account.

In fact, it's often when money doesn't feel real that we find ourselves in financial trouble. That's where you encounter people who rack up thousands in debt before realizing or lottery winners who spend what seems like an endless supply of cash. When you don't recognize the truth, you can get in trouble ... fast.

Below, find nine hard truths every adult should learn to accept about money.

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You don't get what you don't ask for

Personal finance journalist and author Farnoosh Torabi puts it succinctly: "You don't get what you deserve. You get what you negotiate."

The first step to negotiating is simply asking. See a job you want? Ask for it. A discount you should get? Ask for it. A project you're dying to work on? Ask.

Lee E. Miller, co-author of "A Woman's Guide to Successful Negotiating" with his daughter Jessica, finds that women in particular have trouble asking for what they want. 

One tactic Miller has seen among women is to accept a position without negotiating, with the intention of proving their worth and then approaching their employer for a raise.

But, he explains, there's a flaw in that approach. "If you start too low, your raise is on that too-low base. Aren't you better off getting an additional $10,000 up front and then getting the same 10% raise down the road? You should always be negotiating the best possible deal that you can."

He acknowledges that sometimes an employee isn't in the best position to get more than the initial offer right off the bat. That's fine, he says, but go in with a strategy. "It's very typical if you're changing fields or you need new skills, to get the experience and then ask for the raise. If you can't get it after all that, be willing to change jobs, because someone will be willing to pay you."

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Your wealth is in your hands

Many of the richest, most powerful people in the world are self-made. Take Oracle founder Larry Ellison, who grew up in a poor Chicago neighborhood before going on to start a company that's earned him an estimated $49 billion net worth. Or John Paul DeJoria, who spent time living out of his car before founding John Paul Mitchell systems and amassing an estimated$3.1 billion net worth.

Those examples are probably outliers, but the truth is that in most cases, whether you aspire to great wealth or simply the ability to pay your monthly bills without stress, the financial fairy isn't going to swoop down and grant you net worth. It's up to you.

There are plenty of ways to learn about money — but you have to seek them out. Start with some of our favorite websites to bookmark, books to read, and online courses to take.

Credit cards aren't money

It's a fine line: Credit cards are a tool to spend money, not a source of funds.

You could argue that a line of credit is, technically, a source of funds in the form of a temporary loan from the credit card company, but that's a slippery slope. When you're using credit cards as money, instead of as a vehicle to spend the money you actually have, it's alarmingly easy to spend beyond your means.

(And in case it's unclear, spending beyond your means is the most basic financial misstep a person can make. It can lead to dings on your credit score, more expensive loans in the future, and the hideously stressful state of knowing you're responsible for hugely expensive debt.)

Flickr / Karen Roe

Your retirement is your problem

Except for some lucky individuals, the age of pensions has passed. Now, you're fortunate if your employer provides a sponsored retirement account such as a 401(k), and even more so if they contribute money to it on your behalf for a "match."

And if you have access to this type of account, it's still up to you to enroll, just like it would be for an individual account such as an IRA or Roth IRA.

A Bankrate analysis of median income data from the US Census Bureau's American Community Survey found that although seniors are estimated to need 70% of their working income to live comfortably after retiring, workers in only three states are meeting that goal. 

Another Bankrate survey found that 69% of people 18 to 29 had no retirement savings at all. Some experts say that if millennials don't change their rocky savings habits and start investing, they'll miss the retirement boat completely.

Investing is boring

As CFP Sophia Bera puts it, "Investing should be boring. It's like watching grass grow."

This is directly contradictory to investing as portrayed by the popular media, with its frenetic activity and life-changing stock market increases. That version is only accurate for a few people working in the industry. For the rest of us, investing is better largely left alone.

For example, after analyzing portfolios held by 325,000 users, robo-adviser SigFig foundsomething interesting: The most successful investors in the group were also the least active.

However, you still have to do it. Bera writes:

Some people wait way too long to move from a saver to an investor. Don't make this mistake! If you don't start investing you'll lose your money to another type of risk: inflation. You don't want the value of your money to go down because it's sitting in a savings account and not keeping up with the rate of inflation.

Many experts recommend using investment vehicles in addition to your employer's retirement plan to ensure that you'll have enough to fund your golden years.

If you're maxing out your 401(k) plan, consider contributing money toward a Roth IRA or traditional IRA, research low-cost index funds — which Warren Buffett recommends — and look into the online-investment platforms known as "robo-advisers." 

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Someone always has more money than you do

Sorry.

Have you seen the list of the 50 richest people on earth? You don't even make it onto the list unless your net worth is in the billions.

There's absolutely nothing wrong with striving for wealth. And if you want to be the richest person you know, that's cool, too. But if every story of a coworker's vacation or friend's new car or neighbor's new vacation home makes you feel inadequate, you're on a difficult path.

Trent Hamm from the Simple Dollar has a great breakdown of why living beyond your means to keep up with the proverbial Joneses is a problem.

"People live as though they have more income than they actually do, and in order to do that they cut out retirement savings (and sometimes even get into credit card debt)," he writes. "Some people do it to impress others, but that’s a questionable reason due to the spotlight effect. In reality, few people even notice the car you drive or the clothes you wear, and even fewer really care."

All debts aren't equal

You can argue that all debts are bad — like Patrice C. Washington does ("The only good debt, I say, is the debt that you don't owe anymore," she told Business Insider) — but they'll probably still go from "bad" to "worse."

"Choosing to pay off the wrong debt may be very costly," certified financial planner Jordan Niefeld told Business Insider.

To start, you'll want to rank all of the debt you owe in order of interest rate — from highest to lowest interest rate charged. While you'll always want to pay the minimum on your various debts, prioritize the debt with the highest interest rate in order to pay less over the life of your loans. Once it's paid off, move down your list and tackle the next debt with the highest interest rate.

Note that the alternative strategy is what financial expert Dave Ramsey named "the Debt Snowball": paying the smallest debt first, regardless of interest, then rolling that money into paying off the next-biggest debt and so on, so you completely pay debts as you go. The advantage here is more emotional than monetary — it feels good to cross a debt off the list, and for many people, that emotional boost keeps them going.

Flickr / Abi Skipp

Money alone probably won't make you happy

Happiness is largely subjective, and depending on whom you ask, money may or may not be able to buy it. However, research generally finds that money can increase your happiness ... up to a point, and no further.

The best-publicized finding put that point at about $75,000 a year in 2010 (it may be more like$83,000 today with inflation), but beyond that, it's up to you. It's probably up to you to a certain degree before that point, too.

That's why it's not unusual to see people take a salary cut and find themselves just as happy, if not happier, than when they were higher earners. Take Kristin Addis, who says she's happier earning just 40% of her old salary after quitting her six-figure investment banking job to travel the world, or the bloggers behind Goats on the Road, who left behind steady incomes to go on a similar adventure, and are happier for it.

No one's saying you have to travel the world to find happiness, but at some point, it's up to you to pursue it in whatever form it takes.

No one cares as much about your money as you do

JD Roth of Get Rich Slowly put it well a few years back:

One of the most powerful lessons you can learn is that nobody cares more about your money than you do. When you realize this, when you take responsibility for making your own financial decisions (instead of letting others make them for you), it can bring a tremendous sense of power and control to your life.

He's referring to the fact that while there's plenty of professional help available for your money, it's unlikely that anyone else — even financial advisers — will operate in your best interest to the degree that you would.

That said, if you're looking to pay for professional financial advice, you'll want one word in your back pocket: fiduciary.

As Harold Pollack and Helaine Olen explain further in their book, "The Index Card," "A financial adviser working to the fiduciary standard has a legal duty to act in your best interest and is not getting paid to steer you into buying overpriced investment products you don't want or need. A majority of men and women offering financial advice don't work to the fiduciary standard."

Those not working to the fiduciary standard are held only to a suitability standard, meaning their advice must be suitable for the clients' financial situation, but is not necessarily in their best interest.

To help sniff out the advisers who are best equipped to help you, you'll want to start by asking prospective advisers these specific questions.