Are you holding yourself back with these money lies?
In 2009, I was all excited to start looking for a house to buy. I had been working in a well-paying job for almost five years at that point and I figured I shouldn’t be throwing money down the drain renting. Well, reality came crashing down when I finally looked at my savings. It wasn’t even enough to be a good emergency fund, let alone a down payment. In 2010, I set out to fix my finances. Month after month, I set up and revised my budget. I failed, month after month. I had the perfect budget and it should have worked. But after six months of this, I still was not saving any money. I had so many excuses for not making it work, too: If I were paid a little bit more, of course, it would be easy; I couldn’t have a life being constrained with a budget, etc.
The problem was not my budget. It was me. I was lying, to myself.
It wasn’t until I got brutally honest with myself that I started to turn a new leaf financially. Most of us lie to ourselves so we feel a little better about our shortcomings — but the danger is that at some point we start believing those lies and stop trying to improve. If we really want to turn our financial life around, we have to recognize and acknowledge what we’re doing and then stop doing it.
Here are the lies I told myself (or some of the most common lies I have come across from family or friends).
1. I am never going to retire, so I don’t have to save.
Lie: I love my job; I am not planning to retire — or I will just work until 70, so I have plenty of time to catch up.
Reality: A job is not in your control. Layoffs happen. Sometimes people become disabled and cannot work anymore. Whether we like to acknowledge discrimination based on age or not, it is very difficult to find a job later in your career.
2. I will get my finances in order as soon as I [random excuse]
Lie: I will start saving tomorrow.
Reality: Tomorrow never comes. There will always be something that prevents us from getting to the ideal circumstances we want to experience before we begin to save. However small the effort is, start something now. If your goal is to start saving, open an account and start an automatic transfer of $25 a month. If your goal is to get out of debt, start paying $25 extra on the debt you want to attack first.
3. Investing is too risky; I don’t understand how it works
Lie: I need to completely understand all the jargon and read complicated books not to lose money in investments. It is better to learn everything before starting to invest.
Reality: Inflation is real. If you just keep your money in a safe bank account and hope not to lose money, you will need significantly more savings to get to a decent nest egg. You do not have to wait to start investing. There are plenty of blogs that spell out what you need to know in an easy-to-understand format. If you absolutely want nothing to do with investing, you can always pick a target date fund and forget about it.
4. My credit score is not important unless I am buying a home or a car
Lie: I am not planning to buy a house or a car in the near future, so my credit score is irrelevant.
Reality: Unfortunately, credit score has found its way into a number of financial areas — insurance, utilities and rental companies to name a few. Even some employers use credit reports as part of their background checks. Get your credit reports regularly and keep an eye on your score.
5. I won’t get married (or have kids), so I don’t have to save for those.
Lie: I will never get married, so I don’t have to save for a wedding.
Reality: This is not just about marriage; this can be for any life event. Life is exciting and it surprises us. You might fall in love at the least expected time or decide to have a baby. Start a targeted account for most common life goals. If you don’t ever get married, your savings will just end up being available for some of the other things you want to experience in life.
6. I should buy a house because renting is wasting money away
Lie: Renting is like throwing money down the drain. It’s building someone else’s equity and the best thing to do is to buy a house as soon as possible.
Reality: Buying is not always a good decision. In some cities, renting is better than buying. There are some good rent vs. buy calculators; check to see if it is worth buying and then buy only after saving up a 20 percent down payment plus any closing costs.
7. I can’t save because I don’t get paid enough
Lie: I get paid way less than what I deserve, so I can’t save.
Reality: Everybody can save something. It might be $1 or $100, start with something and increase until it hurts.
8. I am approved for a $x loan (credit card, car loan or mortgage), so I should be able to handle it
Lie: The banks know better than me. If they think I can handle a $x loan with my income, I should get that loan.
Reality: Banks want you to be in debt for as long as possible. I was approved for a mortgage for five times my income. I could have never handled that payment with my other commitments. I would be spending way more than my income every month. You make a budget and, before you apply for any loan, you decide the maximum amount you want to take.
9. I can’t have a social life if I make a budget
Lie: Budgets are too restrictive. I can’t have a life with a budget.
Reality: Budgets are actually liberating. You don’t have to worry about whether you can afford something because you clearly know the answer. You don’t have to wonder whether you will be able to pay the power bill if you go out for your friend’s birthday. You can also come up with new ways to socialize and have fun by stretching your budget.
10. I don’t need health insurance because I am healthy
Lie: Insurance is for sick people.
Reality: Accidents happen. Unless you have a crystal ball that accurately predicts future events and can guarantee you will never get into an accident, it would be wise to get health insurance — at the very least, a cheap high-deductible insurance policy.
11. I will get Social Security and Medicare, so I don’t need savings
Lie: I pay for Social Security and Medicare that will serve as my retirement savings.
Reality: I don’t know enough to comment on how long Social Security will last, but I know that even if it does pay out when I retire, it will never be enough to cover my entire needs.
12. As long as I get a college degree, I am set in life
Lie: If I get a college degree, whatever it takes (including a huge student loan), I’ll be able to make the life I want.
Reality: A lot of majors won’t pay enough to get rid of the student loan in a reasonable amount of time. Just because you have a degree, doesn’t mean you will be guaranteed a job. For many well-paying jobs, trade school or experience might be all you need.
13. I need to be rich to build wealth
Lie: I need money to make money.
Reality: It is true that money makes money, but that doesn’t mean you need a boat load of money to start making money. Compound interest works for everyone. You could start freelancing on the side to accelerate the process.
14. I don’t need as much money as I am making now when I retire
Lie: My expenses will be a lot less during retirement.
Reality: Yes, some expenses will go down in retirement, like commuting or dry cleaning; but there will be a lot of new expenses that will be way over what you used to spend (ex: healthcare, travel, hobbies).
The harsh reality that I wasn’t reaching my goal is what fueled me to examine my thought process about finances. But how does it work for you? Are money lies holding you back from reaching your goals?
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There are 35 comments to "Are you holding yourself back with these money lies?".
The idea of waiting until a fated “something” happens (better job, marriage, becoming an investment guru) is absolutely fatal to one’s finances. As you posit, you’ve got to just dive in and start now. The great thing about saving and investing is that it’s possible to start very small and create frugal habits that you can build on and expand.
Over time, by spending below your means, you’ll reap the rewards of compounding interest and the absence of debt. But, interest takes time to accrue, which makes it all the more important to start socking away cash now. Thank you for this inspiring article!
Love this list. I’d find it funny if I hadn’t heard some of these things from friends and family.
I’ll cop to believing #5. I do think I’ll get married someday but I’ve lost all interest in a traditional wedding. However, my future groom and his family may not feel the same way 😉 I’m also working on #3. Time to think beyond mutual funds.
And I wish more people would get #6. In the over-priced market where I live, it’s cheaper to rent than to own the equivalent space (1 bedroom plus den) let alone anything larger. I’m saving and investing the difference, so I’m not falling behind.
If a big, expensive wedding turns out to be so important to your future groom and his family, then maybe they should be the ones to pay for it. Why should you have to give up things you do value to save for something you don’t value, just because it’s a “common life goal”?
Johanna, true they should pitch in if it is more important to them but after marriage (in my opinion, it could be different for others) the money becomes ours, so whether I spend the money or my husband spends the money doesn’t really matter. If I save and it makes it easier for us to have the wedding he wants, I am happy.That is just me though.
“whether I spend the money or my husband spends the money doesn’t really matter.”
Well, plenty of people think it makes sense to plan for the possibility that marriage won’t turn out the way they thought it would, and keep their premarital assets separate to the extent that the law allows. From that perspective, it does matter. It might not be romantic, but life seldom is.
“If I save and it makes it easier for us to have the wedding he wants, I am happy.”
If that works for you, that’s great. But if someone is sacrificing their own needs and wants to save for something that their hypothetical future spouse might hypothetically want, I don’t think that makes sense.
Also, for the original article:
“If you don’t ever get married, your savings will just end up being available for some of the other things you want to experience in life.”
I can’t quite make sense of this. People enter into relationships and marriages at all stages of life, so at what point is it safe to say that you won’t ever get married? Maybe when your on your death bed, but by then it’s too late.
I’m sorry if it seems like I’m picking on you. I think the rest of the article is great – it’s just #5 that I think really misses the mark.
re #6. Most people don’t look thoroughly at the costs of owning their own homes. Maintenance, repairs, insurance often make it far more expensive than renting. Additionally, some people are simply not mentally qualified for the responsibility of owning and maintaining a home.
Saying that a home should only be purchased with 20% down is short-sighted. Everything else is very true though.
Number 7 was the excuse I used to have, but fortunately, my father kept on repeating that any little amount you save monthly becomes a big amount after some time. I followed that advice and I am glad I did.
Johanna, maybe part of being married is being able to say, “honey, a big wedding isn’t important to me, but I understand it is to you and your family. And I value your feelings and those of the family I am about to be a part of. So maybe we can compromise by having something a bit larger than I previously thought. Let’s sit down and talk about what we can reasonably afford, as we are about to merge our lives, family, and in some capacity, our finances.” I do agree that if the in-laws want there to be ice sculptures, they should probably be the ones to spring for them, but marriage is all about compromise, working together, and meeting your spouse’s needs not just your own. And that includes finances and the wedding.
I suppose that if I were to get married to someone who wanted a big wedding, I might or might not contribute some of my own money toward the expenses. It would depend on all sorts of factors: His and my overall financial situation, his reasons for wanting a big wedding, and, most importantly, his willingness to compromise in return (whether with money, time, or effort) to help me achieve other things that *I* value. (Although in my case, I actively dislike big weddings for their own sake, not just because they’re a luxury I’d rather not spend my money on. So we’d be doing a *lot* of compromising in this hypothetical relationship.)
But I’m not going to go out and set up a separate savings account earmarked for wedding expenses, just to plan for the chance that this might happen. That’s just bonkers.
Plus, even if your spouse agrees to a small wedding, you will likely have other goals like kids, a house, or traveling you can put the savings towards.
#7 used to be me! Now, I religiously pull out my savings first before paying bills.
Paying yourself first has done wonders for me. It is so simple conceptually but so difficult to practically implement!
#8 is what hammered me early on because it made no sense to me that a business would provide loans to people who couldn’t really afford them since that would force a default and they would be less likely to be paid. But much like the doctor and dentist not coordinating and each providing me with addictive pain killers for separate yet overlapping issues so that by day 45 I was consciously looking forward to my next dose and on a path to disaster, the car dealer, appliance salesman, and mortgage lender (more so in those days) all just looked at their own little world and my salary and decided I was a good risk and silly me thought they would really consider my ability to pay. Sure I could pay, if I didn’t put gas in the car, plug the appliance in and draw utilities, or actually eat food. Took a long time to get out of that hole.
#13 is also a hard one to explain to people living on a lower income, like my siblings and in-laws. Trying to explain $50 a pay, say $100 a month over 40 years at 4% above inflation would yield $114K. But that’s so small! I can’t retire on that! That money would cut into my social life!
Yet when I ask “would you rather have $114K or nothing at 65?” I only get more excuses, no action. They don’t know that saving becomes a habit, that with a little thinking the $100 becomes $200 becomes $400, etc. a month as saving becomes more important, as you might add to it. Even just $10 more a month each year would help. That would be $200 in ten years, $300 in twenty, $400 in thirty, $500 at forty, which is also $500 less that you need to live on a month. But getting a lot of people to see that is really hard.
I really don’t know why businesses loan people money they know people can’t pay back. If I had taken the mortgage I was approved for, now that we have a baby, we would be defaulting already.
It’s amazing how I get approved for far more than I need, and I make a good but hardly huge salary. I have three credit cards each with five-figure limits, but I couldn’t spend nearly that much short of a disaster.
I’ve had medical and furniture store credit cards approved for three times the amount of my original purchase.
Even the conservative credit union that issued my chip-and-PIN credit card, increased my limit from $1,500 to $4,000 after only one year. Which is OK, since I would have requested an increase eventually for my next foreign trip.
Great list! #9 is a tricky one for me because I know people who focus so much on saving money that they really sacrifice spending time with people and pursuits they love. It can be hard to find that balance. This holiday I’d love to see my family but the money for airfare is too much when I’m trying to tackle credit card debt. I guess Skyping will have to do.
#3 was definitely my excuse for years. When living on such a short string, losing any amount is a scary thought.
I had yet a different excuse that I don’t see on the list – that my debt burden was so large and overwhelming that I thought ever paying it off was hopeless, so I told myself it wasn’t worth making the sacrifices to put any extra money toward it beyond minimum payments. I was making so little money anyway, and was so miserable with the entirety of my situation, that the the thought of using say an extra $20 for instant gratification, like going out with friends, was way more appealing than throwing it into the black hole of this monstrous debt. I told myself life was short, and the debt was a battle I couldn’t win, so I may as well not even fight.
After almost a dozen years of this kind of thinking, I finally got tired of myself, and where I was in life, and decided to change my thought pattern and put in the work and sacrifice to get debt free. I’ve spent the past 3 years throwing everything extra I had at it, and it’s finally only a thousand dollars from being totally paid off. It was always possible to pay it off – I just had to stop making excuses.
Such an inspiring comment, CV. Congratulations!
Linda,
This should be a reader story, especially if the poster could focus on how he/she changed her/his mindset towards the possibility of being debt free. I’d be the frugality tips would be much the same as posted elsewhere on GRS, but that psychological aspect of convincing yourself to do what seems impossible would be a great point of view to have represented on this site.
Thanks!
Congratulations on attacking the debt CV! Once you pay off that debt if you channel that money to savings you will be in a great path in no time! Good luck!
Congratulations! And thank you for the nudge to start tackling something that seems impossible and overwhelming to me right now. It’s easy to make excuses.
Its easy to make excuses and its easy to get depressed in the process! I would love to see a readers story on this…
This was a great post. It gets to the core of why people are broke and in debt. They lie to themselves.
Great list. I think a big lie people think is that it has to be hard to get your finances together. The math itself is pretty easy. It’s mentally doing everything you know you should that can be tough.
Johanna I do see your point. I more took the authors suggestion as setting aside savings for “undefined but important milestones”, even if you think you don’t want certain ones, because you will want something and it’s hard to predict what. But yeah, it does seem a little crazy to set up a specifc “wedding fund” if you’re single and don’t ever plan to get married. Reminds me of “it’s a wonderful life” I watched last night, when the lady gives her $ to George at the end of the movie and says, “I’ve been saving this for a divorce, in case I should ever get me a husband!” 🙂
It’s funny how people assume that those who say they don’t want to get married will somehow change their minds and settle down. Of course, some do, but many people who get married change their mind about that as well!
There’s also a difference between wanting a marriage and wanting a wedding. I want to get married, but I’m not overly interested in a wedding. Isn’t financial freedom about thinking outside the box and not spending on things that don’t bring you value? For me, there isn’t a lot of added value between a wedding that’s under $10K and one that’s $20-30K or more. I won’t be happier wearing a $2000 than a $500 dress.
Good observations Beth. Its interesting that the overpriced wedding theme has really gotten a lot of attention on this thread. Maybe its just the fact that we here at this site are a frugal bunch to begin with, but I think the days of what I call the “Circus Wedding” are starting to fade. Now that I’m firmly Middle Age(Crazy?) my days of lots of wedding invites have come and gone, but the ones I go to now seem to have come back to Earth as it were in regards to size and money spent. I was a groomsman in a friends wedding in 1992 and it had to go 30 Grand with the reception. If I recall they were married 10 years. My Grandparents were married at a courthouse with a 15 dollar gold band for grandma and it lasted 68 years on Earth. I’m not saying the size of the wedding is a good or bad thing, I just think people are starting to realize its not a competition to have the largest wedding; Unless you are a celebrity.
Great list. Thank you for sharing. I have encountered many of these before from friends and family…and from me. #2 has probably been the biggest challenge to me. It boils down to procrastination for me. I used to always find one excuse or another. Thankfully, we automated our savings for retirement, college, and other goals to move forward.
I’m using extreme caution on #3. I invested what I thought was safe, only to find out that I was lead astray by what amounted to predators, some of whom had blogs, who gleefully profited from my stupidity. Lost 60% of investment. Read Michael Lewis. Found out that many of those who were SUPPOSED to be representing me, were wolves. AND they were sanctioned by large corporate entities. I lost more than I will ever be able to replace because I Lost 90% of my income too. I am saving, but I sure as hell don’t trust investment advice from blogs, banks and corporations anymore. I learned a brutal lesson. My question is, how do you know the source is TRUSTWORTHY? I cannot afford to repeat my mistakes.
The title made me ask myself,. “What money lies?”. Then I read each article and see how applicable they are. I hear all of these things on a weekly basis!
I understand that everyone has different circumstances, but a few simple rules to live by are: 1) live within your means and 2) prepare for the future!
I used to believe that investing was complicated and that I needed to have more money before jumping in. After I got my first job and started saving enough to get the company match in my , I was very motivated to see how quickly the money built up. And once I actually got started, I learned what I needed to know about investing rather quickly.
I have seen the “after I get a degree everything will be fine” lie very often. The truth is, your degree is meaningless unless you get out and hustle to find a job. And even with a high-paying salary paying off student loans severely limits your standard of living.
These are great, and here’s another common one: “I don’t need to start saving/investing for retirement now; I can wait until I’m closer to retirement age.”
#3: I do understand that inflation is real. But I already invest through a 401K and Roth IRA. While I might earn more in the stock market than in a savings account, I could also face a huge loss. And so my excuse for saving rather than investing is that I don’t want to put too many eggs in one basket. Discuss.