What Financial Lies Are You Telling Yourself?

Derrick has had a stressful day at work, and when he comes home he doesn’t feel like cooking. He tells himself that he “deserves” a night out at a restaurant. This is repeated at least once a week, to a tune of $160 to $200 a month.

Victoria has $4000; instead of saving it, she remodels a part of her house. Before the remodeling is even over, she unexpectedly has a home repair of $8000. Because she has no savings, she must take out a loan from the bank. She laments that this is just the way her life is; she can never get ahead.

Billy frequents discount stores. Because he is getting items more cheaply than he would at a regular store, he tells himself it is okay to buy more. After all, he is “saving” money.

Rachael lives by herself. She thinks, what is the point of just cooking for one. She goes out to eat every night, spending over $100 a week.

What do all of these people have in common? They are all telling themselves financial lies. They have a recording in their minds’ playing over and over which causes them to make the same poor financial decisions over and over again.

In the first example, what Derrick really deserve is to save my money so that one day he can find another job that he enjoys more and is less stressful.

Victoria’s financial life is not as bleak as she imagines. She may be able to get ahead if she thought long term and saved her money instead of spending all of it whenever she gets a little extra.

Billy is getting a good deal by going to discount stores, but the good deal is lost when he spends just as much as (or more than) he would at a retail store.

Rachael could arrange a group of people that she swaps meals with; one week she cooks a meal x4 and shares with three of her friends. Three other nights of the week her friends share with her.

We all tell ourselves financial lies. We may do this unconsciously, yet they have dire effects on our financial future. What financial lies are you telling yourself?

The Flip Side of Keeping Up with the Joneses

We all know about keeping up with the Joneses and what havoc that can wreak on personal finance. When you try to keep up with the Jones’, you spend money you probably don’t have to get all the latest trappings others have, even though those others may be financially strapped.

Yet there is a flip side that no one really talks about. In the reverse, you surround yourself with people who have less than you do, and because you have more, you think you are in a much better financial position than you really are. Dave Ramsey hints at this when he routinely tells callers not to get financial advice from broke people.

I have a coworker I will call Victoria. Victoria has worked at her job for quite a few years, and she is ready to retire. (I can’t really blame her; I am ready to quit and stay home with my kids.) Victoria has struggled most of her life financially. She never really put away for retirement until 20 years ago. She has personally put away about $50,000 in a retirement fund and she will get about $2,400 from her work pension and social security a month. She is 60 now and thinks this amount of money will hold her over just fine for the rest of her life. However, she owes $70,000 on her house and has 19 years left on her mortgage. She has an emergency fund of about $2,000.

When she tells me of her plans to retire in the next year or two, I listen as she rattles off all of her financial information. I warn her that her cost of living may go up when she retires because she wants to travel and socialize quite a bit. Then there are the increased medical costs that are associated with aging.

Victoria assures me she will be just fine and once told me why she is so confident that her retirement is secure—all of her friends are retired and are getting less than she would be earning in retirement. Because of this, she feels she has no worries. She also tells me that people like Suze Orman have an unrealistic view of retirement because a person can never save as much money as Orman suggests. She scoffs at the idea of a 6 month emergency fund. Meanwhile, she is renovating a part of her house and eating out several nights a week.

We are all in charge of our financial destiny, but it is important to avoid comparing to other people. Keeping up with the Jones’ can make you feel insecure and desperate to measure up. The flip side will find you perhaps feeling overly confident and therefore prone to financial missteps.

I worry about Victoria. I hope she has a happy retirement, and I know it is important to retire while still young enough to enjoy it. I also know if she is going to go through with her plan to retire in the next year or two, she should be saving all she can, but she is not because she sees herself as much more financially secure than her friends. I hope she is not making a mistake and that she has enough to see her through many more years.

How Does Your Parent's Financial Example Affect You?

Within the last several weeks, two of the bloggers I read regularly have written posts about their parents and how little they learned about finances from them. Each of these bloggers basically said that they were lucky to have turned out financially responsibly because their parents were woefully irresponsible.

Something about these posts bothered me. In each case, their parents earned very little money, and whenever they did manage to make extra money, they spent it on their kids to give them something they had previously not been able to afford. Each blogger routinely condemned their parents for doing this instead of saving the money.

So, I started thinking about my grandparents, who raised a family of nine children all while living off one salary, my grandpa’s factory salary, while my grandma stayed home and kept up the house and took care of the kids. They were VERY financially responsible. They both lived through the depression, and my grandma washed out baggies and foil until she was on her deathbed. My mom tells stories of her parents looking over the grocery ads together and shopping the loss leaders at several stores. They paid for a private education for each of their children even though it was a financial hardship. They invested wisely and spent conservatively. My grandpa lived to 88, my grandma to 90, and they never ran out of money in retirement. In fact, there was enough leftover to give each of their nine children a small inheritance.

Unlikely the bloggers’ whose posts I read, my grandparents set a beautiful financial example for all of their children. And you know what, I have come to think that means very little. Of their nine children, two have filed bankruptcy during their lifetime. A few are routinely late on bills and have collectors calling. Several others pay their bills on time, but don’t save a lot. Whatever extra they have, they spend. Then there are a few who are very financially responsible, just like my grandparents.

It seems to me that parents’ financial habits do affect their children’s financial habits, but ultimately, the individual has the choice of how responsible they want to be (or not be) with their money.

How We Have Wasted Money Over the Years

I created this blog so that I can relearn how to be frugal. My husband and I were fairly good at frugality early in our marriage, but as my income increased and we became busier, we lived a life of convenience, and, from the frugal perspective, decadence.

I remember one summer we learned about an all you can eat sushi buffet. How much was this buffet? Oh, $25 a person. Despite the price, we went many times that summer. I would say at least 8 times. $400.

We used to air dry our clothes, but we gave that up because in the winter months they took too long to dry inside our apartment. At least three years we dried all of our clothes. $468.

We routinely spent roughly $440 on groceries a month for the past 5 years, when I now know we could have easily cut that down the $350 by just shopping around. $5400.

I bought an exercise bike to get in shape, but I only used it for 3 months because it was so uncomfortable. $500

We moved up to a two bedroom apartment from a one bedroom apartment a year before my son was born. We could have easily stayed in our one bedroom apartment for that year I was pregnant. The rent for the two bedroom was $900; it was $650 for the one bedroom. $3000.

My husband’s family was coming from overseas to visit after our son was born. We would have had to rent a van, and since we had been contemplating buying a mini van anyway, we went ahead and purchased one even though our little car would have worked for another year or two. Our car payment jumped from $250 to $470. Just in year’s time, that is $2640. (We did work very hard and paid off the minivan in 3.5 years instead of the 5 years on the loan.)

These are just some of the big examples that come to mind; I am sure that there were many, many little instances of squandering money that would also add up.

The good news is that now we are much more conscious of our spending. Still, it is interesting to reflect on the ways money slipped through our hands when we stopped practicing frugality.