People don’t usually enjoy talking about money, but when we do, we often lie about it. We lie about how much money we make, how much debt we’re shackled to, and even how much money we’re going to need for the future. As bad as it is to lie to other people, we can cause the most damage by lying to ourselves about money. Let’s take a look at the five worst lies people tell themselves about money.
1. Money is the root of all evil
We’ve all heard this lie so many times that it now gets repeated as gospel. Yet, the actual Bible verse says, “the love of money is the root of all evil.” Leaving “love” out of the equation completely distorts the meaning. Money by itself isn’t evil. In fact, money is simply a tool — a medium of exchange that conveniently allows for the transaction of goods and services. The trouble comes from what people are willing to do in order to acquire money.
The love of money can cause some people to do truly awful acts. One of the most extreme examples is convicted con artist Bernie Madoff, who ran the biggest Ponzi scheme ever seen. The former stockbroker and NASDAQ chairman defrauded thousands of investors over several decades, with the damage totaling about $65 billion. Madoff also had a son who committed suicide exactly two years after the arrest. This is the level of greed and consequences that you should think of when you hear “money is the root of all evil.”
Remember, it’s OK to pursue money. Just make sure to keep your morals and the legal system in mind during the process.
2. I’ll have plenty of time to save money later
Saving money is more difficult than spending money since there is a lack of instant gratification. We don’t want to deprive ourselves in order to better prepare for our future selves, so we often lie to ourselves that we’ll have plenty of time to save money later. This is particularly common among young people who have a hard time thinking where they might be in 20 or 30 years, or what their financial needs will be at that time. However, the saying “time is money” is not a lie. Time is the most precious commodity we have, and an important part in building wealth.
The chart above shows why you should never lie to yourself about having plenty of time to save money. Not only can life’s obstacles distract you from your financial goals, but the longer you wait, the harder you make it on yourself. A person who invests $5,000 annually between the ages of 25 and 35 will have an estimated $563,000 at age 65, assuming a 7% annual return. By comparison, a person who invests $5,000 between the ages of 35 and 65 will have about $58,000 less. A person investing $5,000 between ages 25 and 65 could accumulate over $1 million. This is a prime example why you should start saving as soon as possible. Even if it’s a small amount, it’s important to start building good money habits.
3. I won’t ever retire
America’s retirement crisis has many people worried about their so-called golden years. Trying to imagine a scenario where you save and invest enough money to completely leave the workforce can be difficult, if not impossible. To make up for the difference, some people plan to delay retirement or simple never retire. If you never retire, you don’t need to worry about having enough retirement savings, right? Wrong. Telling yourself you won’t ever retire is probably another lie.
One in four American workers believe they won’t be able to retire until after age 70, if at all, according to a recent survey by Willis Towers Watson. The average worker believes they’ll retire at age 65, but they admit there’s a coin-flip chance of working until 70. Making matters worse, the survey shows employees who expect to work longer are less healthy, more stressed, and more likely to feel stuck in their jobs than those who expect to retire earlier. A quarter of employees under 30 think they’ll retire in their 70s or later, while a third of employees in their 40s say the same.
In reality, you might have to retire sooner than you think. An analysis by the Transamerica Center for Retirement Studies (TCRS) finds 60% of retirees retired sooner than they planned — and not for good reasons. Across all age ranges, fewer than 10% of retirees retired later than planned. Reasons for retiring sooner than planned range from employment-related reasons to health issues. Only 12% of retirees of all ages who retired sooner than planned say they did so because they saved enough cash and could afford to retire.
4. I can afford it
Humans have perfected the art of rationalization. No matter how we spend money, we can find a reason to tell ourselves that it’s ok. Buying new stylish clothes on credit every season? “I need to look good for my job.” Leasing a fancy car because it would otherwise be too expensive? “It keeps my monthly payments low and I deserve some luxury.” Going out to eat a couple times a week? “I can afford to not cook at home every night.” If we’re committed to spending money, there’s no limit to what we’ll tell ourselves so we don’t feel bad about our consumer indulgences.
Lying to yourself about your spending may feel good in the moment, but the appeal of purchases eventually wears off. Unless you plan on dying tomorrow, you’ll need money for your future self. Instead of making excuses to why you should be able to buy something, ask yourself the following questions.
- How many hours do I have to work to afford this?
- Do I have credit card debt that needs to be paid off instead?
- Am I maximizing my retirement accounts?
- Do I really need this new purchase?
- How will this purchase help me accomplish my financial goals?
If the answers to the these questions give you cause for concern, then reevaluate your prospective purchase. People don’t usually regret saving too much money. In fact, a Bankrate survey finds 42 million Americans regret not saving more for retirement.
5. Out of sight, out of mind
Ignorance is not bliss when it involves your finances; it’s costly. Sure, lying to yourself about your financial situation may help you sleep at night this week, but what about when a financial emergency arises? What about when you need — not want — to retire? You’ll be forced to pay attention to your money and you may not like what you find if you’ve been ignoring it for years.
Sadly, many people believe in the out-of-sight-out-of-mind money lie. NerdWallet finds that lender-reported credit card debt is 155% greater than borrower-reported balances, meaning some people don’t even know how much debt they owe. Twenty-three percent of credit card users admit they have been surprised by their bills. A separate study from GoBankingRates finds 21% of Americans don’t even have a savings account. Our level of ignorance with money is ridiculous.
Nobody cares as much about your money as you do. If you don’t start acting like it once in a while, you risk leaving your future self destitute.
Follow Eric on Twitter @Mr_Eric_WSCS