Liar, Liar, Pants On Fire: Money Fibs You Can’t Stop Telling

Just because untruths are a reality for our political news doesn’t mean you should let fiction run away with your finances. The lies you tell yourself as you manage your money can have a lasting impact on your financial well-being and prevent you from living the life you want to lead.

Honesty is the best policy

You’ve heard this one before, but there’s a reason for that. Whether they’re small white lies spun to spare someone’s feelings or elaborate inventions to impress those around you, lies complicate your life as you pull the wool over everyone’s eyes. Once the people in your life realize what you’re doing, the fallout when the truth is revealed can ruin relationships and your reputation.

The numbers in your bank account can’t lie, so neither should you. Take a hint from the black and white figures in your budget, and save yourself the consequences by cutting out these common fibs from your life.

“I only need a budget when I’m tight on cash”

The budget has earned a bad reputation it doesn’t deserve. It’s often only ever put in place when people are down on their luck, so in many people’s minds it implies a life of sacrifices as they apply strict limits on their spending and rely on cash loans to get by. In reality, it’s a financial tool you should use all the time, as it lets you know where your cash is going every month.

It doesn’t matter if you make enough to be comfortable or if you’re making less than you’d like, you should take the time to map out your finances. A budget can do more than track your expenses. By outlining the ways you spend your cash, you can identify the spending habits that prevent you from achieving your financial goals.

If you aren’t sure how to create a budget, there’s a great collection of finance articles online designed to help. These guides offer up simple yet effective tips on how to budget and save money. You can also try out some of these money management apps to generate your very first digital budget.

“I have savings, so I don’t need to invest”

Savings are an important feature of any budget. If you have them, you’re already doing better than the six out of ten Americans who have less than $500 to their names, but you can do better.

A basic savings account is great for short-term goals like going on holiday or buying a brand-new laptop, but it’s not equipped to help you achieve long-term goals.

The average interest rate of a basic savings account is only 0.01%, while the current rate of inflation is as high as 1.6%. If the discrepancy between these rates continue, the interest you earn on your savings won’t be large enough to offset the cost of inflation decades into the future. That means your money loses its purchasing power the longer it stays in your savings.

If you intend to set aside money to help pay for a new home or your retirement, you need something that can off-set the cost of inflation, like a 401k, mutual funds, or ETFs (Exchange Traded Funds). These investments are meant to go untouched for years, so it can earn enough compound interest and other dividends to support you through retirement and other important life goals.

“My small purchases don’t matter in the long run”

One pumpkin spice latte. A single ticket to Black Panther. A solitary item in your Amazon shopping cart. On their own, they don’t have the power to make or break your budget, but put together, their combined cost could have a huge impact on your finances.

Compared to the big purchases in your budget — like rent or loan payments — it’s easy to discount their influence on your finances. This is an especially harmful lie to believe, as eventually the individual purchases will add up and create a huge hole in your budget. If you don’t get a handle on the small ways you spend your money, you’ll use up the cash you’d otherwise spend on those big, important purchases.

I’ll start tomorrow”

Through the web of lies you spin around your finances, you may recognize your need to alter your spending habits if you expect to reach new goals, but the financial procrastinator rarely finds the time to make these changes. There’s always something that stops them.

The day was too long and you’re too tired, you’ve already made a huge purchase that’s at odds with your new goal, or you’re too busy to take on another responsibility just now. Whatever it is that’s stopping you, you always promise tomorrow will be the day. Sadly, you live in a reality when tomorrow is never the day you begin your goals.

Postponing your start date to an imaginary day when the conditions are perfect won’t just lead to financial stagnation. It can actively hurt your future success, as many of the financial assets you’ll rely on in retirement require long-term investing. Your savings and retirement plans need ample time to compound interest. Without it, you may not have enough savings set aside to help you retire when you want to.

The solution? Stop lying!

It’s time to fess up to all your fibbing ways. If you make a habit of telling these lies as you spend and save your money, you need to make a huge change in the way you approach your finances. If you don’t, you could be hurting your chances at a financially successful future. Inject some honest into your money management methods, and see a return on truth.