Be Honest About your Finances
The first step in solving any problem is recognizing it. In the case of financial problems, that requires some honesty. One common theme I recognize about people with financial problems is they haven’t accepted reality. Instead, they try to convince themselves and others they are doing well financially. But, they are often ignoring or hiding from their financial problems.
Delusion, Justification & Sabotage
delusion (n): false belief that you can ignore your finances and get ahead
Pouring over all of the details of your financial life isn’t fun. But, it’s very necessary if you don’t understand where your money is going. It’s kind of like a dieter who is convinced they are losing weight, but they refuse to step on a scale. Unless you are honest about your spending, you are never going to get it under control.
justification (n): a common excuse to overspend and accumulate debt
- I can afford the payment.
- I got an incredible deal.
- I deserve it. (I’m worth it.)
- This is an investment.
People can justify anything, if they want it badly enough. This little trick of logic always says yes, even when your paycheck says no. Marketeers love justification. In fact, they practically invented the concept and they use it regularly. So, before you convince yourself that you deserve something expensive, try to remember if it was your idea or a commercial’s.
sabotage (v): to destroy your future prosperity with false values
Another reason some people have money problems is because they sabotage their finances. For example, they may dream about being having more money, but believe rich people are evil. Or, they may have financial goals but take no action towards them, because they believe abundance will be provided. Being aware of the psychology that can sabotage your finances is crucial for future prosperity.
Do you suffer from delusion, justification or sabotage?
Impressing the Joneses
If you wanted to impress your neighbors and make your friends jealous, you could buy an expensive new vehicle. It could bring immediate recognition that you are doing well financially. Unfortunately, it could also saddle you with a huge payment for years to come. This would reduce your future discretionary income, actually making you poorer, despite the fact that you look richer to others.
On the other hand, if you wanted to get ahead financially, you could pay off all of your debts and invest part of your income for your future. Unfortunately, no one would notice the progress from these actions for many years. It may appear to others like you are poorer that you really are, despite the fact you are quietly getting richer.
Is it more important for you to look wealthy or to be wealthy?
Honesty in Relationships
The biggest cause of divorce in America is financial problems. Unfortunately, I’ve watched a couple of my friends get divorced because of financial cheating. Whenever one spouse controls the finances and keeps the other in the dark, problems are likely to follow. Secret purchases, bank accounts and credit cards are sure sign disaster is imminent.
Good relationships are built on trust. And, it’s very difficult to regain trust after it has been lost. Like I have told my kids on many occasions, “if you can’t tell the truth about what you are up to, then you are doing the wrong thing”. If you can’t level with your spouse about your financial decisions, you are definitely doing the wrong thing.
Do you lie to your spouse, family or others about your finances?
The Bottom Line
The bottom line is that honesty is just a reflection of your confidence. The inability to be honest, with yourself or with others, shows a disconnect between what you are doing and what you should be doing.
“The first and worst of all frauds is to cheat one’s self.”
Pearl Bailey – American Entertainer
Recommended Reading
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Hi Bret, I think the worst financial delusion I ever had was believing I could have my own apartment in Boston while employed as a social worker. I worked myself sick trying (50-60 hours of work a week with 2 very stressful jobs). I went back to having a roommate, and changed fields entirely.
I’ve shown off with possessions before and I decided it wasn’t for me. I don’t like making friends jealous, or making myself an attractive target for crime. I’d rather people had no idea how much money I have so people don’t act weird around me.
I totally agree about not having financial secrets. I’ve also seen this break up marriages.
Jennifer,
I remember moving out when I was 19 and living at the beach. It sure was fun, but it was tough financially. I can remember living on a 50 cent hamburger per day for almost a week, when I worked as a gardener.
I honestly think this experience helped me to become sucesful later in my life. There is nothing like a rumbling stomach to put your priorities in order. I also think the struggle has helped me to appreciate the good times.
We can probably guess that much of the lack of honesty stems from not liking what you see when you look at your finances. Denial is the next step. Then disaster after that.
In the end, honesty takes courage. We live in an era when telling happy lies is the norm, and telling unpleasant truths can get us in trouble. Somehow, culturally, that becomes the preferred route. The media do it, politicians, and even “the news”.
Kevin,
You are so right about the happy lies. I’m disappointed about the declining integrity in our society. It has definitely become more common and more acceptable to lie. I think it’s a tragedy.
We can’t hide from the truth. It’s procrastination, but ultimately we have to pay the price one way or another with our finances.
If we handle the truth up front, we can align our behavior with reality. Then, our ultimate outcome is likely to be better.
Really, much of this I think is a matter of many folks not having great financial role models growing up, and not having any kind of financial education. Most high schools don’t teach it in any substantive, practical way. These 2 factors, as well as our society’s bend toward instant gratification, gets people in trouble by not acknowledging or even understanding their financial reality.
The keeping up with the Joneses one is tough for many, but you have to stay to our own situation. One of my longtime friends recently shared with me the success he and his wife have had with their finances – in terms of savings and investment results. He’s a no bull kind of guy. I was stunned by how well they have done, and given that we’re the same age, I admit that I felt big pangs of envy and some disappointment that I hadn’t reached anywhere near their financial success. They keep it under wraps.
Then, after a few hours, I came back to my normal established philosophy about not competing in that way. Their financial life has no bearing on mine, so it’s a waste of time to keep up. Best to be happy for people who have succeeded more than you, and try to learn a thing or two from how they did it. And that’s it. Be hungry, but be very thankful for what you have and don’t try to keep up with anybody else. Just live within your means and be responsible.
That’s a great thought about not trying to compete with others financially. I think it’s such a big part of the American culture that it’s hard to resist. Comparing our financss with others can only lead to jealousy and disapointment.
I mostly strive for financial success to bring about security and contentment. Comparisons with others don’t seem to bring about either for me.
You really nailed this one, Bret, wen you say “honesty is just a reflection of your confidence.” Absolutely!
Until we learn to be honest with ourselves it’s really hard to be honest with our personal finances.
All the best,
Len
Len Penzo dot Com
Thanks Len,
I was actually thinking of someone I know and love when I wrote that line. I won’t say anything that would identify him or her, but it makes me sad to listent to all of the stories, knowing his or her financial life is a shambles.