When it comes to your finances have you ever told yourself a little white lie to justify spending, going into debt, or simply not saving, or made excuses why you haven’t done something when you know you should have? In today’s post we’re looking at the 7 biggest money lies we all tell ourselves.
It doesn’t matter how good you are with money; we reckon everyone tells themselves these money lies to some extent. Let us know down in the comments if you’ve been telling these porkies to yourself. Now, let’s check it out…
With InvestEngine you can build a portfolio of fractional ETFs for FREE. No trading fees – no FX fees. And, new users to the platform will receive a £50 welcome bonus if you use this link. Read our full InvestEngine review here.
Alternatively Watch The YouTube Video > > >
Lie #1 – I’ll Be Happier When I Have £x
Some research done in the US from 2010 showed that people tend to feel happier the more money they make only up until the point that they earn about $75,000 a year.
Once your basic needs are met, more money will not make you any happier. The major issue we’ve identified with money and happiness studies is that they always seem to intertwine the concept of more money with more work.
This is the trap that we see so many professional managers up and down the land fall into. You’ve only got so much time, so giving away all of it to your employer in the pursuit of a little extra money is clearly going to have a negative effect on your happiness. If you’re not happy with £40,000, then you won’t be happy with £50,000.
Anecdotally, most people we speak to say they were at their happiest when they were in school and at university – times in their lives when they had little to no money.
Ben and I (MU cofounders) became mates at university and while there we had an awesome time, and in a single year we each must have lived on less than £10,000 a year to cover rent, bills, food and living costs. Lack of money certainly didn’t make us unhappy.
In the years following when we had to endure soul crushing work, our colleagues and managers couldn’t understand why we pursued shortened workweeks for less overall pay, when they and everyone else only ever wanted more and more money.
We think that once you earn £40,000 or more in the UK, then it’s not worth working longer hours to earn any more. At that point you need to think about earning more time to do things that interest you – new hobbies, spending time with family, rest and relaxation, or whatever you like.
Ideally what you want to do if possible is to break the link between your time and how much money you earn.
Lie #2 – I’ll Start Saving Later
Most people know they need to either start saving or save more but they convince themselves that everything is ok – they will “start saving later”. Deep down they know that if they are unable to put a few quid aside now, how on earth will they do it in the future? Their financial life is likely to get harder – not easier.
Some people are living with their parents and literally have no bills and yet still haven’t saved a single penny.
People move on to have expensive kids of their own and buy bigger and bigger houses – you don’t see many 45-year-olds downsizing to 1 bed flats. Also, once you have become accustomed to a more expensive lifestyle it’s extremely difficult to go backwards, which you’ll likely need to do in order to start saving.
As we mentioned we loved our no-frills student lifestyle, but I could never go back to living like that. My expectation bar is now set way too high. Ignorance was bliss.
Just recently I’m annoyed that my new flat doesn’t have soft close toilet seats as that’s now what I’m used to. I know that sounds ridiculous when said out loud, but my standards have been raised. These won’t be that expensive to replace but it’s just one example of lifestyle creep that individually is so small that it’s barely noticeable. Now, multiply it across your entire life!
Most people are no different, so if you’re young start saving now before you raise your expectations, and if you’re a little older you may just have to bite the bullet, slash some expenses, and find a way to save now.
And if you’re still BSing yourself, saying that you don’t need to worry about retiring because you’re only in your twenties, you need to understand that money invested now is worth way more to your retirement than money invested later.
If a 20-year-old invests £100 a month for just 10 years and then stops contributing but allows the pot to continue growing until age 70, earning 8%, their final pot is worth £444k.
But if somebody else elected not to save a penny in the first 10 years and then invested £100 a month for the next 40 years, they would end up with just £349k, almost 100k less despite 3 decades of extra saving.
Lie #3 – It’s The Government’s Fault
We’re guilty of blaming the government for many of our and society’s money problems. While we truly believe that their financial mismanagement is indeed creating problems for everyone, they are not the underlying reason for everyone’s money difficulties. The government often make things harder but not impossible!
Constant tax rises and red tape really does grind our gears because it makes life so much more difficult for everyone but let’s be honest, we are still able to keep enough of our money to make it worthwhile earning more. And we all have the capability to make a boat load of cash if we work harder, smarter, and do what other people won’t. Our hypothesis is that most people don’t have the drive to earn more. Simple as!
We live in an age that allows us to access the world’s information at our fingertips. We can learn about any subject imaginable for either free or a very small fee. We can also connect with recruiters, business contacts, suppliers, and everyone else, anywhere in the world, with ease, at any time, in any language. No longer are we confined to traditional working hours either, so you are able to hustle when it’s convenient to you.
One of my favourite success stories is that of Phil Knight, founder of Nike. He started the shoe company by flying over to Japan and somehow negotiating with foreign speaking suppliers. He then had a torrid time dealing with a banking system that didn’t lend back then. Looking back this seems like it was impossible.
Today we have it so much easier, and the government don’t prevent us from being successful.
Lie #4 – Everyone Does This, So It’s Okay
This is a really common lie to tell yourself. There seems to be a herd mentality for getting in deep money problems. It’s the equivalent of being happy with an average BMI, which in the UK is 27 – or in other words still overweight!
And just because everyone else has chosen to jump into a money cesspit doesn’t mean you should follow them. So, what are we talking about exactly? Massive car payments, luxury holidays, expensive unnecessary tech, too many nights out, excessive monthly subscriptions, needless patio furniture, and branded clothes and accessories you don’t need. These are just some of the many ways people blow all their money away.
It really is a case of just copying everyone else despite knowing that you can’t afford it. Over time these unnecessary expenditures become almost essential. For example, how many monthly subscriptions do you have?
These are services that just a few years ago didn’t even exist but as everyone buys them you must have them too. A few years ago, we bet most people didn’t even spend £120 a year on music but today we all have subscriptions to Spotify or Amazon Music spending exactly this. By the way we’re not preaching to you; we’re probably as bad as the next guy and there’s no way I’m cancelling my music subscription.
If you do want to start resolving the problem, we suggest first tackling the easiest and most profitable win. Don’t fall into the monthly car payment trap. The car industry has somehow duped people into the perpetual new car cycle every 2 or 3 years. Just because everyone else does this and chooses to be broke doesn’t mean you have to. They can choose image while you choose wealth!
Lie # 5 – I Get Paid Well, So This Crappy Job Is Worth It
This is a really sad one because we’ve seen so many older workers in this trap. Literally decades away from retirement, working a job that zaps their life from them, but they convince themselves they must suffer the same repetition and corporate crap day-in, day-out.
Why do they tolerate this torture? Because it pays well, they are addicted to the pay, and they believe they cannot earn good money elsewhere and/or are afraid of the change.
We always urge people to regularly switch jobs to keep their skillset fresh, their earning power high, and so they can move up the career ladder more swiftly. But inevitably some people choose to stick to the same job for far too long and often become institutionalised.
Some of these workers find themselves on very high salaries that do not represent the market for their experience level, and so cannot leave without a huge salary cut, which most are reluctant to do. This is a dangerous mental predicament to be in!
We don’t have a miracle answer to resolving this problem for you once you’re in the mess. If deep down the job isn’t worth the pain, it’s time to make sweeping changes to your financial life and start pursuing a career or business that gives each day new meaning.
Lie #6 – A Little Bit Of Consumer Debt Is OK
Attitudes to debt have changed drastically over the years and so have the means of taking on debt. Our parent’s generation would have saved up before making a purchase but today it’s the norm to just buy on credit – credit cards, overdrafts, store cards, payment plans, loans, and buy-now-pay-later services.
In fact, although we’ve said the lie is ‘a little bit of consumer debt is ok’ it could be worse than this. Some people are actually bragging about their consumer debt as if it’s something to be proud about and is a badge of honour.
Let’s be clear – consumer debt is never okay because it makes you poorer and usually is offered by stores so you can buy things you can’t afford. Previously we highlighted the lie of ‘Everyone Does This, So It’s Okay’ and this is another perfect example of this.
Just because your friends are using debt to fund a lifestyle they can’t afford doesn’t mean you should too. This debt fuelled consumption is fed by a series of lies including: ‘I deserve the things I want’, and ‘I have to buy it; it’s on discount.’
If you have to borrow to buy something, then we’re sad to say you don’t deserve it as you haven’t yet earned it. And discounts are used by retailers to encourage sales. It’s not the first discount and it won’t be the last. Don’t let a perceived saving influence your buying decision, especially when debt is involved.
Lie #7 – I Can Spend My Savings
While being in debt is super common these days, many of those that are able to stay in the black are never able to grow their wealth any further because as long as money sits in their account it is there to be spent.
Every penny that comes into your life should have a purpose. When you save you should be assigning a reason for that saving. Retirement savings – or as we call it, a freedom fund – should be one pot that you won’t withdraw from until you’re retired, but it’s good practice to have savings pots for big purchases like holidays, cars, and other irregular expenses.
If you don’t do this, you’re lying to yourself as it’s highly likely that you cannot afford to spend your savings. Can you really afford that holiday using your savings if the money should really be earmarked for something else?
Kid yourself for long enough and you’ll fall into debt when an unexpected large expense arises. Moreover, managing your finances like this often means the retirement pot gets neglected the most because it seems like the need for it is the most distant.
Hopefully you’ve found this post interesting and helpful, and don’t forget to grab your free money with InvestEngine and start investing for your future.
What money lies have you told yourself or what have you seen other people do? Join the conversation in the comments below.
Written by Andy
Featured image credit: pathdoc/Shutterstock.com