Financial Fibbing: How Lying to Yourself Can Help You

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“It’s only three bites. I’m not really eating dessert.”

Oh, the lies we tell ourselves … about dessert, the number of times per week we’ll make it to the gym and the choices (good and bad) we make with our money.

We don’t lie to ourselves all the time, of course, but–just like justifying why a little bit of cake is okay, and therefore not stuffing ourselves–some of the lies we tell ourselves can actually help us get closer to our goals.

So says Professor Dan Ariely, author of the new book “The (Honest) Truth About Dishonesty: How We Lie to Everyone—Especially Ourselves.” The way we fib to ourselves can make a big difference for our money, too.

Today, we’ll help you tell the difference between good lies and bad, and harness the power of the good ones to achieve all of your goals, financial and otherwise.

One Simple Question to Tell Good Lies From Bad

Ask yourself: Does this lie get me closer to my goals?

According to Ariely, we often lie to ourselves when we want to achieve something. Specifically, we justify our slip-ups en route to difficult goals so they seem less grave. That helps keep us on track, particularly because our fragile egos don’t like to face defeat.

Good lies help you focus on the positive without getting bogged down by the negative. (i.e. “This is the amount I ‘get’ in my paycheck and it’s all I can spend–so let’s enjoy it!” vs. “By saving that $500, now I have less I can spend!”)

Other good financial justifications that move you closer to your goals:

  • “I spent a little more this month than I meant to … but I’m going to ignore that and move on to my goals for next month!”
  • “I know it’s best to max out my IRA for retirement by contributing $416 a month … but I can’t swing that right now, so I’ll contribute $200 instead, and that’s great!”
  • “I don’t have as much cash on hand for gifts this year, but handmade items show I care even more!”
  • “I did a great job of staying on budget this month, so I deserve a cupcake to reward myself!”
  • “Sure, I’d love a bigger or fancier place to live, but I’m happy where I am now. A bigger place would be that much harder to clean!”

How to Spot a Bad Lie

When it comes to financial fibs, Ariely says: “Lying to ourselves in the financial domain mostly comes from not thinking about the real consequences of our actions. When you say to yourself ‘Oh I have enough money’ or ‘This really doesn’t matter,’ you’re not thinking about the long-term consequences.”

Instead, he says, bad financial lies are justifications that hurt us in the grand scheme: “It’s like turning a blind eye or ‘comfortable forgetting’ … It’s incredibly dangerous, and I think that the role of financial advisors is to prevent us from doing this.” (Need to find a financial advisor? We can help.)

In a nutshell, bad lies can further you from your goals–and, in the worst cases, hurt others and breed even more lies.

Here are some examples of bad lies about money:

  • “I spent more than I meant to this month … but it never makes a difference, anyway!” (keeps you from reaching your savings goals)
  • “I don’t have as much cash on hand for gifts this year, but I bet everyone will understand if I show up empty-handed.” (hurts others)
  • “I did a great job of staying on budget this month, so I deserve a weekend getaway to reward myself!” (furthers you from your goals)
  • Rounding up your salary numbers with your significant other … which then sets expectations for what you can afford and how much you can pitch in, later in your relationship. (breeds even more lies)

Before buying into your own fibs, try to step back and see the situation for what it really is. As Ariely explains, when we repeatedly tell ourselves the same lie, we’re much more inclined to believe it’s the truth. “We’re storytelling creatures by nature,” he says. “We tell ourselves story after story until we come up with an explanation that we like.”

Our bad lies trap us in a world of make-believe, so if your “stretchings” of the truth start to swell, take a step back. Evaluate why you’re lying, and whether your goals are achievable.

Using the Good and Avoiding the Bad

For the most part, your intuition will tell you if your lies are helpful or harmful. If your lies are the bad kind, you’ll probably find yourself justifying your mistakes to shield yourself from a truth you don’t want to acknowledge.

When your lies are good, they’ll empower you by giving you the confidence to disregard small stumbles and achieve your goal.

So go on: Eat the three bites of dessert. After all, there are ways that splurging can help you.

  • http://twitter.com/FrontRowTierra Tierra Filhiol

    To justify paying for parking, I tell myself that the opportunity cost of time justifies spending $8/day to park closer to my destination rather than taking the free bus + 15 min. bus ride. However, I have plenty of time before and after my appointments that I could actually use a stress free ride to decompress and catch up on the news or even breathing a little. 

    It also doesn’t factor in the stress of racing to my car each day, praying I don’t have a ticket (more money), or being out of $176/month and actually needing to save every penny I have for the bigger issues like daycare which is $520/month…but now I’m venting. Needless to say, I’ve been taking free transpo for the last two weeks and laying off sushi and nagiri 3 days/week and my pockets are noticeably heftier. Closer to my goals for sure.

  • ranavain

    I love that you talked to Dan Ariely! I discovered his blog a couple months ago and it’s FASCINATING. So it’s absolutely fabulous to see him team up with LearnVest to talk a little about money. You should consider doing some kind of longer piece with him too! Get him to write a guest post!

  • Pmyogi

    I’m absolutely disappointed with this article. You want me to lie to myself by justifying how it might get me closer to my goals? Facts help me achieve my goals- not twisting them. You either met your budget or you didn’t. If you didn’t, perhaps you shouldn’t lie to yourself –make a halfway contribution to your savings look okay– and spend your time figuring out how you could have been successful and what you need to do in the future to get there. I still can’t believe today’s advice is to lie to yourself. How much did you have to lie to justify this article? I’m seriously reconsidering any financial advice and ideas from Learnvest.

    • Cathswart

      I completely agree. This is terrible advice. And the examples of “good lies” aren’t really lies at all – they are examples that show objective management of a budget. Lying to yourself is definitely never a good idea and doing it gives you an unrealistic view of yourself and your situation. Developing that kind of habit is how people develop unrealistic views and end up justifying their spiral into credit card debt and other problems.

      • m @ random musings

        I agree with the others on this response thread. The term ‘lying’ appears to add a connotation of negativity to otherwise healthy coping mechanisms. If one really can’t swing the full IRA payments, something *is* better than nothing, although that person may want to revisit the word “can’t”. 

        I am always happy to receive a jar of homemade jam – it may be cheaper for the giver [than buying stuff] but as a recepient, I *know* the quality of fruit is better than what is locally available (rural midwest towns aren’t really the best access point for fresh berries unless you grow ‘em yourself)

    • Onyi

      At first I was inclined to agree but if you think about it the term ‘lie’ here is used pretty loosely.  While the terminology used here may not be the best, I think the underlying advice is still sound.  Technically any justification you use for any money decision can be considered bs depending on your point of view.  To me the point is using reasonable justifications for your money decisions is what gets you closer to your goals. As long as your justifications, goals and rewards are all in line with one another you’ll be fine.

  • JoStef

    The way “good lies” are truthfully described here.  Every example of a “good lie” is really a healthy change of perspective, NOT a lie.  The only way these examples are lies are if you know you have no intention of doing better next month;  or you promise yourself an affordable reward like a cupcake, but really mean that you’re buying that cupcake when you spend too much money going away for the weekend.  

    I find the twisting of the description of a lie disturbing.  Since most people will not actually read this book, the only message they will be getting is from the lie of a title.  So there’s your lie, and it’s a bad one.  

    • Jo Bernard

      I was just thinking the same thing! Sayng “I need a montly deposit of $416 to retire but I can’t right now so I’ll do $200 until I can do more” is not a lie. It would be a lie if the numbers say you need $416 and you decide to do $200 instead and never increase it, because “I’ll strike it rich somehow before retirement” 

  • http://www.facebook.com/jkminer Justin Miner

    THIS ARTICLE IS RUBBISH! It is never good to lie to yourself; especially when it comes to money!

    Here’s what the article said is a “good lie”:
    “I spent a little more this month than I meant to … but I’m going to ignore that and move on to my goals for next month!”
    This is flawed thinking. It’s probably the reason why most people are broke. If you want to make a change, there is no such thing as “next month.” You can’t change tomorrow if you can’t change today. Now is the best time! If you spent over your budget in the month, you need to look at what you did that lead you to that predicament. Maybe you went to the bar? Maybe you ate out, instead of take food from home? Whatever that was, remove it and replace it with a cheaper alternative, or if you can live without it all together.

    Here’s another “good lie” the article said that was flawed:
    “I did a great job of staying on budget this month, so I deserve a cupcake to reward myself!”It is never good to reward yourself! Why? Again, it’s that same mentality that will put you back into debt, or back to being broke! Well… honestly, it IS good to reward yourself, but this is why I say it’s bad: people that have bad financial habits have a totally different idea of what a reward is, versus what a financially responsible or wealthy person believes a reward is….The financially irresponsible person probably has probably ate ramen noodles, and brought from home to take to work all week. Why? Because she’s barely got any money left till next payday. Once payday comes around, she rewards herself by eating out every day because of the suffering she endured the previous week. Guess what? Now she’s back at square one. She’s making food from home because she doesn’t have enough money left to carry herself over to next payday again! That’s a financially irresponsible mentality for ya!But as far as a financially responsible person goes, he would have a good amount of money saved up in all his accounts, so if her decides to go out to the clubs with friends, and spend $200, he can do it, and will still have $500 left in his checking, and $100,000 in his savings.Finally! The last lie they said was “good” that I want to touch on: “Sure,
    I’d love a bigger or fancier place to live, but I’m happy where I am
    now. A bigger place would be that much harder to clean!”This is complete rubbish! You know you want a bigger and better place! You know that you want more from life! If you lie to yourself, sooner or later, the truth will come back with a vengeance, and you’ll explode because you no longer can lie to yourself. If you want to live in a bigger place, or make money, create a goal to!Create an income goal, and map out a financial plan. Maybe getting a better paying job might do the trick? Maybe investing in stocks, or in a side business might be good options for you? If want to move into a nicer home, don’t lie to yourself, go for it!

  • http://twitter.com/PChiappa Pat Chiappa

    For the first time in my lucky life, I’m starting to count calories and watch what I eat.  I’ve always been really disciplined about money, and I have just NOW made the connection of how similar the money/food issues are.
    (I lost 15 pounds in 6 months by just paying attention to what I was ‘spending’ my calories on.)
    Enjoyed the post.

  • Belief

    Sounds like a recipe for Settling in Life and not achieving your TRUE potential… stop Sacrificing and Start living your true power. If you don’t have what you truly want in life Without limitations, the real Lie is not Stopping and answering the question “WHY NOT?” Life isn’t meant to be lived on a Budget!!! Quit making excuses people… own your excuses and Do Whatever It Takes to Become your most Powerful Being Possible!!!!