Updated on 07.31.08

Overcoming a Habit of Lying to Yourself About Money

Trent Hamm

Nine minutes by markpasc on Flickr!After my recent article about how to deal with a partner that hides and lies about money problems, several readers made the astute point that many of these situations are often the result of people lying to themselves about money, whether directly (by actually telling yourself false conclusions about the facts you already know) or indirectly (avoiding the facts).

I used to often lie to myself about money. I’d buy things on the credit card without checking balances or considering the consequences, believing it wasn’t that big of a deal or that I could easily afford it later. Sometimes, I’d figure out my complete financial state, know on some level that it was atrocious, but tell myself that it wasn’t bad and that I had things under control.

Here are some of the tactics I used to overcome that tendency to deceive myself about my financial state. Without these tactics, it would have been much more difficult to turn my financial life around.

First, realize what you’re doing
If you don’t recognize a problem, you’re going to go on deceiving yourself and digging yourself into a deeper and deeper financial hole. Here are some of the big warning signs to look for:
+ Do you often feel like you have to “justify” purchases because your brain tells you you can’t afford them?
+ Do you avoid looking at bills and financial statements?
+ Do you tell yourself that your “future self” will take care of this bill?
+ Do you try to block thoughts of your debts and budgeting out of your mind when you want something?
+ Are you often “surprised” by your credit card bills, but you don’t even think about the bills when you bust out the plastic?
+ Do you tend to believe you’re more well off than you are when you’re out in public buying stuff than when you’re looking at your bills?

If any number of those are true, you’re either directly or indirectly misleading yourself when it comes to your financial state, and that directly leads to financial trouble.

The first step is to simply realize you’re doing it – and to realize that it’s not helping you with financial success.

Figure out the truth
The next step is to figure out your exact financial state so that you can see the raw numbers. This means facing those bills that you dread and coming to terms with the fact that your income isn’t really matching your spending.

One good way to do this is to tabulate all of your spending for a given month. Go through all of your receipts and statements and determine where exactly every dime went for the past month. Group them together in obvious ways – all spending at each store, or all spending at each type of store, for starters. A person who just gets a coffee each morning might be able to tell themselves it’s not a problem, but looking at a pile of 23 charges to the local coffee shop for $8 to $10 a pop might make things look different – that’s a car payment. Four clothing binges? That’s a problem.

Another method for seeing everything at once is to calculate your net worth. That means tallying up the value of all of your assets, then subtracting from that the total of all of your debts. What’s left might actually be negative, which means that for all of the time you’ve spent working in your life, you’ve actually accumulated less than nothing.

These numbers are the truth of the matter. The truth is not the story you’ve created in your head. Look at these numbers carefully, and figure them up on a very regular basis so you can see the exact effect of the bad choices you make on your financial state.

Create some reminders
Once you’ve figured up these numbers, you may want to just push them out of your head and forget about them. Don’t. Put a copy of your net worth balance sheet up on the fridge and on the dashboard of your car. Wrap a note around your credit cards saying “I spent $800 on stupid things last month – that’s more than a week’s worth of pay.”

The key is making the truth so prevalent that you can’t avoid it. If the truth is around every corner, the lies have nowhere to hide.

For me, the most powerful reminder was a picture of my children wrapped around my credit card. My son keeps me honest with myself – I know that every bad financial move I make means fewer opportunities for him as he grows up.

Try a “cash only” spending plan for a while
Another tactic to enforce honesty is to switch to a “cash only” policy for spending. Whenever you intend to make a purchase, do it with only cash. This means using the ATM machine and keeping cash in your wallet for any purchases you might make. To enforce this, start keeping your credit card at home or keep only a low-limit one in your wallet for emergencies.

This keeps you honest in the sense that once there’s no money left, there’s no money left. You can’t deceive yourself because of the availability of credit – the amount of money you have is really all you have.

Be fully honest with at least one other person
One other tactic that’s fairly surprising but really helped me to face the truth of my situation was full honesty with another person.

When we faced our financial crisis in April 2006, I spent some time assembling all of this information about our financial state. I found out how much we owed on all of our debts, figured up our net worth, and put together a vague plan for what we needed to do.

Then I took the big step. I shared all of this with her. We sat down and went through everything. I showed her a complete picture of our financial state. We talked about our goals and what we wanted from our lives. We started to look for some solutions, too.

The most powerful part, though, was revealing all of the bad moves to my wife. She had a sense that we were in a difficult financial shape, but she really had no grasp as to how deep our financial troubles went. By showing her the whole picture, it went from just being something I could keep to myself and hide from others to being something that someone else knew about. She now knew the whole truth, just as I did, and thus any statement or action I made with regard to our money not only had to pass through my own sense of truth, but it had to pass through hers as well.

In short, she became a much higher standard of honesty about money. It’s a lot harder to deceive yourself if you know that deception requires you to also deceive the people you love the most. By opening the whole of our finances to her, any lie I told about our money, even to myself, became much the same as lying to her, something I can’t stomach.

Find someone you trust deeply and value deeply and open up your situation to them. You’ll find that you’ve committed yourself to a deeper level of honesty and it will push you to a higher standard than before.

Set microgoals
Pledge that you’ll get through just the next day without spending dishonestly. Take it one step at a time, and renew your honesty at the end of each day by taking a sincere look at what you spent that day. Then repeat it the next day. Start a journal about your progress, writing down the successes and the challenges of each day.

Eventually, you’ll come to truly trust yourself again. You’ll find that you’re naturally moving to a state of internal honesty, and that makes it much easier to be truly honest with others. That honesty about money will also lead you straight towards financial success, as you’ll be connecting the consequences of your spending with the rewards of getting things under control and building a surplus.

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  1. Going cash only and developing a budget about where the money is supposed to be going vs where it actually went was a big help.

    In the Dave Ramsey teachings, he talks about the nerd (the money watcher) vs the free spirit (the money spender) and that’s the way it is with my wife and myself. Even when I talk about getting something for myself and consulting with her as to whether it’s a smart move or not, she’ll say “get it.” I try to watch the budget and the spending while my wife just “does”.

    I used to justify credit purchases and big car loans to myself but thinking, “everyone does it, it’s the American way!” but I just couldn’t take it anymore.

    It is important to be able to look yourself in the mirror.

  2. Dave says:

    Trent –

    Very good post, as I’ve kind of been putting off a lot of my financial evaluation for the past month or so, since I’ve been out of work and have been watching my savings dwindle – thankfully I have found some income and will be able to get myself back up on my feet in a few weeks. It really is hard to take an honest look at your financial state when you KNOW it’s not what you want it to be. I’ve got a pretty good self control, but I know that a lot of people out there don’t – it took my parents over $100,000 in credit card debt ALONE to realize how bad of financial shape they were in (but they got out of it in a few years time) so they’ve taught me some good financial sense ;)

    Something I feel the need to comment on, though, is the cash only system. I think this system only really works if you’ve got more self control for spending cash than for spending on a card. I’m completely the opposite person – if I have cash, I spend it almost immediately. I think that cash is a lot easier to use unwisely, personally, because I can’t track it nearly as effectively as I can a credit card where I get statements each month and can say ‘This is what I spend money on’ without looking at old receipts. The cash system can be deadly for people like me, but if you’ve got the self control I think it’d be a good system to use to help dig yourself out of debt.

  3. writer dad says:

    NOTHING is better than following the cash only rule. My wife and I both follow it, and save ourselves from a lot of trouble.

  4. Excellent post. Too many people are trapped in the cycle of lying to themselves about money. The cash only system is a big saver for most people. The emotional connection to cash is much higher than to plastic.

    Much of this post could be transfer to other areas as well. People often lie to themselves about their physical fitness, their health, the stability of their job etc. etc. If this is true for someone they also need to confront the truth, find someone to tell, and start setting microgoals.

    Thanks again.

  5. Setting “micro” goals are great ways to keep motivated during a financial turnaround! Being able to meet a financial goal on a daily basis, whether it be something as simple as reducing the amount of driving that you do on a particular day can be a great motivational tool!

    The first step to any addiction problem is to admit that there is a problem. Admiting that you have been lying to yourself (or just being ignorant) is the first step to recovering from an addiction to debt!@

  6. expat says:

    It a constant battle, being honest, particularly when it comes to money. Because it’s often very easy to deceive yourself and your loved ones, the idea of constant reminders is very important. Yet another great post, Trent!

  7. Jessica says:

    I’m guilty of this and I know it! A common excuse I have is that I’ll be coming into some extra money soon so I can charge it and pay it off later (like our tax return, bonus from our jobs, a raise, etc.)

    But historically, I just end up spending that money twice – the charges I make before I get the money, then something else when I actually get the money, without paying down the debt in the first place.

    Now that I’m thinking this all out… it’s becoming more apparent how simple and irresponsible this is… Off to think…

  8. Mike says:

    Dave mentioned “I’m completely the opposite person – if I have cash, I spend it almost immediately. I think that cash is a lot easier to use unwisely, personally, because I can’t track it nearly as effectively as I can a credit card where I get statements each month and can say ‘This is what I spend money on’ without looking at old receipts.”

    Your are not alone, I was talked to a retired teacher friend of mine and he put it rather simply, “If I have it, I spend it!”. I really didn’t know how to react to that because as a kid that was pretty much was the norm for money and me. My question is does a time horizon help you out? Knowing that you will have 100 dollars miscellaneous cash for 2 weeks?(example) Seems like the only alternative is credit.

  9. sjw says:

    I lie to myself all the time about money. e.g.
    – I have a set amount of cash for the week (as if the bank wouldn’t let me take out anything until Friday).
    – I didn’t get a raise (the new money is automatically funneled to retirement and mortgage).
    – I need to talk with the SO before deciding on purchasing a very nice new phone.

  10. clint says:

    “And the Truth will set you free”

    I like the cash only method…mostly, the only thing better than the cash method is a check only method. My wife and I used the cash method for about 10 years and did fine it got us out of debt and we knew how much money we had. The only problem we had was that it was a lot harder to track ware things went. When you use a old style check book with carbon pages and balance it each time you spend money you know just how much you have and it is easy to track.

    I have even seen a fold out check registrar that will let you “pull” money from one budget or another wile still keeping it all in the same account. That way if you run out of food money you have to take it from some ware else like fun money or rent money. You don’t need to reach for the Credit card, and you know you are giving up your fun money or you are spending your rent money to buy what ever you are looking at. It puts a whole new twist on the thought proses. “do you really NEED that movie ticket or do you need to pay rent more” Think about it.

    Thanks for all you do to keep me thinking

    Clint Lawton


  11. Dave, my husband is the same way with cash. Going cash only would be a horrible idea for him! If he has money in his wallet, he keeps thinking about ways to spend it, but if he just has his credit cards, he’s fine.

  12. Sandy Naidu says:

    Getting all your expenses for the past months works like magic…Just looking at where you stand can make you serious (well it worked for me).

  13. akb says:

    i stink at the cash thing too, if i have it i spend it. the only time this helps me is for my social spending. i take out what i want to spend on social activities for the month, and when i run out, i run out. which makes the rest of the month kind of crappy. which makes me spend my social money much more wisely. I couldnt do this with all my money, or i’d die the first month i didnt have food after the first week.. (ok maybe not die, but completely disregard my rules.. )

  14. April says:

    “Are you often ‘surprised’ by your credit card bills, but you don’t even think about the bills when you bust out the plastic?”

    That was very much my M.O. Reality set in when my husband and I got married, and I started adding up everything on our various cards. We seriously buckled down and paid off thousands of dollars of debt.

    We still use one credit card, though. We pay it off every month, and so far we have enough miles for two tickets to Europe. My husband’s old card had points that got us $200 worth of gift cards from Williams-Sonoma. I think if you know you can’t handle a credit card, though, cash-only is a better option. I monitor our credit card almost daily, and I make sure we’re under our monthly self-imposed limit so that we’re reaching our goals for savings.

  15. steve says:

    This is a fantastic post.

    It’s true, the numbers never lie–sometimes we choose to ignore them.

    That’s why i am mostly skeptical of people who see they would get “no value” from tracking their income and expenses. In that vast gulf of ignorance about one’s own financial affairs lies the cover for all kinds of self-delusion.

    Deciding to stop lying to yourself if the number one most important financial decision.

    Great post, Trent!

  16. ‘Another tactic to enforce honesty is to switch to a “cash only” policy for spending. Whenever you intend to make a purchase, do it with only cash. This means using the ATM machine and keeping cash in your wallet for any purchases you might make.’

    But if you’re getting your cash from the ATM, it’s just as easy to pull it from your available credit line as from your checking account. :-) At least with a debit card I know exactly where the money is coming from. Unless you are paid in cash, or at least directly cash your paychecks, it’s tough for me to understand why people find letting go of cash so much more ‘heavy’ than using a debit card.

  17. My fiance and I dated 3 years before I told her about my credit card debt. When I did, she raised one of her little blond eyebrows and gave me a stern look telling me I had better pay it off before we were to be married. So I did.

    But you are SO right, HOLY CRAP is it hard to come out and admit how bad it has gotten. But once you do, it is a huge weight off of your chest and really gives you motivation to hit the ground running in overcoming you debt battles. If you never admit a problem or you are never truthful about it, you won’t ever truly address it.

  18. MoneyBlogga says:

    The first step must be that of honesty with oneself. No change will occur until THAT occurs. Many of us have to hit rock bottom to finally reach that point of wanting to be honest with ourselves regarding our finances or any other self destructive behavior. Once I hit that rock bottom place, I realized that I HAD to be honest or else I would die penniless and, probably, ostracized from the family. It was that bad. I think, too, that confronting my dad, my childhood abuser, took me to rock bottom and, from there, back up. I am on the way back up. It’s never too late to turn things around and sometimes a person has to get to the root of the evil to begin. A cleansing of the soul, if you will.

    The only thing I couldn’t do was to share my financial disaster with another person. My partner never had a clue because I was afraid of the wrath. My friends always think I’m so “together” and I was too proud to admit otherwise. I like to think that progress is being made slowly, surely, and positively.

  19. neilo says:

    Just found this blog; interesting reading.

    A year ago, we were in a financial mess. Sure; we made the credit card repayments etc., but the truth behind the numbers was horrible – and neither of us really wanted to face up to it. My wife half mentioned things from time to time, and I remember looking at credit card bills and thinking that this was going to get ugly. I had no idea what to do about it, though.

    One day, I came home from work, and my wife had laid out a spreadsheet of our debt and a budget. It had taken her the best part of the day to create, and it showed that right now, we were living beyond our means. Her part-time job would keep us afloat until the end of the year, but after that, it was a reasonably swift slide into financial oblivion.

    She fixed me with a look that only a wife can, and said “fix it”. Nothing more was said.

    What I should have done is sat down with her a day or so later and worked out a solution, but what I did do was typical Aussie male: I said nothing. Behind the scenes, I was working at fixing things. Timing was important; I knew a pay rise was coming down the tubes, so I researched personal loans to consolidate all the debt. A lot of her numbers were guesses, so we started keeping track of petrol purchases to get an idea of how much we spent on fuel.

    Her budget was done in Excel. It was great to look at, but tracking transactions etc. is beyond a spreadsheet if you want to do decent analysis of spendings. So, I researched and decided on Microsoft Money. Best A$50 I ever spent. Her budget translated into Money quite well. Being able to keep track of transactions and see where our money was really going was amazing.

    Finally, the pay rise came through, and I applied for debt consolidation loans; one from a bank and another with a finance company. The remainder of the debt was transferred to a zero interest credit card. This was three months after my wife had originally sat me down, and I hadn’t said much about money or debt since then. She was surprised and shocked (to a degree), because she figured that since I wasn’t talking about it I must have ignored her or forgotten about it.

    Today, we’re a few months away from having a zero credit card balance. We can make this happen by the end of the year! I can’t believe it, to be honest. Sure, there are the loans to go… and we’re deciding now on what we’ll do once we’re free of credit cards: how much extra to pay off the loans, and how much to start investing with. Also, we’re saving! Sure, putting money away for bills is saving, but we’re putting money away for “rainy day” savings, too. I know that people argue that paying off debt is more important, but if the car’s automatic transmission goes kers-plat and we don’t have savings to cover it, we’ll have to put the repairs on a credit card. Not a particularly smart option.

    One thing that has happened is our communications have improved heaps. Being honest with each other financially has spilled over into every other area of our lives, and the payoffs are great. The dicipline of sticking to a budget is helping in other areas, too.

    In short, almost hitting the financial rocks has been the best thing to happen to us.

  20. Kira =] says:

    Wow! i didn’t even realize I was lying to myself.

    I found your site googling for homemade laundry detergent. I love what I’ve read so far (and it’s given me a lot to evaluate about ourselves). I added you on facebook. And I’m going to share your site with my loved ones through my blog. Thanks!!!

  21. It is SO EASY to go underground with issues like money and sex. I really appreciate you sharing your personal experiences around money deception. I write about “being invisible” and “overcoming invisibility” on my Invisible Lives blog (www.invisiblelives.com), and your post captures one of the biggies when it comes to being invisible in life…and real strategies for bringing the truth to the surface. Thank you! Paul Plamondon

  22. For those who are struggling to hold on to cash:

    Try having a cash budget for only a week. Then be disciplined that when you run out, you don’t spend anything else – even if it hurts. No groceries, no eating out, no coffee.. nothing. The pain will help you discipline yourself.

    If that doesn’t work, at the least switch to a debit card.

  23. steve says:

    I have to second Success Professor’s post above–having a cash budget for a week and not spending anything else even if it hurts is how you develop discipline.

    Some people seem to think that the “cash only” system means “spend cash only, then get more cash when you run out!”

    No, there’s a system to it–which involves a form of budgeting where you decide ahead of time how much you can spend in, say, a week.

    As to “cash being harder to track than my debit card”, again, it’s a matter of habit and technique. One think I do with cash is I have a rule that if I spend cash, I have to make out a “receipt” on a piece of paper, which I file in my wallet. If I don’t have paper and pencil in hadn, I make it my first job to do at the next place I can get paper and pencil. It usually says something like “7/27/08 $2.10 cash parking”
    This receipt goes in a jar by my computer where I Put all of my receipts to be tracked until I sit down to enter them into Excel.

    I think most people could benefit from running at least a month when they use a cash-only budgeting system. It’s how my grandparents and great-grandparents managed their personal (not business) money, and it’s really the basic fundamental skill that provides the basis for managing, say, a checkbook, a debit card, or a credit card.

    I do have to amend Success Professor’s comment that “If that doesn’t work, at the least switch to a debit card,” because I think if you can’t learn to manage a cash budget and discipline yourself to “go without”, even as an experiment for a month to learn what it will teach you about yourself, you haven’t developed the will or mindset to control your money. And whether you use cash, debit, or credit at that point is irrelevent–you will still likely be out of control of your spending.

    (Interesting note: when some of my elder relatives passed away about 5 years ago, we found notebooks in their house that listed every bit of income and EVERY expense that they made, with a note for what each was–they had notebooks going back 50 years!! For them, this was “how it was done”, no questions asked. Unfortunately for me that bit of wisdom didn’t get passed on to me and I had to learn it the hard, expensive way in my mid-30s!)

  24. Kimberlin says:

    I admit, I am one of those that lied to their spouse about the state of the finances. My husband completely trusted me with our finances and what I told him.

    February 2008, I began following a program to reduce our debt. I paid off a little over $7,000 before one June evening, after being questioned about how much money we had in our various accounts, he started pressuring me, and I caved. I had to face him and explain how we had $45,000 in credit card debt, and unsecured loans, not including the house and car payment.

    It was very difficult to share the truth with him, however the best thing I could have done. I will spare you the horrid details, but thankfully, our marriage survived, and is now thriving.

    Finances are no longer the weight on my shoulders alone. WE carry the burden, and are working on on paying the debt together. WE sit down every other night and go over our finances, make sure our register balances and that WE are on the same page. WE have a budget, WE have categories for which we put money aside each pay period, WE have spending money, are saving money, paying debt, and have money in the bank. Together, WE are doing it. I cannot describe how much better I feel that I no longer carry the entire burden.

    I’m no longer deceiving myself, or my husband, nor robbing Peter to pay Paul. I’m thankful my husband is forgiving and understanding. It wasn’t easy for him to forgive me and I have broken trust that will take some time to rebuild.

    I worked hard to hide everything from him. It wasn’t easy, and I was tortured daily by hiding the truth from him. He did ask me questions. My personal favorite response, “Yes, the bills are paid.” I always responded “that everything was fine”, “or don’t worry about it, I’ve got it taken care of.”

    I’m thrilled that the truth is out, and there are no more stories in my head.

  25. steve says:

    “It was great to look at, but tracking transactions etc. is beyond a spreadsheet if you want to do decent analysis of spendings.”

    Well, it is if you don’t know much about array formulas. For someone who is fluent in Excel, a few simple array formulas will slice and dice that any way you want.

  26. Chris Roland says:

    This is an awesome post. It brings a different perspective to how I look at money.

    The comments are great too.

  27. princess_peas says:

    Who do you turn to in this situation if you are not married/dating and in a completely different financial system from any of your friends?

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