We are all guilty of telling ourselves little white lies on a daily basis. Anything from "One more slice of cake won't make a difference," to "There's time to watch one more episode before bed." However, some of the lies we tell ourselves about money, especially if we're short on it, can be very harmful.
They are the lies that keep us in debt, and stop us from living the life we really want to live. Here are 10 of the biggest lies that struggling people tell themselves week after week — and that successful people never tell themselves.
1. "I Really Need It!"
We need to separate the want from the need. Do any of us really need the latest smartphone? Do we need to dine out every Friday night? Do we need a $40,000 wedding? (No one does.) Do we need new clothes? And if we do need new clothes, do they need to be brand new, or can they come from a thrift store?
We will convince ourselves, through a series of pep talks and excuses, that we really need to have something. But often, we just want it. People who are good with money will know the difference between what they need, and what they want, and if they cannot afford it, they won't get it.
2. "Credit is FREE Money!"
No, it's not. Credit is actually more expensive money, if you really want to analyze it. Almost all credit comes with an annual APR, so when you borrow money, be it on a credit card, a loan, or any other form of credit, you are entering into a contract to pay back the money you borrow plus interest. Some people think that by getting out a bunch of credit cards, they are helping themselves to a ton of free money. But those bills will have to be paid at some point, and the interest will be accumulating until it's paid off. This also leads into another huge lie…
3. "I Can Only Afford to Pay the Minimum."
Actually, none of us can really afford to pay only the minimum on credit cards and loans. The interest quickly racks up on any debt you incur, and by paying the minimum you are spending it almost entirely on paying off that monthly interest charge. That means very little, if any, of the money we pay back on a loan gets applied to the principal. For instance, if we have $5000 on a credit card with an 11.9% interest rate, and pay $100 a month on that card, it will take 70 months to pay it off. We will have paid almost $2000 in interest. By doubling that payment to $200 a month, it takes just 29 months, and we pay only $775 in interest.
4. "I'm Never Going to Have Any Money Anyway."
Says who? There are many examples of people who came from nothing and made fortunes; Oprah Winfrey is perhaps the most famous example of that. If we continue to tell ourselves that we won't be successful, or we are destined to be financially challenged, then it becomes a self-fulfilling prophecy. By thinking positive, we can at least start to get out of that rut and make opportunities for ourselves.
5. "I Have to Buy It; It's on Sale."
There are several ways to look at sales. They can be opportunities to save money, or even make money. By all means, we should shop the sales when we are looking for a specific item. However, buying something when it's on sale just because it is on sale is a terrible way to waste money.
If we buy something, for instance a blender, for $60 because it is reduced by $20, we think we've saved money. But if we didn't really need a new blender (remember the need vs. want argument) we haven't saved $20 at all…we've spent $60. It can get even worse when we buy lots of sale items simply because we like the feeling we get of saving money. We cannot fall into that trap. Unless we really need something, or can see a way to buy and sell at a profit, we should all avoid those sales like the plague.
6. "Everyone Has a Car Payment."
Ask around at work. Ask your friends, and family. You will find out that some people have small car payments, other have huge car payments, and some have no payments at all. The ones who don't have a payment are smart. They either paid off their car in one lump sum, or made monthly payments until it was paid in full, and then kept the car. We all get tempted by the latest models, and as few of us can afford to drop $25,000 to $30,000 on a shiny new car, we opt for a monthly bill. But that monthly bill comes at a cost greater than money. It's taking away from money we could be putting into a savings account, or spending on experiences like vacations or education.
7. "I've Earned It."
"I worked really hard this week, I've earned this $5 cup of coffee." "I worked an extra shift, I definitely earned this new outfit." We are all guilty of this kind of thinking. We work hard, we feel like we earned the rewards that come from those endeavors. However, what are those little treats really costing us?
A $5 cup of coffee every day is around $150 a month. That's $1800 every year. What could that money buy us, especially when we can make a decent cup of coffee at home for just pennies? What we have really earned is the chance to have a better life, and we're cheating ourselves out of it by spending money on frivolous things just because they give us a few extra minutes of pleasure.
8. "It's Only Money."
That's a little like saying "It's only oxygen." We need money to live (unless we have found a way to survive without it, which is rare to say the least). That kind of blasé attitude to money is what keeps poor people poor; rich people never think that way about money. It shows a complete lack of respect for the currency that we need to live on, and if we spend like there's no tomorrow, guess what…tomorrow is going to suck. Money may not bring us happiness, but a lack of it can certainly make us very unhappy, and even unhealthy.
9. "I'm Not Gonna Live Forever."
Add "You only live once (YOLO)" to that, and "Spend it while you're young enough to enjoy it." The problem with that kind of thinking is that the money runs out, the debt piles up, and we are committing ourselves to a future of worry, stress, and life without any kind of comfort. Humans are living longer lives. We may not live forever (yet) but we need to live like there's a long future ahead of us, and save accordingly.
10. "Something Will Turn Up."
Relying on luck to change our fortunes is foolhardy. Yes, something may very well turn up out of the blue. We may buy a lottery ticket and win millions. The chances of it happening are microscopic, but it could happen. We may also get a massive promotion at work, out of the blue. However, most of the time we create our own luck. We need to make sure that we're working towards a way to grasp opportunities when they present themselves, or the things that "turn up" could include unexpected medical bills, unemployment, or bankruptcy.