NEW YORK (CNN/Money) – You brag about the stock you bought that doubled in value, but never mention the three on which you lost your shirt.
You drive a Mercedes but you don't have health insurance.
You occasionally plead poverty in social settings but fail to note the monthly income you get from your trust fund.
You say you bought something on sale when you paid full price.
You swear you'll save more for retirement later.
Welcome to Money Lies 101.
Whether you lie to yourself about money or you lie to others, you're eager to avoid something – envy, pity, criticism, the truth, feeling like a loser, you name it.
I'm not a liar by nature, but on rare occasions, when asked, I may have told my mother that I bought some expensive item of clothing for less than I really paid.
I figure of all the issues I've got to contend with and how I like to spend my time, I don't want to waste energy defending my sometimes-stupid shopping habits, considering the only money I spent is mine. Nor do I wish to be reminded – if only by her sigh of disappointment -- that I'm a gene short of adequate as a savvy consumer.
Of course, generally speaking, "It's better not to lie," said L.A.-based psychologist James Gottfurcht, president of Psychology of Money Consultants. And it's better to tell a partial truth than an outright lie, he said, so long as the partial truth is not a lie by omission.
Still, Gottfurcht conceded reluctantly that with some small lies, "the positive consequences may be better than the negative." A lot has to do with the matter you're lying about and how that matter affects the person to whom you're lying.
That is, you might feel slightly less slimy for distinguishing yourself from George Washington if the situation meets all of the following tests:
- The matter fundamentally is no one's business but your own;
- Telling the truth might cause unnecessary tension;
- And lying would not cause harm.
Don't make a habit of it
But many lies can be hurtful and sabotage your relationships, if not your life.
Say you don't tell your spouse about the extent of your gambling or investment losses. That can be hurtful on two levels: financially, since it's hard to build a future together without clear communication; and emotionally, since the truth likely will out and the trust between you will be damaged.
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Ditto, if you hide the credit card bill.
Or take what Gottfurcht tags as one of the biggest and most harmful money lies many of us tell ourselves: "I can't save for retirement now. I'll save for it later."
That's the approach taken by one of his clients. Self-employed in his mid-40s, the client has just begun to break even in his business after a period of negative cash flow, Gottfurcht said.
He makes about $100,000 a year, has $300,000 in home equity in pricey Brentwood, Calif., but only has about $25,000 earmarked for retirement.
The client uses several filters to justify his lie and put off saving, Gottfurcht said.
Two are rationalization and idealization, a refusal to consider anything but positive outcomes.
As in, "My business has just begun to break even. I don't have to start saving until I'm older. Besides, I'll invest in stocks and will generate 10 percent annual returns, thereby doubling my money in seven years. And I'll have Social Security, my home equity and possibly an inheritance to cushion me."
Should the client end up with far less than he anticipates, instead of taking responsibility for his decisions, he may project blame on the stock market for not performing well or on Social Security for not giving him what he banked on, Gottfurcht said. And that blame can turn into bitterness, which can have a profound effect on his outlook in retirement.
Financial counselor Ruth Hayden of St. Paul, Minn. also has heard clients claim they can't save for retirement, often when they are living beyond their means.
"Most people spend a lot of time justifying why it's got to be this way," Hayden said. But, she added, in most cases, "they can put away something."
If you're one of these people, I'll make you a deal. You start to put away something and I'll try to be more honest with my mother.
Jeanne Sahadi writes about personal finance for CNN/Money. She also appears regularly on CNNfn's "Your Money," which airs weeknights at 5 p.m. ET. You can e-mail her at everydaymoney@cnnmoney.com.
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