7 Money Lies We Tell Ourselves

Do you think you’re telling yourself the truth about money? We may think we know the facts about our finances. But our beliefs can often overshadow the facts.

Our wishes, hopes and fears can tip the scales away from the truth. This makes it easier for us to believe what we want to about money — and it can happen without us even realizing it.

The “money lies” we tell ourselves can change the way we think and act when it comes to finances. And since most of us rarely talk about money with our friends and family, the money lies we tell ourselves stick around. That can lock us into destructive beliefs and reinforce poor financial habits.

But no matter what money lies we tell ourselves, it’s never too late to set the record straight. Let’s look at some of the most common money lies we all buy into at some point — and the truth behind them.

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1. I’ll be happier when I have $_____.

Bundles of money stick out of a bucket.Bundles of money stick out of a bucket.

“With $___ in the bank (whatever amount you think is ideal), many of my problems would go away, and I’d be happier.”

Does this sound familiar?

Goals and target numbers for earnings, savings and budgets are great. But if you make the mistake of thinking some magic number will flip a happiness switch for you, think again.

When we tell ourselves this money lie, we put too much emotion into a single number. And we may be setting ourselves up for disappointment — both if we never get $__, and if we do get $__ and realize it doesn’t make us as happy as we thought it should.

The good news? Studies show that making progress toward our goals can be incredibly satisfying, regardless of whether we hit the target.

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2. I deserve it, regardless of whether I can afford it.

A woman holds many shopping bags and looks miffed.A woman holds many shopping bags and looks miffed.

“I work hard, and I don’t treat myself often.”

“I could kick the bucket tomorrow (YOLO).”

“I’m getting a great deal!”

These are just some of the rationalizations we use to convince ourselves that it’s OK to buy something.

Whatever legs this money lie stands on, it’s usually used to soothe the sting of expensive purchases — those that aren’t really essential — and perhaps items we know, deep down, we don’t really need.

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3. I have strong financial willpower.

A woman chooses between an apple and a huge hamburger.A woman chooses between an apple and a huge hamburger.

When faced with temptation, most of us lie to ourselves that we’re great at resisting it. But, when was the last time you chose not to buy something you really wanted? When was the last time you made an impulse buy?

The average American spends at least a couple of hundred dollars a month on impulse purchases.

And we’re more likely to buy on impulse and spend more when we’re stressed. That’s probably why impulse spending shot up about 18% in 2020.

Plus, those of us who are shopping with credit cards are probably spending more on the regular basis than we realize. The average credit card shopper spends about 10% more with their cards than they would with cash. And that’s not even counting the cost of interest if the balance isn’t paid in full.

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4. I’ll save more later.

A piggy bank with a sad face lies on its side.A piggy bank with a sad face lies on its side.

Most folks focus on buying what we need and want now, and we tell ourselves we’ll start saving for the future later. If we save anything at all, it’s likely to be whatever we have left over. In fact, fewer than 1 in 6 of us are saving more than 15% of our income, and 1 in 5 aren’t saving any money.

No matter the reason, when we tell ourselves this money lie and put off saving, we’re prioritizing the present over the future.

That can catch up with us on a “rainy day” or whenever we do start thinking seriously about retiring. By that time, there can be a lot of heavy lifting to play “catch up” with our savings — or it may even be too late.

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5. I have plenty of time to plan for my financial future (& I don’t need to think about it yet).

A drawing of a clock in the sand of a beach is washed away by waves.A drawing of a clock in the sand of a beach is washed away by waves.

The future can seem really far away when we’re looking 10, 20 or even more years out. When we feel like we have a lot of room between now and then, it’s easy to make excuses to not plan or save for it.

This money lie is an excuse for procrastination. It’s the rationale we use when we have a hard time managing our negative feelings or uncertainties about our financial futures. And it makes us turn a blind eye to the years of interest that we lose out on when we don’t plan.

Benjamin Franklin may have spoken best about the truth behind this money lie when he wisely said, “by failing to prepare, you are preparing to fail.”

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6. There is good and bad debt.

A piggy bank with slips of IOUs sticking out.A piggy bank with slips of IOUs sticking out.

We tend to assign moral value to debt, thinking of mortgages and student loans as “good” debt, and considering credit card debt as “bad.”

This money lie gets us to think the wrong way about debt. All debt comes with some cost, and it’s critical to understand how every loan affects our current and future selves.

Instead of focusing on whether debt is “good” or “bad,” concentrate on the total cost of the interest over time (it’s often higher than you think) and on deciding whether the loan is really helping you achieve your goals.

About half of us seem to already be on track with that thinking, saying that we expect to be out of debt within one to five years.

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7. Wanting more is bad.

Ladders lead up into the clouds.Ladders lead up into the clouds.

While I think we can all agree that obsessive greed is wrong, it’s not a bad thing to want more for you and your loved ones.

When we tell ourselves we shouldn’t want more than we have, we agree to settle for less. And we may be tricking ourselves into thinking it’s OK that we’re not doing something (or enough) to improve our financial situation.

This money lie holds us back and can make it hard to improve our financial behaviors.

When we frame wanting more as a positive motivator, it can be easier to take the chances or do the work needed to get to that next financial level we may want.

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How to Stop Losing Out to Costly Money Lies

Hands holding one-hundred dollar billsHands holding one-hundred dollar bills

How many of these money lies sound like something you’ve told yourself?

At some point, I think we’ve all tricked ourselves with at least one of them. Maybe we were rationalizing a decision, or we were trying to make ourselves feel better about what we wanted to do with our money. And we probably didn’t make the best financial choices as a result.

Here’s the truth: Honesty goes a long way with finances.

What we tell ourselves and what we believe about money influences our financial behaviors. If we’re not telling ourselves the truth, our money lies won’t just drain our wallets. They can affect our financial awareness and inflate our confidence. And they get in the way of maintaining or growing wealth.

When we recognize the money lies that we believe, we can reset our thinking, change our mindset and start taking action. And that sets us up to make better choices and make more progress toward our big financial goals.

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This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. The content is developed from sources believed to be providing accurate information; no warranty, expressed or implied, is made regarding accuracy, adequacy, completeness, legality, reliability or usefulness of any information. Consult your financial professional before making any investment decision. For illustrative use only.
Investment advisory services offered through Virtue Capital Management, LLC (VCM), a registered investment advisor. VCM and Reviresco Wealth Advisory are independent of each other. For a complete description of investment risks, fees and services, review the Virtue Capital Management firm brochure (ADV Part 2A) which is available from Reviresco Wealth Advisory or by contacting Virtue Capital Management.

Founder & CEO, Reviresco Wealth Advisory

Ian Maxwell is an independent fee-based fiduciary financial adviser and founder and CEO of Reviresco Wealth Advisory. He is passionate about improving quality of life for clients and developing innovative solutions that help people reconsider how to best achieve their financial goals. Maxwell is a graduate of Williams College, a former Officer in the USMC and holds his Series 6, Series 63, Series 65, and CA Life Insurance licenses.Investment Advisory Services offered through Retirement Wealth Advisors, (RWA) a Registered Investment Advisor. Reviresco Wealth Advisory and RWA are not affiliated. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Consult your financial professional before making any investment decision.

Source: kiplinger.com

Biden’s Tax Plan Could Make ‘Marriage Penalty’ Worse

Getting married is likely one of the biggest life decisions you will make, and while it may seem like an easy one, it could just have gotten a little more complicated. In addition to the obvious selection and reflection of a life with a future spouse, and all the family, friends and other things that come with it, there may now be a new consideration to add to the mix: Uncle Sam.  That’s because the so-called “marriage penalty” may have just gotten larger for high-earning dual-income households. 

Under the recently released so-called “Green Book,” which contains the Department of Treasury’s tax-related proposal for the Biden administration, is a proposal to increase the top marginal income tax rate from the current 37% to 39.6%.  This is similar to previous tax increase proposals by President Biden.  Specifically, the Green Book provides that the increase, as applied to taxable year 2022, will impact those with taxable income over $509,300 for married individuals filing jointly and $452,700 for unmarried individuals.  However, because of the way our tax system and tax brackets work, some married couples who each earn under $452,700 would be subject to a higher tax, as compared to their single counterparts earning the same amount. In this instance, being unmarried and single is better — for tax purposes anyway.  

Married vs. Single: Do the Tax Math

The reason for this dichotomy is because we have different tax brackets for single filers and married filers. Assume you have a couple (not married) each making $452,699. These taxpayers would not have reached the highest bracket for an unmarried individual per the Green Book proposal.  Each individual would be taxed at the 35% bracket, resulting in approximately $132,989 in federal income taxes using this year’s tax bracket for single filers (or a total of $265,978 combined for both individuals).

 If instead this couple decides to marry, they will now have a combined income of $905,398, putting them in the highest tax bracket (39.6%) as married filing jointly. This translates to an estimated $284,412 in federal income tax, which is $18,434 more in taxes (or about 6.9%) than compared to a situation if they were single, according to a projected tax rate schedule we created based on the available federal income tax information.

There is another option for married couples: the filing status of “Married Filing Separately.” In this situation, the couple may file as “single” for tax purposes but must use the “Married Filing Separately” rate table, which for the vast majority of situations, when you do the math, does not yield a better result.

The Effect, Going Forward

If the changes, as currently proposed, pass, I am anticipating a lot of tax planning around filing status and income threshold management.  Accountants will be very busy with detailed analyses and projections to evaluate the optimal filing status for married couples, and where certain deductions or planning opportunities would be more beneficial if applied to one spouse over the other.

In extreme cases, could this factor into one’s marital decision?  While I certainly hope that we do not make life decisions around taxes, the reality is that taxes hit the bottom line, and that impact is real. 

No one has a crystal ball as to what will happen, but let’s hope that in the end, this doesn’t become an unforeseen factor in the increasing divorce rate we have already seen since the start of the pandemic.  Let’s hope for marital bliss, not marital dismiss.

As part of the Wilmington Trust and M&T Emerald Advisory Services® team, Alvina is responsible for wealth planning, strategic advice, and thought leadership development for Wilmington Trust’s Wealth Management division.
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This article is for informational purposes only and is not intended as an offer or solicitation for the sale of any financial product or service. It is not designed or intended to provide financial, tax, legal, investment, accounting or other professional advice since such advice always requires consideration of individual circumstances. Note that tax, estate planning, investing and financial strategies require consideration for suitability of the individual, business or investor, and there is no assurance that any strategy will be successful.

Chief Wealth Strategist, Wilmington Trust

Alvina Lo is responsible for strategic wealth planning at Wilmington Trust, part of M&T Bank. Alvina’s prior experience includes roles at Citi Private Bank, Credit Suisse Private Wealth and as a practicing attorney at Milbank, Tweed, Hadley & McCloy, LLC. She holds a B.S. in civil engineering from the University of Virginia and a JD from the University of Pennsylvania.  She is a published author, frequent lecturer and has been quoted in major outlets such as “The New York Times.”

Source: kiplinger.com

Your Spouse Wants a Divorce … Now What?!

It’s too soon to determine what the long-term impact of the pandemic will be, however one thing is certain: Divorce has become quite common.  Unfortunately, all too often, one spouse learns that their partner is terribly unhappy and feels the marriage is beyond repair.  At this stage, counseling is no longer an option, and the spouse is ready to start divorce proceedings. 

As a CDFA® (Certified Divorce Financial Analyst) my job is to deal with the financial aspects of the separation, however, I often find myself being a “thinking partner” to many of my clients.  Below are some of the topics that we discuss. 

1. Seek support, including counseling

No one enters marriage with the idea of getting a divorce.  When a marriage fails, it often creates depression and anxiety. 

Sadness is normal.  It takes time for one to heal.  For some, the process takes longer than others.    It’s great to have friends and family to lean on and be your sounding board, however, a therapist can be very beneficial and offer an objective view to help the healing process.   

2. Prioritize your kids

When children are in the picture, divorces become more complicated.  Co-parents need to stay attached in some ways, so reconcile as best as possible for your children’s sake.  Make sure to avoid putting children in the middle of conflicts.  Be the best parent possible to help prevent short- and long-term impacts on the kids. Even if your soon-to-be ex-spouse is bad-mouthing you to the kids, try not to retaliate.  Children are intuitive, and as long as they know that you love them and care deeply about their well-being, they will rise above the nastiness and not take sides.  

3. Process your thoughts and emotions

Start a journal.  Write down things you are thinking, describe your emotions and even create to-do lists.  Sometimes this technique can reduce your stress and help you get things done by allowing you to mentally clear the air, enabling you to take the next step forward. 

4. Try to make non-emotional decisions when dividing marital assets

When you are settling a divorce, it is disturbing to think about your marriage as a business, but it can make things less painful if you do so.  Treat the division of marital property in an unemotional, practical manner.   It is just like two business partners parting ways. 

Although going through a divorce will create tons of negative feelings that can cloud thinking and leave you with many mixed emotions, try to keep your composure until you are alone.  My recommendation is to have a plan after these discussions to do something to let off steam and release the built-up tension.  Join a divorce support group or try to meet other people going through the same pain you’re experiencing.   I have a few clients who used to take a hot shower and scream at the top of their lungs or had imaginary conversations telling their soon-to-be ex-spouse exactly what they thought of them.  Crying has helped a lot of people get through hurtful times.

As long as your go-to method of gaining control of your feelings and letting off steam is legal and non-detrimental to your children (i.e., don’t fall back on getting drunk or taking nonprescription drugs), go for it.

5. Seek legal advice

There are several ways one can go through the legal process of divorce.  You need to determine the best choice for your situation and what type of legal representation you may need. 

  • Contested divorce: Each party has their own attorney advocating for them.
  • Collaborative divorce: Each spouse hires an attorney trained in the collaborative process, and the four of you negotiate a settlement together. 
  • Mediation: The couple, with the help of a trained mediator, work out the terms of the settlement. I strongly suggest that clients who choose mediation have the document reviewed by a divorce attorney prior to signing the agreement.

6. Get trusted financial advice

It is critical to get good financial advice from a professional during such an emotional time.  There are financial planners who have experience in divorce, however, working with someone who is specifically trained in the field of divorce may prove to be advantageous. 

A financial expert should help you determine what is financially feasible based on your assets, liabilities, income, expenses, needs and goals.  In order to put together a workable budget for your post-divorce life, you will need accurate financial information, such as income and expenses.  Sources of information may be prior tax returns, credit card statements, utility bills, mortgage documents, etc.  The goal is to have an equal and equitable division of marital property according to your state’s divorce laws. 

7. Exercise

In addition to being a healthy activity for everyone, exercise is particularly important for people under stress.  Whether you swim, run or lift weights, you may be able to get rid of pent-up negative feelings and in many cases burn unwanted calories.  Many people do their best thinking while exercising and are able to come up with solutions to difficult situations and problems. 

Divorce is not pleasant, regardless of the circumstances.  It takes time, effort and hard work to restore your equilibrium and positively move on in your life.    

President, HMS Financial Group

Barbara Shapiro is the President of HMS Financial Group located in Dedham, Mass. She is a CFP®, Certified Divorce Financial Analyst and a Financial Transitionist®. She is also co-author of “He Said: She Said: A Practical Guide to Finance and Money During Divorce.” Her firm specializes in comprehensive financial planning with a subspecialty in divorce that assists clients’ transition from marriage to independence with peace of mind and confidence. Learn more at HMS-Financial.com.

Securities and Advisory Services offered through Cadaret, Grant & Co., Inc., a Registered Investment Adviser and Member FINRA/SIPC. HMS Financial Group and Cadaret, Grant & Co., Inc. are separate entities.

Source: kiplinger.com

Philanthropists Should Encourage Greater Giving – Not Force the Issue

What’s the most effective way to increase charitable giving? Billionaire energy trader John Arnold and his wife, Laura, recently offered one solution. They created the “Give While You Live” campaign, encouraging billionaires to donate a minimum of 5% of their wealth to charity every year.

The Arnolds are putting their money where their mouth is, which is commendable. And they’re not the only ones. Overall charitable giving in 2020 increased more than 10% over the previous year for donors of all income brackets.

For decades, household charitable giving has been stuck around 2% of a family’s adjusted gross income. To make gains, we need people like the Arnolds encouraging a sizable leap toward greater giving. They lead by example and, in so doing, inspire others to act in-kind.

A Push for New Rules on How Charity Works

Yet John Arnold isn’t wedded to the “carrot” approach. He’s OK with sticks, too. He and Boston College law professor Ray Madoff are lobbying Congress and the Biden administration to force philanthropists using donor-advised funds (DAFs) to move up the timeline on grant payouts made from these charitable accounts.

Encouraging more philanthropy is critically important but involving the heavy hand of government to mandate payout timelines on DAFs is misguided, in my opinion. Independent philanthropic freedom is critical in a free society and should be preserved.

Arnold and Madoff, moreover, are trying to force sweeping changes to a financial vehicle that safeguards and optimizes a person’s charitable dollars. Why fix what isn’t broken? Instead, we should be celebrating all those who recommend such grants after thoughtful consideration of their own interests, timeline and charitable giving goals.

The past year of giving indicates that donors can and will engage to address problems, especially when massive problems – such as those created by a pandemic and economic crisis – make needs so evident.

DAFs serve as a charitable saving account for donors. There is value in having a rainy-day fund to draw from when times get tough. This past year, we’ve seen that promise play out (as we did, by the way, during the economic downturn of 2008 and 2009).

DAF payout rates are climbing. At more than 20% annually in recent years, DAF payout rates consistently dwarf payout rates of similar charitable vehicles and nearly doubled between 2019 and 2020 as COVID-19 wreaked havoc across the United States.

A Bad Rap for Donor Advised Funds

As Howard Husock, adjunct scholar at the American Enterprise Institute, writes, DAFs award “far more than the 5% which mega-foundations like Gates and Ford are required to disburse” and, as a result, should not be singled out for heavy-handed regulation.

Yet DAFs in particular have been wrongly criticized for years. This is often due to confusion over payout rates, anonymity and growing account balances, which some believe stems from donors taking an immediate tax deduction and then refraining from awarding grants right away.

People forget about the time value of money. As Husock discusses in a recent paper, funds in DAF accounts grow over time, enabling additional generosity. This optimizes a donor’s gift to his or her charity of choice on a timeline that works for the donor’s unique circumstances.

These charitable investment funds, effectively, are an essential financial stewardship tool. Put another way, the purpose of a DAF is to be actively charitable. “Warehousing” money in a DAF is a misnomer, as a DAF is inherently dynamic. Money doesn’t simply “sit” in a DAF — it generally grows in a DAF, and those funds can only be used for an operating charity.

Those with DAFs award grants at higher rates than those overseeing similar funds, and step up to the plate even more during times of crisis, as evidenced by giving trends throughout 2020. The payout rate at DonorsTrust in 2020, for example, was closer to 60%.

Allies of the Arnolds have created additional campaigns, proposed mandates and other initiatives to increase and encourage giving, as well as significantly alter the rules around DAFs. These plans, however, offer a solution in search of a problem.

New Mandates Sought

Despite the proof from 2020 that Americans are happy to give voluntarily, the conversation centered on increasing overall giving continues to include calls for new mandates. Another way to look at it, some groups simply want “more money” from citizen givers.

The Initiative to Accelerate Charitable Giving, the formal name for the Arnold/Madoff proposal, for example, has made efforts to weaken philanthropic freedom through new mandates on private foundations and DAFs to spend their money faster or face punitive measures. For a more detailed discussion about these mendates, visit the Philanthropy Roundtable blog to hear from other subject matter experts. 

Mandatory volunteerism is a bit of an oxymoron. Instead, let’s celebrate the diversity of giving inherent in Americans instead of forcing a one-size-fits-all framework on donors.

Inspiring charitable giving through actions is a commendable sort of leadership. Rather than overreach and discourage philanthropy, we should encourage both the wealthy and those of lesser means to give more money the right way.

Especially now, as we emerge into a post-pandemic world, the economic damage of the past 18 months continues to wreak havoc on families in a deeply personal way. We should be praising those who continue to give charitably – regardless of how they do it – rather than succumbing to mandates by those who think they know best how to spend other people’s charitable dollars.

President, CEO, DonorsTrust

Lawson Bader has served as president and CEO of DonorsTrust since 2015. He has had 20 years’ experience leading free-market research and advocacy groups, including the Competitive Enterprise Institute and the Mercatus Center. DonorsTrust is a community foundation safeguarding the intent of accountholders who seek to promote charities that address civic concerns, are mostly privately funded, do not increase the size and scope of government, and promote free enterprise and personal responsibility.

Source: kiplinger.com