Common Money Lies We Tell Ourselves

A version of this article was originally published in O, The Oprah Magazine

My college roommate and I used to “bargain” shop once a month. We’d team up at the mall to purchase needless items on deep discount. Think: buy-one-get-two-free bath oils and out-of-season sweaters marked 70% off. On the bus ride back to campus, we marveled the fact that while we’d spent $50, we had “saved” over $100.  

Had I really saved $100 a month back then, I would have graduated with close to $5,000 in the bank. I could have paid off my credit card bill in one fell swoop.

Face palm.

Bad financial decisions happen thanks to our various emotions around money from over-excitement to fear and anxiety. There’s also the fact that we’re human. As behavioral experts described to me in my book Psych Yourself Rich, we’re simply hardwired as humans to make more than a few irrational money choices. (Indeed, my draw to the clearance racks was primal!)

If you ever found yourself thinking these thoughts below, here’s my advice to help you put them to rest so you can start making the most of your money.

“You need to be rich to invest.”

It may seem that way. After all, we call finance a “white collar” industry. And growing up we may never have been introduced to investing, leaving us with a sense that it’s not for everyday folks. But commit to investing just $5 a day in a plain index fund that tracks the market and 25 years later (at a rate of return of 5%) you could have upwards of $85,000.

“I’ll be able to save more when I make more.”

Psychologists might call this procrastination. I call it wishful thinking. The fact is, the more you make, the harder it may be to save because your expenses also increase. If there’s one regret I often hear from the older generation, it’s that they wish they’d started saving earlier in life. To make it simple, automatically direct a percentage of your monthly paycheck to a savings account. Start small with $20 or $30 a week. Eventually work your way up to saving 10% of your take-home pay.  The most important thing is that you start. Now.

“Little things don’t matter.”

Dan Ariely, Professor of Psychology and Behavioral Economics at Duke University, believes this to be one of our biggest money mindset challenges. “We probably think a lot before we spend on something big, but we don’t focus on the small payments like restaurants. We don’t see them accumulating,” he says. The workaround? Stick to cash or a debit card with a set amount of money for the week’s discretionary spending. “If the card runs out, too bad,” says Ariely. “You just stop spending.”

“It’s not polite to talk about money.”

This thought probably goes back to our parents who forbid us to talk about money along with sex and politics, says Carl Richards, author of The Behavior Gap: Simple Ways to Stop Doing Dumb Things with Money. But did you know that we can actually save more by simply sharing our money goals with friends and professionals? “It’s only when we talk about our financial choices that we can begin to pick the smarter options,” says Richards.To that end, you could start a meet-up group with friends (like a book club for money), join a private Facebook group focused on personal finance or work with a financial advisor.

Farnoosh Torabi