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Everyone believes certain lies about money. But there are 7 that run rampant through society. 

While some of these lies might seem obvious and benign, they can cripple your retirement portfolio, financial freedom, and add more stress to your shoulders. 

That’s the bad news. The good news? 

Once you’re aware of these money lies, you can plan a way to minimize their impact. 

In this episode, I reveal what the 7 most common money lies we tell ourselves are. And how to avoid them so you can achieve financial independence sooner. 

Show Highlights Include:

  • Why avoiding money conversations with your friends and family lock you into destructive beliefs and habits (4:11) 
  • The “Monopoly Effect” that explains why hitting a certain income amount doesn’t magically make you happier (5:53) 
  • Warren Buffet’s “don’t buy it” technique that helps you avoid making expensive and unnecessary purchases (8:42) 
  • Why temptation almost always beats your financial willpower (and how to not give in to temptation) (8:59) 
  • How extra stress made impulse purchases skyrocket by 20% in 2020 (9:24) 
  • The weird way using a credit card makes you spend 10% more than using cash (even if you don’t pay interest) (9:46) 
  • How putting off your financial future robs you of compounding interest in plain sight (13:01) 
  • The counterintuitive way to use your greed to build a better financial portfolio for your family (17:19) 
  • The 7 most dangerous money lies everyone believes that sacrifice your retirement and financial independence (18:35) 

To schedule your free retirement tracking meeting, specifically for first responders, head to http://pensionattention.com/ or call us at 805-409-8150.

Read Full Transcript

Welcome to Pension Attention, the best show for first responders who want to take control of their finances.

After advising Los Angeles city firefighters for over 12 years, financial advisor, Brad Barrett now shares how you can grow your wealth, build your legacy and enjoy a life of freedom. And now here's your host, Brad Barrett. [00:19.9]

Brad: Welcome to Pension Attention, the show for you, first responders who want more out of their deferred compensation and pension plan. My goal with this podcast is to reach you where you are. At whatever stage in your career, you are in, in order to provide my nearly 15 years of experience working exclusively with both active and retired service members on their investment and retirement planning. My team of fiduciary advisors here at One Capital Management are dedicated to ensuring you not only take control of your finances and build the life you deserve. To find out more about me or my advisor partner, or any one of our advisors here at One Capital Management, you can go to our website PensionAttention.com or you can give us a call. You can call us at (805) 409-8150. And a big shout out before we get started on this week's episode of Pension Attention to all those of you listening each week, I appreciate it. I love the feedback, so, keep them coming. And if you haven't already done so you can go on our website again at PensionAttention.com. You can click on the media tab and there you can download and subscribe the Pension Attention podcast, but you can also download on any platform you would otherwise download a podcast, whether it's Spotify, SoundCloud, or the apple app on your phone, just type in Pension Attention or Brad Barrett, and it should pull up and you'd be able to find that. And as I always say, each week, if you like the show, share it with someone you like, if you don't like the show, share with someone you don't like, but today we're going to be talking about something that I've masked this list recently of the money lies, I call it. [01:56.2]

You know, usually when I'm meeting with a prospective client, a lot of the behavioral financial traits come out. We talked a lot about this last week on the emotional versus rational side of our brains when it comes to investing. And if you haven't already done so you can take a look at last week's episode was episode 40 of the Pension Attention podcast on emotional versus rational. And when I was writing that episode for that week, I was thinking a lot about my meetings that I have with clients. And this is spanning over nearly 20 years now as a financial advisor and over 15 years now, specifically working exclusively with first responders around the lies we tell ourselves. This happens to be a lot of the life that happens in a psychology world, but specifically it's pertains to money. Everyone does it one way or another. Okay, so I want you to see if any of these lies sound familiar to you and find out what kind of damage believing them can do to your finances. [02:50.8]

Now, if you notice a few weeks ago, we did a podcast on the seven ways to reduce financial stress, also, a good one, take a look at that. And this week's lies I was coming up with when I was talking about all these meetings going through it, I came up with seven money lies. I don't know why I keep coming up with number seven, forgive me. It's a biblical number so, I guess I'll go with it. But the seven money lies, we tell ourselves it's something I was going through again with a lot of our discovery clients we have with prospective clients coming in, whether through stations or referrals or through the Pension Attention podcast, all of which we are grateful for. I was also looking at a Kiplinger article as well, which I thought was fascinating and it touched on a lot of the same items we're going through. So, I want to start out by asking one question. Do you think you're telling yourself the truth about money? [03:38.0]

We may think we know the facts about our finances, but our beliefs can often overshadow the facts. Again, something I mentioned heavily when it comes to the emotional versus rational side of our investing brain. Now our wishes, hopes and fears can tip the scales away from the truth. This makes it really easy for us to believe what we want to about money and it can happen really without us even realizing it. The money lies we tell ourselves can change the way we think and act when it comes to our finances. And since most of us rarely talk about money with our friends and family, the money lies, we tell ourselves, stick around. And for any of you clients listening right now, one of the first things I say when we meet is regarding the confidentiality and the privilege it is for me as an advisor and for us here at One Capital Management, to be an advisor to our clients, to be privileged in the conversation about money. [04:35.1]

It is a private topic, but sometimes these private topics do need to be discussed. And why I wanted to go through it on this episode is to go through these seven lies that many people tell themselves and for any of you listening right now, it's something that you might find yourself getting caught up into as well. I want to take the cap off some of these misnomers that are out there and really let everyone know that this happens to everybody, it's not just you, so, we're going to talk about that. And when we keep things or rarely talk about money in particular with our friends, which by the way I understand it really is a private matter. It can lock us into destructive beliefs and really, as we know, when we get locked into destructive beliefs, it can reinforce poor habits in this case, poor financial habits. But no matter what money lies, we tell ourselves it's never too late to set the record straight. And that's what I want to start today. And if you're listening right now and want to seek that counsel and really go further in depth on this topic, as it pertains to your specific planning, you can always reach out to us. Again, you can call us at (805) 409-8150 or go to PensionAttention.com. [05:39.5]

But let's look at some of the most common money lies as I mentioned, we all buy into at some point and the truth behind them. All right, number one, this is probably top of the list I hear and we all know we feel this sometimes, and that is the Ill be happier when I have blank amount, put in whatever amount you want, but the question of, or the items that we tell ourselves, the lie that we tell ourselves, I'll be happier when I have X amount. With X amount in the bank account, whatever amount you think is ideal, many of my problems will go away. I'd be so much happier Brad, does this sound familiar? So, 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. In economics, there's actually something we call the monopoly effect. This stork, that's going to show up at your doorstep and just drop a bag of a million dollars on your doorstep, we all get caught in it. We've been on the 405 or the 101 and traffic thinking man, if I just had a certain amount of money, I'd just be this much happier. And it usually has to do with some situation that we're going through. Wouldn't you agree? And when we tell ourselves this money lie, we put, I think too much emotion into a single number. And we may be setting ourselves up for disappointment. Both, if we never get that dollar amount that you may have in your head and if we do get that dollar amount, our head, and really that doesn't make us happy as we thought it should. And we've all heard this and I can't tell you in nearly 20 years of being a financial advisor, how true this is. More money, more problems, you've heard that, but more importantly is money doesn't buy you happiness. It gives you options, but it doesn't buy you happiness. The good news here with this first money lie is studies show that making progress toward our goals can be incredibly satisfying, regardless of whether we hit the target. Planning does have some euphoric traits to it. We know we're moving towards a goal, there are some really happy moments along the way. But setting a number, getting too focused on one number can really lead to more disappointment than anything else. [07:52.8]

Number two, I deserve it whether or not I can afford it. So, I deserve it regardless of whether or not I can afford it. The whole notion that we're telling ourselves I work hard. I don't treat myself to often, or I could kick the bucket tomorrow. YOLO, you know, as the younger kids say. These are just some of the rationalizations we use to convince ourselves that it's okay to buy something. Whatever legs this money lie stands on, it's usually used to soothe the sting, I would say of expensive purchases, those that aren't really essential and perhaps items we know deep down, we don't really need. Now, this is a tough one for people, and I'm not trying to get in anyone's business here, but just ask yourself, do you find yourself caught up in the lie that I deserve it, regardless of whether I can afford it. There's a good old saying by Warren buffet, ‘If you don't have cash to buy it, don't buy it.’ Now we all live in a world where we are credit cards and lines of credit and things like that and it's okay to use those within reason for things that are necessary. But be careful of the money lie of, I deserve it regardless of whether or not I can afford it. [08:59.7]

Number three, I have strong financial willpower. So, this is to the human element of things. The willpower item, the when faced with temptation, most of us tend to 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 really ask yourself that I get caught up in this too, by the way. So, when was the last time you made an impulse buy? The average American spends at least a couple of hundred dollars a month on what they call impulse purchases. And we're more likely to buy on impulse and spend more when we're stressed. That's a fact. That's probably why impulse spending shut up about 18% in 2020 as reported by PR Newswire. 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% 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 again, that was actually based on a value penguin by Lending Tree article around credit cards. Pretty interesting when you think about it. So be honest with yourself is what I'm trying to say about number three - the, I have strong willpower lie because we have to really be honest with ourselves and truly know ourselves and it's okay to be brutally honest. So, you know what? My emotions are wanting me to buy this because I saw an Instagram ad or some sort of stress situations going on in my life and I just want to get that. And I get it, there's something to be said about retail therapy. Don't get me wrong, but just be careful as that lie keeps growing and growing and growing. [10:39.8]

Number four, I'll save more later. This one and the next few coming up are largely around probably twenties and 30-year-old. So many of you listening right now who are newer on the job, maybe things like that, the notion of I'll save more later. Most people and be honest with yourself right now, when I say this. Most people focus on buying what we need and want now. And we tell ourselves we'll start saving for the future later. I definitely got caught up in this in my early twenties. So, if we save anything at all, it's likely to be whatever we have leftover. In fact, fewer than one in six of us are saving more than 15% of our income and one in five aren't saving any money at all. This is relative to an article written on CNBC regarding the stats around savings. Pretty interesting. Warren buffet once said, ‘don't save what is left after spending, spend what is left after saving.’ Think about that. So, no matter the reason we tell ourselves this money lie and put off savings, we're prioritizing the present over the future. That can catch up with us. My biggest point I want to make about money lie number four is that can up to us on a “rainy day.” You've heard that saying before or whenever we do start thinking seriously about retiring, we're going to realize we should have started earlier. [12:01.9]

One of the more common comments I've heard in working with my first responder clients for more than let's say five or 10 years, many of which have been with me for a long time have said, Brad, I wish we had started earlier. Now that's not necessarily a credit to me as their advisor, although I do appreciate that, it's also about the planning process. About being able to start saving, being purposeful about your savings, that does matter. Because by the time you get to retirement, if you have that notion of, I wish I had started earlier. By that time, there can be a lot of heavy lifting to play, catch up with our savings, or may even be too late, so be careful about money lie number four. [12:43.4]

Do you know how much you should be contributing to your deferred compensation plan? Are you getting the most out of your current investment options? Looking at entering or about to exit the DROP program? Go to www.pensionattention.com to find out how we can help. [12:59.4]

Alright, money lie number five. And again, I hear this a lot from those that are younger or just starting their career out. And that is, I have plenty of time to plan for my financial future. And I don't need to think about it yet. Now you can see the number five comes right on the heels of number four, but the future can seem really far away when we're looking at 10, 20, or even more years out. Wouldn't you agree? So, 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. The money lie is an excuse for procrastination, in my opinion. It's the rationale we use when we have had a hard time managing our negative feelings or uncertainties about our financial futures. And it makes us turn a blind eye, if you will, to the years of interest that we lose out on, when we don't plan. It reminds me of the Ben Franklin quote, “money makes money and the money that money makes, makes money.” Don't lose out on compound interest and the ability to grow your financial independence through your deferred comp plan through savings, through proper planning. It matters when you add it up. Ben Franklin also, he may have spoken about the best truth behind this money lie. When he wisely said again, another quote, “by failing to prepare, you are preparing to fail.” We've all heard that. So, make sure you don't get caught in money line number five - the, I have plenty of time to plan for financial future, so why would I focus on it now? Be careful there because time comes fast. [14:35.5]

Money lie number six, now this one's an interesting one. I talk about it heavily on the Pension Attention podcast, as well as with each of my clients, when it comes down to there is good and bad debt. Okay. So, we tend to assign what I'll call a moral value to debt, thinking of mortgages and student loans as good debt and considering maybe credit card debt as bad. Now, I want to be careful because I do believe that debt is something that we all use as long as you use it for our advantage. Now, what I mean by that is this can be a lie though, because it gets us to think the wrong way about debt when we start labeling it, good debt and bad debt. Now, many of you clients have heard me talk about good debt and bad debt because it's easy to categorize. And good debt in general is low interest, typically deductible and for an asset or an investment. The two that come up the most, I just mentioned are mortgage and student loans, right take a mortgage for example. Typically, lower than a credit card because it's secured on a house versus unsecured on nothing on a credit card. So, you get lower interest rate, it's deductible, typically on your schedule a deductions, that's a tax person's question necessarily, but usually it's deductible for clients and it's for an asset, it's for your house, it's for an investment. Okay. And student loans are the other ones that get thrown into the category. And again, you wanna be careful of lying to yourself about categories when it comes to good debt and bad debt. But again, just to speak about it, student loans, another one typically lower and straight than a credit card. It's typically deductible, depending on the amount of money you make each year and it's for an asset, the asset being you or your son or your daughter, you're investing in their future. [16:14.9]

So instead of focusing though on whether debt is good or bad, what I'm trying to say is we want to concentrate on the total cost of interest over time. Usually, it's often higher than we think and on deciding really whether the loan is really helping you achieve your goals. This I can say was surety is one of the larger topics with each of my clients we go through, whether it's investing in a new property, refinancing, taking a loan out of deferred comp plan maybe. There's a lot of topics that come through when it comes to planning that I talk with our clients about each of you listening and for those of you who aren't clients and go through this kind of stuff, debt can be a great thing, but it can also be a dangerous thing. So be careful to get caught in the lie that, oh, it's good debt. It's low interest. It's deductible, it's for an asset. I'm okay. Getting as much of it as I possibly can. Right. You gotta be careful there, really careful there. Okay. [17:07.1]

Number seven, I'm going to end with this one. And I was thinking about this one. I try to end it with six to make sure this wasn't a huge list, but seven is a good one and I couldn't ignore it. Number seven, money lie - wanting more is bad. Now all of the previous six things we mentioned, you might be thinking Brad, well, you're just telling me to get what I need, not what I want. Be careful the debt that I'm getting into and be mindful of the lies I'm telling myself when it comes to, oh, I need this. I should just have it. I don't need to plan. Now I'll plan later. Those are all the lies we just went through, right? So, you might be thinking, wanting more is bad. That may be a lie. And I want to clarify what I mean. 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. So, when we tell ourselves we shouldn't want more than we have, we agreed to settle for less, wouldn't you agree? And we may be tricking ourselves into thinking it's okay, 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. So, 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. [18:29.8]

And I chose this last one of wanting more, as bad as number seven, the last one on the list, because if we proper align the previous six lies, we just went through the number seven can be framed as a good thing. If we properly align, I'll be happier when I have a certain amount of number as line number one, or I deserve it, regardless of whether I can afford it number two, or number three, I have strong financial willpower so I'll be okay. Or number four, I'll save more later, which goes right into money lie number five, I have plenty of time to plan for financial future, so I'll take care of that later. And then number six, categorizing, good debt and bad debt and focusing on good debt and if it's good, I can just have as much of it. If we prioritize those six ahead of time, the number seven, we won't have an issue really getting trapped into, because wanting more is the American way, that is okay. Properly plan and have what I call the two D’s when it comes to investing. Discipline and Discernment, you have those two things and you look at each of those aspects of being disciplined with, is it a want or the need? And if it's a want, am I okay with this one? And can I afford it versus going into debt to get it? All the lies we went through are really important to set yourself up for not getting trapped in the money lie of okay, if all those things are true, Brad than wanting more, as bad, bad, bad, bad, no, it's not. It's good. You want to achieve that next level. You want to get to a savings goal. You want to get to what I call financial independence. You know, the word retirement is really confusing for a lot of people, especially in their twenties, thirties, and forties. We talk about it a lot here. [20:10.9]

Now it gets more important in your fifties and sixties because you're really knocking on the door of retirement, the proverbial word of retirement. But the reality is retirement can really be said differently as financial independence. And that can happen when you're 40 years old. In fact, I had a client three weeks ago, come in. I mentioned, I shared this story as well in one of the podcasts, as a, as a prospective client, we did discovery meeting. He was 25 years old and his whole goal was to retire. Again, he used the word retire at age 40. Now you might be thinking, well, what does that mean? That's not getting 55 or 60 at normal retirement and working 30, 40 years, he still wanted to work. He just wanted to be financially independent. What does that mean? It means mining your debt, making sure you don't have too much of it or paying debt off as soon as he can, which takes a lot of willpower and discipline back to my two D’s, a discipline in discernment. Right? But that can be retirement. So, the idea with these money lies is to help you understand what is your retirement date. And it can be as simple number as when you retire going through pension numbers and we'll do all that strategy, but it can also be an open conversation with your advisor around financial independence and what that means to you. [21:24.2]

So, with all that said, how many of these money lies that I went through sound like something you've told yourself. You don't have to tell me or anyone else be honest with yourself. But at some point, I think we've all tricked ourselves, myself included, at least one of these. Maybe we start rationalizing a decision over 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. We all make mistakes. No, one's perfect here. So, here's the truth. Honesty goes a long way with finances. I want to repeat that. Honesty with yourself goes a long way when it comes to your 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 or deflate our confidence. And they get in the way of maintaining or growing your wealth and ultimately your health. There's a saying that in our youth, we tend to sacrifice our health for our wealth and as we get older, we then invert that and now are sacrificing our wealth for our health. So, you want to be careful there and understand that a lot of stress can come from these lies that we don't realize we're telling ourselves about money and then money itself becomes stressful. So, when we recognize the money lies that we believe we can reset our thinking, change our mindset and really start taking action. [22:55.1]

And that sets up all of us to make better choices and make more progress toward our big financial goals, essentially what your financial goals are. And if you haven't already done that, or if you're not sure what your goals and objectives are again, find good counsel, seek that advice. If you want to reach out to us, you can, our number is (805) 409-8150. Again, you can go on our website at PensionAttention.com and you can schedule some time with myself or Toby Rodriguez or anyone of our advisors here at the firm that focus on first responders and we'll help you align those things and make sure that these money lies don't creep into your life. Because, accountability is a great tool when it comes to keeping ourselves out of our own minds. I know I do it in my own life for my own personal advising, for my own personal growth. Seeking counsel and having accountability is a great tool to make sure we don't get trapped in the seven money lies that I brought up today. [23:55.7]

I want to thank you for listening to pension attention this week, if you haven't already done so, as I mentioned before, you can go to PensionAttention.com and you can download and subscribe to the Pension Attention podcasts. Or again, you can download the Pension Attention podcasts on anywhere you would otherwise download a podcast, whether that's Spotify or SoundCloud or the Google podcast app or the apple app on your phone. And remember before acting on anything discussed today, remember to speak with a financial advisor near you about your specific situation, or again, if you'd like our help, you can visit us at PensionAttention.com or again, give us a call at (805) 409-8150. And until next week stay safe. [24:37.7]

The information in this podcast is educational and general in nature and does not take into consideration the listeners personal circumstances. Therefore, it is not intended to be a substitute for specific individualized, financial, legal, or tax advice.

To determine which strategies or investments may be suitable for you consult the appropriate qualified professional prior to making a final decision. [25:01.1]

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