Are You A Financial Liar?
| July 13, 2012 | Posted by Roshawn Watson under Personal Finance, psychology |
By: Roshawn Watson
We often espouse honesty as an important societal virtue. We tend to agree that trust underscores our relationships, and lies erode that trust. The implications of lying extend beyond its effect on relationships though. Sometimes in the name of protecting ourselves, facts about our circumstances are conveniently distorted in order to make them more palatable. Unfortunately, we’re so convincing that we often succeed in deceiving even ourselves. One area particularly prone to embellishment is our finances. After all, who wants to admit that she is destined for lack, mediocrity, or failure? We consequently end up with something other than the truth with respect to money, but does that make us financial liars or just positive thinkers?
Lies, Lies, Lies
Kaffee: “I want the truth.”
Col. Jessep: “You can’t handle the truth.” A Few Good Men
Many of us profess to want the truth, much like Kaffee in A Few Good Men; however, it appears that we value the truth much less than what we proclaim, particularly when there are incentives for lying. In The Honest Truth about Dishonesty, Duke researcher Dan Ariely conducted an interesting experiment to test this hypothesis. He first had a control group try to solve a very hard set of matrix equations. He figured out the average number of matrix equations that a given group could correctly solve. He then asked an experimental group to complete the same questions. However, this time, he requested that they shred their test sheets and self-report the number of correct answers. He also introduced an economic incentive: he paid participants for correct answers (either actual correct answers or reported answers). He attributed the variation between the scores in the control and the experimental groups to represent the extent of their dishonesty. 1 The experimental group did indeed “fudge” their number of correct answers frequently to reap both the economical and psychological (ie save face) rewards.
Related Article: Do You Have the Courage To Be Wealthy
Owning the Truth
No matter what you do, no matter how awful, no one ever thinks that they’re a bad person. The Talented Mr. Ripley
Similar motivations cause us to routinely use our own fudge factors, and lying is apparently not limited to when we receive economic rewards. For example, sometimes boasting occurs to preserve esteem and position, or lying is used in the name of tact and politeness. Consider a study, published in the Journal of Basic and Applied Psychology, where 2 strangers were placed in a room for 10 minutes and had their conversations recorded. Afterwards, the strangers were interviewed independently and asked about the truthfulness of their responses. Nearly everyone initially claimed that they were truthful, so it surprised them to actually watch the recordings of their exchanges. Sixty percent of the participants had lied at least once during the 10-minute conversation, saying an average of 2.92 inaccurate things. This study highlights that even when money is not a driver of behavior, the psychological reward of “looking better,” even to a complete stranger, was sufficient enough to lie approximately once every 3 minutes.
Related Article: 4 Reasons to Set Unrealistically High Goals
Distorted Money Paradigm
Our willingness to massage the truth in order to look better is not restricted to impressing others: we end up telling some of the biggest whoppers to ourselves. For example, consider the person who looks in the mirror and tells himself that he is not fat. He rationalizes and sucks in his gut. He maneuvers himself into a favorable position on the scale. He simply can’t admit that he let himself go. Likewise, the same type of self-deception can prevail with our money; we instinctively do whatever manipulations are necessary to protect the image of our financial health. The “enhanced” visions of ourselves project us as being prosperous, solvent, and secure. We discount any warnings signs of our dysfunction, such as debt, low net worth, low investment funds, and no emergency funds. This denial permits us to be comfortable with our disorder, and therein is the problem. Whatever we can tolerate, we will not change.
Related Article: 10 Reasons to Seek Abundance
Unfortunately, change was never the motivation for the denial in the first place: the embellishments serve to protect the status quo. The sanctity of our money framework demands a positive spin on our present states, even if it is to our future detriment. Admitting that we’re financially unfit would be a potentially devastating blow to our egos. “Many animals engage in deception, or deliberately misleading another, but only humans are wired to deceive both themselves and others, researchers say.”
Nonetheless, at some point, the lies will cease to work. For example, you can only pretend credit card debts are nonexistent or that retirement will “take care of itself” for so long. Using deception to push the problem down the road may seem like an okay strategy. However, until we not only acknowledge but also own the truth of our finances predicaments, it is hard to take the steps necessary to enter true abundance. After all, why would anyone change what is already “working?”
Pygmalion Effect
Ironically, knowing the dangers of self-deception should not preclude us from seeing a future that disagrees with our present.
According to ancient Greek mythology, Pygmalion, a Cypriot sculptor, fell in love with a female statue he had carved out of ivory. He quietly wished that his ivory sculpture would be changed into a real woman, made an offering, and when he returned home, he kissed his sculpture, and she became real.
That’s because the power of belief and expectancy, such as the Pygmalion Effect (also known as a self-fulfilling prophecy), has been shown to have real world implications. One of the most prominent studies of this phenomenon is the Rosenthal and Jacobson study of the observer-expectancy effect, which demonstrated that experimenters can unconsciously bias study results with their personal expectations. They administered the Tests of General Ability (TOGA), an IQ test, and deliberately misled 18 elementary school educators to believe that they were teaching students with higher‑than-normal IQs. In actuality, they were teaching students randomly selected from a general population of students, yet when you look at their subsequent improvements on the TOGA after 1 year, the youngest children (1st and 2nd graders) had markedly surpassed their “normal-labeled” counterparts. The teachers’ expectations brought the students up to higher levels, despite students’ innate abilities rather than because of them. In this regard, Stephen Covey advises that we must realize just “how deeply imbedded our perceptions are… (and) investigate the lens through which we see the world, as well as at the world we see,” and acknowledge “that the lens itself shapes how we interpret the world.”
Related Article: How to See a Bright Financial Future
The power of seeing a bright financial future is the basis for setting unrealistically high goals that stretch you to become greater than your current self and for associating and reading the teachings of those who operate on a higher level. The point is not to deny your present but to embrace your future potential. Possibilities are not necessarily determined by circumstances or even abilities but by your capacity to believe.
Closing Thoughts
You are certainly not a financial liar for simply believing in a bright future. After all, courage to believe in a better tomorrow is fundamental to building significant wealth. That said, we should not blindly ignore the financial sign posts warning us that something is amidst. Even if a crash appears imminent, remember that the quicker you hit bottom, the sooner recovery begins. Thus, being positive and truthful are not at odds with each other. Just like we benefit from optimism, it would do us well to pay attention to any unsettling feelings regarding our progress. That feeling may be just the wake-up call that we need to break through the deception and experience prosperity like never before.
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1 Interestingly, the dishonesty among the experimental group was lessened when they had to acknowledge that they were bound by an honor code and when they were being watched by an observer.
Image Credit: Rosmary
It's difficult to tell if you are lying to yourself or not. That's why it's important to get an impartial opinion if you can.
My goal is to quit my job and I think our family can handle it. It will be tight, but I'm sure we can deal with it for at least a few years. If worse come to worse, I can always go back to find a job, but I don't think I'll have to do that. We'll just have to see how it goes.
The truth is that I would like to be in a stronger financial position, but then it will just keep getting put off.
What a great example! Yes, self-deception is very difficult to detect. For me, that's why sometimes I have to get away. In the quiet, there is much insight. Looking at your history can be helpful as well. It is funny how it repeats itself. Lastly, I agree with finding an objective second opinion.
I would have to agree with RB40. We have plans with how we think things will go and we do support each other but there are no guarantees. Chances are working a bit longer might be to our benefit but you hit a point where you just have to commit and cut yourself off.
Yeah, guarantees are very rare, and often the payoffs for guarantees are weak. You do have to cut the chord at some point. good luck with the exciting transition.
I have been called blunt, brusque and occasionally too candid! I try to treat other people the way I want to be treated. I want to hear the truth because it is easier to deal with than a polite lie. There are times when a white lie may be more appropriate though.
Blunt is good, so is candid. As long as you are not being cruel, you are helping people. Polite lies often do a disservice long term, even though in the short term, they can be protecting. Personally, I am a fan of truth with tact, but it is not for everyone (i.e., some family members).
I refer to my style as New York attitude. It is the truth, the whole truth and nothing but the truth! I would rather say nothing at times, but I will when asked! The white lie that I am referring to can range from I am fine (response to how are you) when you are not or I can't make the party because of another engagement ( better than I don't want to go).
Got it, my friend. I chuckled when I read your response ("I will when asked"). LOL! I definitely understand a response such as "I am fine" as a polite way to avoid discussing your feelings. My wife sometimes answers the question with how she is really feeling at the moment and found that people often didn't even want a real answer.
Roshawn, it looks like you and I enjoy similar reading material! I am on page 50 of The Honest Truth about Dishonesty. It's a great book so far.
Hi Jon,
I absolutely love that. It's good to know we're kindred reading spirits. I'll have to get some good recommendations!
I was just an overly optimistic person! That's how I prefer to state it anyway. I just thought I could spend spend spend and that I would have more money next year to pay it all off. I was foolish, but I don't think I was lying necessarily…just dumb.
-M
Dear Michelle,
That's a fine way to frame it: overly optimistic. I love being positive too, and somehow I miss the memo of being more careful too. I'm glad someone told me the truth. I feel so spared from my own foolishness.
I see this financial dishonesty on a daily basis. Clients have to disclose their salaries and net worth when applying to trade options. Its amazing how often these two numbers do not coincide. Either people disclose a very high net worth or an inflated salary.
That's a good and scary example. Hasn't the housing crisis taught people anything about lying in order to qualify for financial products? Oh well, I'm not surprised, but this is of course displeasing 🙁
Love the parallel you drew to Pygmalion here – it makes a lot of sense, but I'd never thought of it that way. Hate the picture of the mime-looking guy with the long nose… he's creepy.
Thanks so much Elizabeth! I was hoping to give a different spin to it, so I feel good to have accomplished that.
You are right: that picture is creepy 🙂 I didn't have the copyright privileges to use Pinocchio's image.
Very thought provoking. I think we tend to tell ourselves things we WANT to hear… and tell other people things we think they want to hear.
Thanks so much Julie. I agree. When we ask people "how are you?" do we really want or expect for them to give us their true feelings like someone would divulge to Oprah or Barbara Walters? Of course not, so I can definitely see your point.