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Are you financially honest with yourself?<\/p>\n
This question is at the heart of Washington Post personal finance columnist Michelle Singletary\u2019s latest money column. In it, she lays out the top five financial lies people tell themselves, with a nod to Jack Nicholson\u2019s iconic role in A Few Good Men: You can\u2019t handle the truth.<\/p>\n<\/p>\n
\u201cMany people unintentionally misrepresent their spending, naively believing their own narratives about where their money goes until they are confronted with the undeniable evidence of their bank statements,\u201d Singletary wrote.<\/p>\n
She notes that this \u201cfinancial amnesia\u201d tends to happen because someone doesn\u2019t actually have a budget. While they like to think they aren\u2019t spending much on evenings out or Uber Eats, they aren\u2019t regularly tracking how much they spend on these things.<\/p>\n
So, what are the five lies she hears the most?<\/p>\n
Some people think they have a budget because they decided on a ballpark number for food, clothes and gifts each month \u2014 but they never actually track their spending.<\/p>\n
Mental \u201ctracking\u201d isn\u2019t a budget. If you take time to write down exactly how much you spent on Uber Eats last month, you\u2019ll probably be shocked.<\/p>\n
Seeing the numbers in front of you is the only way to know how much you\u2019re actually spending. Once you realize your restaurant budget is double what you thought it was, you\u2019ll have more motivation to stick with a budget.<\/p>\n
Budgeting apps like Monarch Money<\/a> can help you quickly set up a budget \u2014 since you can track spending, account balances, transactions and investments all in one place. You can also integrate this info with your partner\u2019s finances at no extra cost, making it a simple way for couples to manage finances together.<\/p>\n They currently offer a seven-day free trial<\/a> to see if Monarch Money gives you a new perspective on your budget.<\/p>\n If you find the app helpful, for a limited time you can get 50% off your first year with code MONARCHVIP<\/a>.<\/p>\n Read more: Here are the 7 top habits of \u2018quietly wealthy\u2019 Americans<\/a> \u2014 how many do you follow?<\/strong><\/p>\n Having a few thousand dollars floating around in your bank after payday might feel like an emergency fund, but if you don\u2019t have a separate savings account set up and funded as your designated emergency fund \u2014 meaning you only touch it if an actual financial emergency occurs \u2014 it\u2019s not actually for emergencies.<\/p>\n \u201cPeople will swear they have a rainy-day fund, but they raid it so regularly that it becomes just another spending account,\u201d Singletary wrote.<\/p>\n Try to find a highly liquid account with as high an interest rate as possible, and let it cook for as long as you can. In a perfect world, you’ll only have to deal with major emergencies once in a while, but life sometimes has other plans. This is why liquidity, or ease of access, is so important.<\/p>\n This lie is easy to sell yourself if you\u2019ve bought into the noise around maximizing credit card rewards. Wanting to use your card for everything so you can easily track spending makes sense, but it might be the reason you blow past your budget every month.<\/p>\n According to Singletary, \u201cresearch reveals that paying with plastic \u2014 credit or debit \u2014 increases how much people spend.\u201d<\/p>\n She points out that in 2016 the Federal Reserve Bank of Boston found that consumers spend an average of $112 when using credit cards, but just $22 when using cash.<\/p>\n If you find it difficult to stop overspending, consider cutting the credit card and trying out cash only (where possible) for the next month. Compare your spending to the previous month to see if it made a significant impact.<\/p>\n If you\u2019re looking to use your money in a more productive way, consider trying Acorns<\/a>, an investment platform that automatically invests spare change from your everyday purchases into a diversified portfolio of ETFs.<\/p>\n For instance, if you buy a coffee for $3.25, Acorns will round it up to $4 and invest the change in a diversified investment portfolio<\/a>. So a $3.25 purchase automatically becomes a 75-cent investment in your future.<\/p>\n Sign up today to receive a $20 bonus investment<\/a> when you set up a recurring deposit.<\/p>\n Restaurant bills can add up much faster than some might realize. This is especially true in the age of food delivery apps, when your favorite meal is just a few taps away from your door.<\/p>\n \u201cThe average American household spent nearly $4,000 on food away from home in 2023, an 8 percent increase from the previous year,\u201d Singletary writes.<\/p>\n If you\u2019re not a fan of cooking, be sure to track exactly how much you are spending on food someone else prepared for you each month.<\/p>\n But if dining out is something you enjoy and don\u2019t necessarily want to cut back on, you can still optimize this spending using a platform like Upside<\/a>, an app that provides cash-back on gas, groceries, dining and more.<\/p>\n It will even give you up to 25 cents per gallon<\/a> back on gas at the pump. You can also get a bonus 25 cents off per gallon when you use code MONEYWISE25<\/a> on your first transaction when you sign up.<\/p>\n Just claim the offer in-app, shop as usual, then purchase and pay with a linked credit or debit card. Simply cash out your earnings directly to your bank account, PayPal or a gift card.<\/p>\n If you\u2019ve caught yourself saying this before, you need a financial audit. Perhaps your money situation changed recently, but your spending habits didn\u2019t. It\u2019s time to get real about your income and expenses, so you can take action.<\/p>\n \u201cIf you genuinely reflected on your spending habits and combed through your bank or credit union statements, you\u2019d quickly uncover the reason your budget isn\u2019t balancing,\u201d Singletary wrote.<\/p>\n Be ruthless about your spending and find ways to cut costs.<\/p>\n For example, insurance providers tend to increase prices over time, making that once great deal you had on car insurance suddenly expensive. Take stock of how much you are paying, and see if you can find a better deal.<\/p>\n You can save on car insurance using aggregators like OfficialCarInsurance.com<\/a> \u2014 just type in your age, zip code and current car insurance provider and you\u2019ll instantly be provided with a selection of quotes to compare.<\/p>\n Providers include household names like GEICO, State Farm and Allstate. Depending on factors like your driving history and location, you can secure rates as low as $29 per month<\/a>.<\/p>\n And if you\u2019re paying too much for home insurance? OfficialHomeInsurance.com<\/a> can help.<\/p>\n Simply input a few data points to be provided with a variety of insurance quotes \u2014 you could save an average of $482<\/a> this year alone.<\/p>\n