Secrets, lies and money
(Article by Scott Medintz from Money Magazine, April 2005)
An exclusive MONEY survey reveals just how much we hide about our money. Hint: If you think you have a handle on what your spouse spends or what your friends make, think again.
BE HONEST, NOW: Have you ever told your spouse you paid less for something than you really did--say, a great pair of shoes, or maybe that very cool 52-inch TV now gracing the family room? Have you ever bragged about the killing you made on a stock but failed to mention the other 10 that went sour? Ever overstated a charitable tax deduction? Padded your expenses? Pulled the wool over your own eyes about your finances by shoving bills or bank statements into a drawer (out of sight, out of mind)?
No need to answer. The response to at least some of these questions: Of course you have. And it's highly likely that almost everyone you know has too.
That is the striking conclusion of a nationwide survey conducted for MONEY by Mathew Greenwald & Associates. We asked 1,001 adults (half men, half women) with household incomes of $50,000 or more about their money deceptions--the everyday secrets, little white lies and occasional whoppers we almost all tell. And we do mean almost all: 71% of those polled owned up to one kind of money secret or another.
Perusing the survey results, you quickly see that these household secrets have less to do with greed than with simple insecurity. We want people to see us as we wish we were rather than as we fear we are. "People lie because they need to present themselves as competent and worthy," says Robert Feldman of the University of Massachusetts at Amherst, a psychologist and the author of several landmark studies on deception. "MONEY is one key way people feel they are valued."
But even if our motivation isn't financial, the consequences of lying often are. Our efforts to control our image can spur us to spend too much, save too little, invest recklessly, and generally not plan for our future as well as we otherwise could. Nobody's wagging any fingers here. But chances are, in some of these survey results or in the real-life stories that accompany them, you'll recognize yourself or someone you love--and you'll end up making a better money decision because of it. That would be good. In fact, that would be the whole point.
Scenes from a Marriage: The Secrets Spouses Keep
Judging from the survey, marriage is to money secrets what a hothouse is to tomatoes. And many couples have no problem with that: 44% say it's okay to keep financial secrets from your spouse, at least under certain circumstances.
Spending elicits the most marital subterfuge. Some 40% of married respondents, for example, admit that they've told their spouse that they spent less on something than they actually did. No gender surprises here: Women were more likely to have told their husbands they paid less than they really did for clothing, shoes and gifts; men to have understated spending on car stuff, entertainment and sports tickets. Interestingly, though, wives who owned up to fudging on what they spent were most likely to do so on items for their children. Husbands, by contrast, were most likely to have lied about what they spent on themselves.
Downplaying a purchase price is a marital misdemeanor, but hiding the purchase altogether kicks the deception up a few notches. Even so, 16% of the married respondents admitted they'd bought something they did not want their spouse to find out about. Husbands and wives both were guilty of this practice, but guys turned out to be the big-ticket secret spenders: Twice as many men as women said they'd spent more than $1,000 without their spouse's knowledge. Women were most likely to say that less than $100 was the most they'd ever spent without telling their husbands.
What's the point of all this sneaking around? To keep the peace. Some 43% of respondents said the reason they deceived a spouse was to avoid conflict. "A lot of married people don't share spending details because they don't want a spouse telling them what they should and shouldn't do," says Violet Woodhouse, a financial planner and family law specialist in Newport Beach, Calif. "We don't want to be judged, and we don't want to be held accountable." Among respondents who hid purchases, in fact, 45% did so to avoid a spouse's anger, disapproval or lecturing.
Suzanne, a business consultant who lives in Connecticut, says this is why she hides many purchases from her husband. (Due to the sensitive nature of the subject, MONEY agreed not to fully identify the people who responded to our requests for personal stories about financial deception.) "Anytime I buy something, I get a lecture from my husband," she says. So now whenever she shops for herself--and the bills can run as much as a few hundred dollars a month--she keeps the loot in the trunk of her car and waits until her husband is out to bring it in. He often catches on, asking: "Is that new? When did you get it? What, another pair of sandals?" She says, "I just don't want to hear it."
A word to the wise, spouses: However much you disapprove of your partner's spending, trying to control it too forcefully could backfire. Victoria Collins, an Irvine, Calif. financial planner and the author of Couples and MONEY, cites the example of one client, whose husband routinely demanded detailed accounts of her spending, even asking to review her grocery receipts. Yearning to assert her independence, the wife started running up large purchases on plastic, even though she knew her husband would find out. "The glee she got from defying him outweighed the pain of his anger when the statements arrived," explains Collins, who also has a doctorate in psychology. The client moved on to skimming from her household expense kitty, building a secret stash she could spend without her husband's knowledge. The marriage, not surprisingly, ended in divorce.
Talk of secret stashes in marriage often elicits a quiet chuckle of recognition, particularly among women. In fact, though, very few of the married people in our survey owned up to having such a cache. But three in 10 did say that they or their partner had a separate account both knew about. So what's the secret? About 30% of the time, only the owner knew how much the account held.
Still, these separate accounts are often a smart arrangement, says Olivia Mellan, a Washington, D.C. psychotherapist who specializes in financial issues. "There's a big difference between privacy and secrecy," says Mellan, author of MONEY Harmony: Resolving MONEY Conflicts in Your Life and Relationships. "Privacy allows you a degree of autonomy in your relationship, and that's healthy." By agreeing in advance that each spouse should have some separate discretionary money to use however he or she wants, you eliminate the resentment that helps fuel secretive spending. (See "How to Keep Yourself Honest" at the bottom of this page.)
Respondents claimed that they keep very little from their spouses apart from spending. Few admitted, for example, to misleading their partner about how well the household was doing financially. Among those who did, the most common ways were to give the impression that they earn more money than they actually do, to overstate their investment gains or to understate their losses.
Take Steve, a small business owner from New England who, unbeknown to his wife, invested his three sons' college savings in a single penny stock--and lost all $50,000 of it. "My wife would never have gone for something so risky, but I kept thinking the stock would come back," he says. "I'm trying to make it up little by little. I still haven't told her. She'd lose it."
Steve is playing a very dangerous game. "It's no big deal to keep minor purchases secret," says Scott Stanley, a psychologist at the University of Denver's Center for Marital and Family Studies and co-author of You Paid How Much for That? "But when the amounts are out of control, you're endangering your family's future." Steep losses are tremendously difficult to recoup quickly, simply as a matter of arithmetic: For every 50% drop in a stock's value, for instance, you need to double your remaining stake just to get even. That leads many secret investment losers to try to dig out quickly by taking ever more desperate risks.
Besides, secret losses have a way of suddenly ceasing to be secret--usually painfully. One way or another, Steve is likely to find himself confronting an outraged wife. Collins points out that his best hope of putting his family's finances back on track--not to mention his marriage--is to come clean before his wife finds out on her own. First, though, he should put together a prudent plan to make up at least some of the losses, involving real sacrifice on his part. "He can promise, say, to delay replacing his car or to give up Saturday golf and put the fees toward rebuilding the college fund," says Collins. That's far less risky than doubling down on other dubious investments in hopes of covering his mistake.
Meet the Fakers: Secrets We Keep from Others
Outside of marriage, most of us claim we don't lie about our money as much as we just keep quiet about it. In fact, these days people are just as uncomfortable talking about money as they are about sex: Half of the survey takers said they consider money a sensitive topic. Far fewer said the same about politics or religion.
While we may be shy about disclosing our financial situation, however, we're still intensely concerned about what others may think of it. About three out of every 10 people surveyed admit that they have misrepresented their professional or financial success to family or friends.
Consider Shayna, a young professional working in corporate communications in Los Angeles. "I work hard to present a certain image," says Shayna, who is paying off $12,000 in student loans and $30,000 in medical bills incurred when she was without health insurance three years ago. "I pretend that I have less debt than I do, and I definitely spend more on clothes and entertainment than I can afford." She often picks up rounds of drinks for friends, making sure to specify, say, Grey Goose rather than the house vodka. "My fear is that someone will find out my real financial position and think, 'She doesn't belong,'" says Shayna, who believes that most of her co-workers are better off than she is. "I worry they'll think, 'If she can't manage her finances, how can she manage her position?'"
There's a strong possibility, though, that many of Shayna's seemingly prosperous friends share her fears. Americans "often think their neighbors and friends have much more than they do and they're the ones living a sham," says Kathleen Gurney, CEO of Financial Psychology in Sarasota. "But there's a very good chance that their friends and neighbors are in the same situation." Gurney advises Shayna to consider singling out a trusted member of her circle and confessing that she's having a hard time keeping up. She might be pleasantly surprised to find that her confidante shares the same feeling. Together they might be able to persuade at least some in their circle of friends to settle for a less high-priced lifestyle.
A quarter of those polled also admitted to lying to others for personal gain. Misleading the government was most common: Almost one out of 10 owned up to understating their income to the IRS, while 12% admitted that they'd inflated charitable contributions for a bigger tax deduction. Fewer people, though, fessed up to padding an expense report or to telling a prospective boss they earn more at their current job than they actually do.
Our Money, Ourselves: Lying to Yourself
Shayna, at least, knows that she's faking it. Many others in her situation don't. A survey done at the same time as MONEY's--this one by financial services firm Genworth Financial--confirmed that many Americans spend more than they can afford to in an effort to keep up with people around them. But while 80% of the Genworth respondents recognized this failing in others, only 10% saw it in themselves. "Faking a lifestyle becomes so much a part of your identity that you just don't see it anymore," says Gurney, who worked with Genworth on the study.
The MONEY survey likewise found that many of us--36%, in fact--go to great lengths to avoid facing up to financial reality. Some 17% of respondents said they avoid thinking about their money by refusing to look at bank balances or financial statements. A sizable number also put off paying their bills (13%) or ignore financial news (16%) as a way to avoid unpleasant realities. One in six avoid seeing a financial adviser.
Beth, a Connecticut lawyer, fell into the self-deception trap a few years ago while making a career switch. Instead of cutting expenses while she attended law school at night, she started splurging "to handle the stress." Eventually she rang up $30,000 on her credit cards. "I knew my debt was out of control, but I just shoved my statements in a drawer and avoided looking," she says. Beth managed to disguise the depth of her problems until her mother had a medical emergency a few years ago. Beth's siblings all chipped in to pay for their mom's care, but Beth couldn't afford her share. "That forced me to admit to my family that I was in over my head," she says. It also drove her at last to seek help from a credit counselor. Happily, Beth has since not only stopped burying her bills in a drawer but also managed to pay all of them off.
Beth's tale underscores the role that self-deception plays in the entire web of money lies we tell. Yes, whitewashing your financial situation may keep loved ones from worrying, but it also allows you to put off worrying yourself. Sure, hiding your latest splurge from your spouse may prevent a fight, but it also helps you avoid facing your overspending. "Self-deception helps us deceive," observes David Livingstone Smith, a professor of philosophy at the University of New England and author of Why We Lie. The most important money lie you tell, he says, is the one you tell yourself.
It's encouraging that many who took the survey do recognize that keeping money secrets--from others as well as themselves--can have consequences. Roughly one out of five say their deceptions caused them to make bad investment decisions. Nearly a quarter worry that keeping secrets hurts their relationships. Almost one out of three see that some secrets may prevent them from reaching their financial goals.
The challenge, then, is to take that realization a step or two further. Yes, certain money secrets can be the grease that makes life run smoothly. But others are like a wrench in the works. The key, of course, is to recognize the difference.
SURVEY SAYS: In an exclusive nationwide survey conducted for MONEY by pollsters Mathew Greenwald & Associates, we asked 1,001 adults (half men and half women) with household incomes of $50,000 or more to tell us their most common secrets and lies about money. Here are some highlights.
"I consider ______ a sensitive issue in my household." (sex - 53%; money - 51%; politics - 30%; religion - 28%)
"I don't discuss how much I make with anyone, even my spouse." (22% total)
"I would be most uncomfortable if guests saw my..." (dirty laundry - 37%; tax return or pay stub - 34%; bottle of Viagra - 15%; child's failing report card - 4%)
"I hide certain purchases because..." (my spouse would lecture me - 30%; my spouse would get angry - 13%; my spouse would spend more as well - 9%)
AMONG MARRIED PEOPLE WHO MADE SECRET PURCHASES:
"The value of at least one secret purchase I made has exceeded $1,000." (men - 22%; women - 10%)
Lied for profit... 24% total (12% by inflating charitable deductions; 8% by understating taxable income)
Misled friends and family... 29% total (12% by making my job seem more impressive; 6% by understating my investment losses)
Avoided thinking about my finances... 36% total (17% by ignoring financial statements; 16% by not paying attention to the financial news; 16% by not seeing a financial advisor; 13% by putting off paying my bills; 9% by pretending my situation is better than it is)
NOTE: The margin of error is plus or minus 3.1 percentage points for total respondents, and plus or minus 3.3 percentage points for married respondents.
SECRETS WE SHOULD KEEP ABOUT MONEY
Yes, honesty usually is the best policy. But there are exceptions.
The following financial information is better kept to yourself.
- DON'T TELL your kids anything you don't want known. Young children, almost by definition, can't be discreet. They blab, plain and simple, and you don't need other parents in your car pool knowing what you make, what your house is worth or how much money you have in the bank. Plus, kids can't put the numbers in perspective, so they may worry unduly about your financial situation - or get an inflated sense of your riches. Neither outcome is good.
- DON'T TELL a realtor what your best offer will be. Any good real estate agent knows how to make herself invaluable to you when you're shopping for a home. But when you start bidding on property, realize that she ceases to be your friend. Unless she identifies herself as a buyer's agent, she has a legal duty (not to mention a monetary incentive) to get the seller the highest price. So be friendly, but keep your negotiating strategy to yourself.
- DON'T TELL relatives or friends your password. You know you shouldn't hand out sensitive financial information to strangers. But it's also a good idea to keep credit-card statements, ATM card PINs and similar access codes tucked away at home too. A new study has found that relatives, friends and neighbors make up half of all known ID thieves. Of course, they're highly unlikely to be your relatives, but better safe than sorry.
- DON'T TELL a job interviewer your salary. Why should you give a prospective employer an opening to start the negotiations with a lower offer than he or she might otherwise put forth? You shouldn't lie outright about your salary. But you can skirt the issue by focusing on how much the new position should pay, given your skills and experience. If you're offered less than you earn now, however, be frank about the difference.
HOW TO KEEP YOURSELF HONEST
The real secret: avoid the temptation to deceive in the first place
The everyday financial deceptions we all practice may be no big deal the first, or second, or third time we commit them. The problem is keeping the fiction going: The expectations you set up can become increasingly expensive to live up to and more and more awkward to get out of. It's much better to set things up so that the urge to deceive never arises.
- Trade places with your spouse. Many fights about spending - and the secrets we keep to avoid them - stem from ignorance. If you've never shopped for your kids' clothes, you don't know how quickly the costs can add up, nor do you understand the pressure to buy some item your child is begging for. If you don't get involved in retirement planning, you don't know how scary it can be to see how far you are from your savings goals. So switch financial roles for, say, a month. You'll each better understand the challenges the other faces, and stop judging each other's decisions so harshly. When the blaming stops, the need for secrets may too.
- Keep "mad money" accounts. You should each have some money to spend or save as you see fit without answering to the other about it. That way you can occasionally splurge on something that your spouse doesn't approve of without worrying about lectures or reprisals. It also has symbolic value, allowing each of you to feel in complete control of at least one part of your financial life.
- Get the facts. The powerful drive to keep up with the Joneses is often based on false assumptions. Yes, the neighbors may be driving swank new cars and cooking on $1,000 grills. But what's the unpaid balance on their credit cards? In truth, it's likely that your peers are struggling with the same money issues you are. If you are really stretching to maintain appearances, pick a friend you can trust and open up about the challenges you face. You may find you have company - or that you're hanging with the wrong crowd. Either way, it'll be a relief.
- Create personal goals. The experts call this "building an internal frame of reference." That is, stop comparing yourself financially with others and instead measure yourself against realistic goals that you develop based on your own needs and values.
- Get a tracking mechanism. It's easy to slip into denial about your financial health (or lack thereof) if you don't have a clear sense of how you're doing. So spend time every month with some money-management software. Or schedule regular meetings with a financial planner.
- Reward yourself. You can't maintain unrelenting fiscal discipline without time off for good behavior. So budget in some rule breaking as a reward for not breaking the rules too often. Buy yourself a CD every time you pay off your credit-card bill in full, for example. Or schedule dinner out after a visit with your financial planner.