One of our clients was commenting on how often the men she meets from online dating sites exaggerate various aspects of their background. They are not quite as athletic, successful, or emotionally available as they claim. We spent a few minutes talking about how she described herself and quickly realized that she also fell victim to some of those same vanities. Most of us look at ourselves less critically than we do others. And this can be a real issue when it comes to our financial planning.

How do clients create stories to justify behavior that objectively could be interpreted as deluding themselves?

When we go through cash flow with clients, many of them will preface the discussion with how little they really spend. Then we lay out the numbers and invariably there is 15 to 25 percent of their spending unaccounted for. I believe that this leakage occurs because most people don't want the harsh light of facts to obstruct their beliefs regarding their money values. The slippage is usually through the "occasional" big-ticket item that happens every year, or the constant stream of little purchases that offer an immediate pick-me-up but no positive lingering experience.

The only way that we've found for people to really get a handle on what they are spending is by keeping a spending diary. They can do this online, using a service such as, or carry a notebook. The advantage of the spending diary is that it not only records behavior, it helps shape it. When clients are accountable (even to themselves) for where their money goes, they tend to either spend less or direct it to things that are more meaningful. The journal also helps prevent the "What the heck" behavior where a slight spending misstep leads to a sense that the client has already blown it so they spend even more.

In his book "The (Honest) Truth About Dishonesty,'' Dan Ariely writes: "The first act of dishonesty might be particularly important in shaping the way a person looks at himself and his actions from that point on -- and because of that, the first dishonest act is the most important one to prevent."

Justification may be an indicator of taking that first step. Clients who have difficulty saving for retirement may claim that they will simply work longer. This is a great idea, but it can be difficult to execute. We have had clients with health issues that shortened their careers. Others lose jobs from which they did not want to retire.

It is important to continuously challenge the assumptions that you're making. Why are you are making current decisions? How will they impact your future? Clients will often focus on rate-of-return assumptions when evaluating the effectiveness of their retirement plans. But four more important factors are the amount of money being saved; how much they plan on spending; the amount of time before the money is needed, and how long it needs to last.

While rates of return matter, they may have a smaller impact than those other items. Don't let investment returns, which are often out of your control, obstruct those other four variables.

At times, various clients have expressed their frustrations that others they know seem to have so much more than they do -- even though one would think that their situations are similar. Money is often spent to convey something -- power, prestige, success. Everyone shows things and hides things with how they use their money. The challenge for each of us is to become solid in our own money beliefs so that we won't be manipulated by the actions of others.

One of our clients found that they missed the people from their municipal golf course when they joined a country club. So they quit the club. By being willing to look at what truly matters, they discovered who they really were.

Spend your life wisely.


Ross Levin is the founding principal of Accredited Investors Inc. in Edina. He is a certified financial planner and author of "The Wealth Management Index." His Gains & Losses column appears on the last Sunday of the month. His e-mail is