My (34M) wife (37F) makes up facts about us in front of our friends

It is too much. Sounds like your wife is crazy insecure and has destructive ways of coping. Exaggerating and making shit up probably makes her feel more important so she doesn’t have to deal with her feelings of insignificance. Her criticizing someone who she feels threatened by is her trying to make herself look better by putting someone else down. These are really unhealthy relationship behaviors. And these behaviors are also ones that people do when they don’t want to face how they’re feeling. Problem is, to fix issues like this she’s going to have to face her feelings.

These habits are huge red flags and relationship destroyers because if she’s lying to others most likely she’s lying to you too. If she’s putting others down to feel better about herself, it’s likely she’ll do it to you too. It’s uncomfortable that you’re already married because if you weren’t, I’d tell you to run for the hills. Instead I’d suggest individual therapy, for you. Yes you. Reason being, it might help you to have someone help you sort out how you feel about this marriage, if it’s healthy for you, what you want from it. I’d start there, and then hopefully the therapist can help you decide what you want to do. As your wife’s behavior isn’t something that’s going to change easily, it’ll probably take therapy on her part and a lot of it, and the behavior may not change at all. Thinking through all that in the context of your full relationship would be useful to help you decide if it’s worth the effort to encourage her to seek therapy, to put up with it while she’s addressing it and wait around for it to get better.

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