Money is the dirty little secret of American society. The unspoken social contract stipulates that, like Voldemort, he will not be named. We may joke about winning the lottery, but we are not exposing the strained financial circumstances underlying this pipe dream. Modern life is not cheap. Unfortunately, many jobs and professions do not reflect this reality. Could We Make More Money? Who knows? Many companies forbid their employees from discussing salaries with colleagues.
In the meantime, our consumer culture makes it easy for money to fly out of our wallets onto our credit cards. Financial experts (some of whom sound a bit like scolding) are telling us to maximize our contributions to our retirement plans and have enough savings to support us from unemployment for six months or more. These are worthy goals, but most Americans find them difficult to achieve.
A 2019 survey by the personal finance firm Bankrate found that approximately 28% of Americans had no emergency savings and only 18% had enough to live for six months. A 2019 Federal Reserve report found that 25% of non-retired workers had no retirement plans at all. Surveys show that a large proportion of Americans – including those who earn higher salaries – live from paycheck to paycheck. Many people get by on one credit card – or three or four. A recent survey by CreditCards.com found that nearly half of Americans (47%) are currently in credit card debt. And while it is so common to conflict with credit card companies, carrying this type of debt is still associated with a lack of financial responsibility.
Just set a budget! Track your expenses! Stop buying that daily Starbucks latte!
It's not the bar. And the unified financial advice offered by cable speakers and in bestselling books usually doesn't work. Not just because people's financial obligations are different, but because managing money isn't just about the numbers. The way we spend – and save – is closely tied to emotions and is determined by learned behaviors and beliefs, the existence of which we often do not know, according to experts studying neuroeconomics. These factors can prevent us from effectively managing our money.
The psychological consequences of financial difficulties can be considerable. Even before the recession caused by the COVID-19 pandemic, Americans often rated financial worries as one of their top causes of stress. Last October, the fourth installment in a special pandemic-focused series of Stress in America polls by the American Psychological Association found that nearly 2 in 3 adults (64%) said money was a significant source of stress in their lives.
Financial difficulties can cause stress and depression. Stress and depression make it difficult to cope with money problems. It becomes a vicious circle – especially for those who are already living with mental health problems.
Enter financial therapy, which is defined by the Financial Therapy Association (FTA) as “a process of both therapeutic and financial competencies that helps people think, feel, communicate differently with money and behave differently to improve overall well-being through evidence-based practice and interventions. "
Financial therapists come mainly from the fields of mental health, coaching and finance. Some of them are psychiatrists who realized that money is an important part of overall wellbeing and decided to take training in providing financial therapy in addition to their regular practice. Others are finance professionals who realized they needed to be able to deal with the emotional aspects of money, received additional behavioral training, or in some cases, became licensed psychiatrists.
All of the sources Counseling Today spoke to for this article are licensed counselors who provide financial therapy to existing interested customers or as a standalone service. They use a variety of tools to help clients understand their internal money narratives, identify patterns of behavior, and process the emotions that stand in the way of setting and achieving their financial goals.
The area developed from a series of researches on neuroeconomics. Psychologists Ted Klontz and Brad Klontz and financial planner Rick Kahler are widely regarded as the "grandfathers" of financial therapy.
Early lessons learned
Research by Klontz, Kahler, and Klontz suggests that people begin to develop monetary beliefs – and potential future problems – as early as childhood. These attitudes are often developed through experience and observation rather than parental instruction.
That's because many families don't talk about money, notes Elaine Korngold, a member of the American Counseling Association, a licensed professional counselor in Portland, Oregon. Children grow up in families without knowing how much money their parents are making, how much (or how little) different jobs are paying, and what income is required to cover basics like rent / mortgage, utilities, and food – let alone how to get one sets a budget, she says.
Although parents usually talk about and teach their children about essential life skills like driving, everything money-related is often kept secret, says Korngold, who worked in the financial sector before becoming a consultant. This not only leaves children uninformed and unprepared, but also strengthens the social perception of money as a taboo subject. As a result, many adults who struggle with managing their finances simply don't know how to seek help or are too ashamed to ask, she says.
But even if parents don't specifically teach their children money, they still teach, says Kathy Haines, an LPC in Marietta, Georgia that is training to be a certified financial therapist through a free trade agreement.
An integral part of the Haines financial therapy process is examining the financial beliefs of a client's family of origin. Haines, an ACA member, asked if and how money was ever discussed, who ran the family's finances, and how. "Was there a dispute about money?" Asks Haines. "Spoken or unspoken messages, such as no credit debt? Work hard so you can take care of yourself?"
Similarly, Korngold asks customers about the spending behavior that they observed growing up. Does it seem like the family is only going to make it through payday, or was there some financial cushion? If the family had more money than usual, what did they do with it? Put it on the bench? Take vacation? Buy a TV?
Jennifer Dunkle, a Fort Collins, Colorado LPC that specializes in financial therapy, asks clients to write their "money story" by answering several questions: What are your earliest memories of money? What did you learn about money from your family? What specifically did you learn from your father? From your mother? What was your experience with money as a young adult?
These messages and experiences contribute to what Klontz, Kahler and Klontz call "money scripts" – unconscious beliefs that shape our financial behavior.
Money stories
Like many financial therapists, Dunkle gives customers the rating of the Klontz Money Script Inventory (KMSI).
"Most adult money scripts are based on previous life experiences," she says. "In order to make sustainable changes to budget, spending, savings and investment plans, it is very helpful to learn more about our underlying beliefs and values in relation to money."
The most common monetary scripts include beliefs such as:
More money will make things better.
Money is bad.
I don't make any money.
I deserved to spend money.
There will never be enough money.
There will always be enough money.
Money is not important.
Money will give meaning to my life.
It is not nice or necessary to talk about money.
If you are good, the universe will meet all of your needs.
Dunkle explains that Klontz, Kahler and Klontz group money scripts into the following types:
Money Avoidance: Avoid dealing with money and decline personal responsibility for financial health.
Money Worship: Believing that a financial slump or higher income will be the solution to all of a person's problems; focus on the intrinsic value of money accumulation.
Monetary Status: Being overly concerned about the idea that self worth equals net worth; to believe that money imparts status; always want to have the next new article with a big ticket; and to be interested in showing one's own wealth to others.
Money Vigilance: Vigilant, vigilant, and concerned about one's finances. Those who watch out for money are much less likely to avoid their financial affairs, over-spend, gamble and participate in financial opportunities.
Klontz, Kahler and Klontz say that the scripts themselves are not "good" or "bad". Rather, they are merely indicators of behavioral influences.
"For example, someone who thinks" I deserve to spend my money "could run into a lot of credit card debt even though they can't afford their purchases," explains Dunkle. "The script," It's Not Nice or Necessary to Talk About Money "could lead to monetary secrets between spouses. The belief that" If you are good, the universe will satisfy all your needs "can make you inadequate plan and save for retirement. "
Working towards change
Dunkle uses motivational interviews to help clients identify the negative impact their financial habits have had on their lives.
"The goal of motivational interviews in financial therapy is to evoke" change talk "by harnessing, affirming, reflecting, listening and summarizing the skills of open-ended questions," she explains. “When customers hear them talking about possible changes, they believe changes are actually possible. For example, "When I have my finances under control, I can sleep so much better at night."
To simplify the process, Dunkle could ask someone who is avoiding money an open-ended question like, "How do you feel when these unopened credit card statements pile up on your desk?"
For someone whose script is money worship, she might make an affirmative remark like, “It sounds like you are starting to work 70 hours a week to make more income. No wonder you feel worn out. "
On a money status case, Dunkle says she can listen and think by saying, “I hear you say that you believe your family worth comes from showing your relatives how much and how much you make They own, not who you are as a person. "
To a client whose script is Money Vigilance, she might watch and say, "Wow, it sounds like you're feeling exhausted thinking that you need to check your accounts every night before you relax and leave can sleep. "
Haines also uses the KMSI as one of its tools to uncover the narratives that influence customers' financial behavior. It breaks down narratives into thoughts about skills or situations and core beliefs about value.
"Step one for both of them is to become aware of these narratives," says Haines. "This can be difficult because they run so fast in the background that we often don't even know they are informing our behavior. It can be difficult to slow down and become curious about our own thoughts and beliefs, but [it] is a necessary first step. "
Haines asks customers to write down their thoughts – reminding them that they are not facts. In reviewing her collection of thoughts and beliefs with them, she asks clients to consider the following questions:
“What makes me believe this is true? Is it from my own personal experience or maybe from another influential person in my life who told me this? "
"Is it always true? Is there any evidence to the contrary? "
"If I don't see evidence that it is true, can I have the possibility that it is not true?"
"If there is evidence that it is not true, how do these cases differ and how can I purposely bring in more of them?"
For example, many customers believe they will never be able to manage money, says Haines. I would ask, 'What makes you think this is true? Are there any instances where you have made good financial decisions that are in line with your values and desires? What was different about those times? What's stopping you from doing more of this? Are there any skills you need to learn? Do you need to ask for help? Is there fear "
"Once we have dealt in depth with the genesis and meaning of the narrative, it can go in any direction," says Haines.
When a customer's narrative is about being of value or "making" something (like money or a higher paying job), Haines uses a similar but less structured process. "I usually tell these customers to slow down, take a few breaths, close their eyes and ask internally," Whose voice is this? "Is it yours or does it belong to someone else?" Haines notes that it is almost always someone else's voice, such as a parent or caregiver or other person, that matters to the client into adulthood.
"We will then unpack everything that comes our way," she says. "I might suggest that those who gave [the client] the message of unworthiness in relation to something – either directly or indirectly – struggled with their own sense of self and meaning in the world and [it] absolutely nothing to do with my client do have."
"I will often use the picture of newborns in a hospital kindergarten," continues Haines. “Are some of these newborns worthy and others born unworthy? This helps them realize that feeling unworthy of something is just an internal narrative, not an absolute truth. I could ask, “What do you need to feel worthy? How do you know when you're worth it? Think of someone who is very dear to your heart. Now decide when and what they are worth. “That usually feels very uncomfortable to them [the client]. Then I think back, that's exactly what they're doing to themselves. "
Haines adds another popular belief about money and success that people who are rich are greedy and have achieved that higher position because they didn't care what they had to do to get there. “Essentially having no integrity,” she continues. “I've seen that a lot. An individual has a strong sense of honesty, integrity, and not being greedy. They want to be successful, but the people in the positions they want don't seem to embody integrity. So the position does not match their values, and their behavior does not support ascension. We then work on how, from a place that aligns with their own values, they can create their own picture of how they can be in that position. "
Where is the money going?
Overspending is a problem that financial therapists often see. Customers show up at Haines' office wondering why, despite a decent salary, they are always in debt. It helps customers identify what types of things they are buying and why.
"I've had clients who wanted to attend, meet up with friends, maybe for dinner and drinks, concerts, plays, etc.," says Haines. "They couldn't really afford to do these things, but as humans our need to belong is so great that we will do almost anything to adjust. I try to help my clients figure out what they are getting out of these activities get out. " It can be a good conversation, advice, a laugh together, an intellectual stimulus, or just not feeling lonely. We then figure out how we can meet those needs without having to spend money on them that they don't have. "
“For example,” she continues, “instead of expensive dinners, they could meet for coffee and have the same connection and conversation at no cost. If it's an intellectual conversation, you might want to start a book club. One idea was to meet in a park and bring lunch. The atmosphere is better than in a restaurant and costs nothing. "
A possible disadvantage is if the customers' friends do not want to make these changes. Then comes the difficult decision of whether the customer is committed to living within their means and taking the risk of losing the relationship (s) or continuing to over-spend and stay in the security of the relationship. This adds another layer of investigation into whether these relationships are indeed healthy and mutual, Haines says, but the overarching theme remains to identify what those dinners or other expensive activities offer customers and how some of those needs might be met in others Ways.
"I would like to add that it is always there to know the 'why' [the necessity] of a change in financial behavior and to get an idea of it," says Haines. "If we come back to this, we can overcome the barriers to change."
“Keeping up with the Joneses” is another common spending impulse. Society encourages competition, for example having a nice car just because “everyone else” drives a nice car. But Haines asks customers whether that really fits their core values.
"If you value a nice car and if you have one, that's great, but if you buy a nice car because everyone in the neighborhood has a nice car, it's going to cause a stir," she says. For Haines, financial therapy is about helping clients get what they want, not what other people think is desirable.
ACA member Edward Kizer, an LPC that specializes in financial therapy, says many of its customers are aware that they are compulsively shopping to calm themselves down or to take care of themselves. He teaches them simple techniques like belly breathing to reduce their anxiety and asks customers to think about what the shopping can offer them.
"If I express a need through retail therapy, what is it and how can I feed it?" he asks. "What is feeding you? Is it creative? Is it nature How does [you] come back to feed himself? "
Impulsiveness is a major contributor to compulsive spending, says Denise Kautzer, licensed professional clinical advisor, who is also a chartered accountant and specializes in financial therapy. She lets customers track their expenses and encourages them to follow the “24 hour rule” of waiting 24 hours after seeing something they want to buy. In the end, they may still buy the item after paying more attention to it, but this approach reduces impulse purchases, she says. In addition, Kautzer helps customers identify other things that bring them joy, as spending often makes them feel good, at least temporarily.
See the whole picture
Customers can't manage their money if they don't know where it's going – or where it's needed. Part of the financial therapy process is identifying expenses and assets: money in and money out.
Brian Farr, a Portland, Oregon LPC that specializes in financial therapy, presents what is known as a "snapshot" in the first session. “It's a simple worksheet for spending, income and debt, not a budget or spending plan. Just a snapshot of what a typical month looks like,” he says. “It's supposed to help you understand the realities of your household finances.” Farr's clients tell him that this exercise gives them clarity and motivation.
Like the other financial therapists Counseling Today spoke to for this article, Farr does not see himself as a financial planner, nor does he offer himself to his clients. Instead, he helps clients understand their finances and develop a system to help them achieve their goals.
"Freedom around money develops a method that makes it visible," says Farr. Once customers have this picture, it helps them be realistic about what they can and can't do. This requires determining how much money is coming in and then giving each dollar a "job".
He finds the youneedabudget.com website useful as it has helpful videos and allows people to not only cover their daily expenses, but also infrequent but high expenses like Christmas gifts, a pet's annual vet check-up, or car maintenance categorize. Customers can then look at the incoming money and evaluate where it needs to go.
"When 60% already have a job to do, forget about doing what you want," Farr told customers. He advises them that knowing how much of their money is free will allow them to make more realistic decisions.
Asking customers about financial health
Many consultants do not like to ask for money. Indeed, several of the professionals surveyed for this article found that consultants often fall into the "avoidant" category of money scripts. However, financial therapists say it is important for counselors to be aware of the stress of money.
"We all have money stress," says Haines. "I don't know any person who at some point in their life has no more money stress. … It affects everyone."
Consultants don't have to create an elaborate process to uncover a customer's money concerns, says Haines. "It could be as simple as asking a question on your admission form such as: Are there any financial concerns that affect you?"
Haines also urges the consultants to pay attention to information nuggets, e.g. B. Customers who mention that they hate opening their mailbox because it is always full of bills. "You can just ask," How does this affect you? "She says. Money problems are something most people don't even talk to their friends about, so advisors can act as trustworthy clients for clients to share those fears with," Haines points out.
Haines and Kautzer both say that one of the most critical parts of their job as financial therapists is giving people hope.
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Laurie Meyers is a senior writer for Counseling Today. Contact them at [email protected].
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Opinions and statements in articles appearing on CT Online should not be assumed to reflect the opinions of the editors or guidelines of the American Counseling Association.
