Preventing Monetary Meltdown

Preventing Monetary Meltdown

From Chicken Soup for the Soul: Say Goodbye to Stress





Almost everyone has conflicted feelings about money. Does it buy happiness or is it the root of all evil? Believe it or not, this conundrum is the subject of some intense scientific scrutiny.

Recently, Princeton University researchers came down on the side of the argument that says money can buy happiness — up to a point. By surveying the earnings and attitudes of nearly half a million Americans, they were able to link an increase in a person’s day-to-day contentment with their income until it hit $75,000 per year. People with smaller paychecks expressed the least amount of everyday satisfaction but once their earnings rose above the $75,000 threshold, daily happiness didn’t blossom any further. More zeros in the bank account did correlate with a greater overall sense of success, just not with a larger daily dose of joy.

On the flip side of the coin (yes, pun intended) having mere thoughts about money seems to leave us feeling more hardhearted towards our fellow man. In experiments where people were reminded of the all mighty dollar in conversation or after viewing monetary images on a computer screensaver, they spent less time helping others, sat farther away from other people and preferred solitary pursuits. Other studies reported that when people make a lot of money, they spend a higher percentage of income on themselves rather than charity or on others. While no one would consider this evil behavior, it’s far from kind, loving and generous.


Money Puts the “S” in $tress

This sort of research doesn’t really help resolve anything about our complicated relationship with finances. Everyone knows money can be one of the most stressful aspects of our lives whether we have a lot or a little. The most recent American Psychological Association’s Stress In America poll found more than 75 percent of Americans worry about money for one reason or another; about 70 percent say it’s their number one source of worry. In another survey by Parade Magazine, money was cited as the leading cause of conflict in marriages. Still another analysis, this time by Financial Finesse Reports, estimated 60 percent of illness is directly or indirectly caused by financial stress, with middle aged, middle income women (those who make between $60,000 and $74,000) feeling financial pressures the most intensely.

I think money is such a stressful, even painful topic for many people because it’s shrouded with uncertainty and in many instances it’s simply taboo. We fear and revere money yet understand almost nothing about it. Consequently, a lot of us are appallingly bad financial managers. In all fairness, we weren’t taught to balance our checkbooks when we learned how to read, nor were we required to take money management courses in high school or college, so the majority of us reach adulthood with little instruction on how to handle our paychecks. I think this is why the pastor was wise to ask Anna Koopman who would handle the checkbook. It’s a question few couples consider before they get married.

This fact is unfortunate because evidence shows a clear link between poor money management skills and financial stress, with a very direct correlation between the degree of financial stress someone faces and their ability to manage their expenses, control their debt, and pay their bills on time. I know plenty of people all up and down the ladder of financial success who don’t follow a budget, do little in the way of financial planning, and don’t do any serious financial preparation for the unexpected. Even those who say they’re pretty mellow about their financial future may not feel the same later in life, since more than half admit they haven’t put much effort into saving for retirement or protecting their assets.


What’s Your Money Personality?

Combined with lack of training, I also believe your “money personality” plays a strong role in your emotional reaction and conduct towards money. The feelings and behaviors you have toward dollars and cents, which may have formed as early as childhood, can govern your spending, giving, and investment decisions. Understanding these powerful forces can help you conquer financial fears and perhaps help curb some undesirable financial behaviors too. Let’s do a quick review of these money personalities. See if you can spot yours in the mix:

Show Off: For you, money equals prestige. You spend it for recognition and whether you realize it or not, you spread cash around to pump up your self-esteem. Your monetary strategy revolves around keeping up with the Joneses even if you can’t afford to.

High Roller: You take risks even when the stakes are high and even if there’s a chance you won’t be able to cover potential losses. You save nothing for a rainy day, thinking you’ll figure something out when the time comes. If you don’t watch it, your tendency towards reckless spending gets you into trouble.

Ostrich: Money scares you so much you feel it’s best to stick your head in the sand and not think about it too much. You hope for the best but fear the worst. Your approach towards money is rooted in dread and ignorance. You likely fear what you don’t know and will never take a risk.

Squirrel: You’re a saver and some might even say a penny pincher. You shop on sale and don’t feel the need to have the nicest car or the fanciest home. Careful planning is your financial hallmark. However, sometimes you’re so vigilant you deprive yourself of affordable luxuries that make life pleasurable.

Beginner: Whether you’re newly divorced, fresh out of college or you’re otherwise striking out on your own for the first time, you’ve never had to handle your own finances before. You have no clue whatsoever how to manage your money. You learn by trial and error and of course your expensive financial education comes from the school of hard knocks.

I certainly don’t claim to be a financial management expert. However, my job as a psychologist is to help my patients gain some perspective about their money-related stressors. All of the personalities I just described are susceptible to worries about money. I like to emphasize the importance of exploring these feelings and attitudes, not necessarily with the goal of changing your personality type but as a way to make peace with money.

Tips for All Types

Do you know how much money is in your various bank accounts, the exact amount of your monthly car payment and your total monthly food budget? Few people do. Ostriches and Beginners may not because they can’t bear to know the answers. Show Offs and High Rollers might figure it doesn’t matter because they’ll continue to spend no matter what. Squirrels are the most likely to check their balances and budgets regularly, though I’ve known plenty of people within this money personality category who sock away dollars while remaining clueless about the state of their financial health. As tough as it can be to face up to facts, I think one of the most effective ways to defuse money stress is by learning all you can about where you are and where you need to be. Ostriches, for example, may discover their finances aren’t as bad as they feared. Or if their situation isn’t where it needs to be, as was the case with Beth Arvin, at least they can come up with a plan to improve their situation and “do the best they can.” For High Rollers and Show Offs, a thorough financial audit can be a wakeup call to curb high stakes behavior. Learning to manage the rush that comes with spending and luxury is also worth the time investment. Really, no matter how you feel about money, knowledge is power — and an incredibly effective stress reducer.

Again, I’m not a financial planner so I can’t give you step-by-step instructions on how to balance the books or tell you what the makeup of your stock portfolio should be. I can however emphasize the importance of knowing as much as possible about your finances. There are plenty of ways to get there: Hire a money manager, buy a financial software package, read a book, take a class, ask a money savvy friend for help. Put your qualms aside and dive in.

If at all possible, enlist your partner in the audit and budgeting process. If he or she won’t or can’t participate, forge ahead anyway. Although it’s ideal if you and your partner match up in terms of personalities and objectives, I often see couples who can’t get together on this. I urge you not to let a reluctant partner stop you from getting a handle on your money. The idea is to alleviate your stress, whether it’s shared by other family members or not.

I also want you to think long and hard about debt. The most common money related stress I see is being freaked out about being in the financial hole. Some spenders make a mess of their finances by maxing out their credit cards or buying into a mortgage that’s over their heads or taking out a loan they’re unable to pay back. Others get there due to a series of unfortunate events like unexpected medical bills, a job loss or some other catastrophe. Both Anna Koopman and Beth Arvin are good examples of the latter. Either way, you have to do your best to stay calm. Stressing about debt won’t make it disappear. I find it only makes things worse. Gaining control of your situation through good planning, expert help and smarter money habits is the way to make yourself feel better.

Credit cards tend to do the most damage so I always advise my patients who struggle with debt stress to devise ways of limiting their use. Although I think all money personality types are susceptible to credit card abuse, Beginners are especially vulnerable because they don’t have a lot of experience paying bills or understanding how quickly the interest on their purchases can compound. Before they know it they’re in trouble. Other types need to learn impulse control and develop a sense of responsibility with their cards.

You can cut up your cards and stick with cash but I recognize that’s not always practical. So to reduce credit card spending, I advise creating as many barriers to using them as possible. You might, for example, not allow websites to store your credit card information; if you have to fetch your wallet every single time you buy something online, I’ll bet you’ll think twice about completing the transaction. Also consider setting a spending limit before you go to the store and then write it down on your wrist so you’re reminded of it every time you reach for an item. Or before you allow yourself to make a purchase, name at least five reasons why you need to buy it. Any game, rule or trick you can devise to reduce card use will keep you from sliding towards unnecessary debt and the despair that comes along with it.

Before we leave the subject of money stress, I want you to consider one more suggestion that may at first seem paradoxical. Donate to charity. Yes, I am asking you to give away some of your hard earned cash though you struggle with money stress. It’s something I strongly recommend to my patients and something I’m committed to in my own life. Here’s why:

Helping those less fortunate makes you think about money in a different way. I’m sure you’ve heard the saying that it’s better to give than receive. Making a charitable contribution allows you see how money — and you — can have a positive impact on someone else’s life through self-sacrifice and generosity. No matter how dire you think things are in your own life, there is always someone who is in greater need.

I understand when you have money hang ups it can be difficult to write a check that doesn’t add to your personal financial wellbeing. If you’re not at the point where you feel comfortable contributing from your already tight budget, consider raising money by participating in an event like a walk-a-thon or donation drive. Or spend some time doing community service. Trust me. Making someone else’s life better is a wonderful, life-affirming experience that has a way of putting your money stress into perspective.

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