How To Overcome Financial Avoidance
February 23, 2015I have had the privilege to work with so many incredible people throughout my career as a financial planning professional. Imagine having the opportunity to listen to people as they share their unique life stories, talk about current challenges, and explore future life goals. Money is a powerful force in our lives and how we choose to use it is up to each individual. What’s even more amazing to me is the fact that the topic of money is not something that everyone is comfortable talking to others about. But sometimes the type of person that needs the most financial guidance is also one of the most challenging groups of people to actually get in front of – these are the money avoiders.
People deal with stress in different ways – some methods are healthier than others. Financial matters are too important for us to avoid. For example, debt is associated with greater stress, lower self-esteem, and lower productivity to name just a few effects of money-related problems. Financial struggles have also been linked to depression.
How do you know if money avoidance is a potential issue in your financial life? Here are some potential warning signs:
- You try to avoid thinking about money matters and personal finances.
- You avoid talking about money with family and friends.
- You avoid looking at bank statements, credit card bills, or 401k statements.
- You have not looked at your credit report in years and have no idea what your credit score is.
- You don’t know your net worth.
- You let your spouse or partner handle all financial matters without any personal involvement.
Money avoiders also have common scripts or messages that they tell themselves about money. Some examples include money beliefs such as “money corrupts people,” or “it’s not okay for me to have a lot of money when others don’t.” Learned helplessness occurs when a person believes his ability to succeed is impossible so he gives up trying (avoidance), even when success is more than just possible but probable with effort and determination.
The good news is that even if you’ve been an avoider in the past, you can take a few simple action steps to proactively deal with your finances going forward. My colleague, Tania Brown, has written about this recently in her blog post You Are Not Your Financial Situation. This is definitely a true statement. Still, while you should never define yourself by your financial status or your current financial situation, you first need to know where you stand.
The first step to overcoming money avoidance is to assess the situation. A little awareness can go a long way. It’s never easy to get our heads out of the proverbial sand, but when we do, any short-term discomfort is usually replaced with a greater sense of empowerment. If you are trying to take control of your financial life, start by assessing your net worth situation and then complete a simple expense tracker to monitor your income and expenses.
Develop routine financial behaviors. Start with creating a personal spending plan. There are a number of good options out there to assist you with creating a plan to spend with a purpose. You can use an Easy Spending Plan spreadsheet, use the old school paper and pencil method, or simplify things with online budgeting tools such as Mint.com or YNAB. The main idea is to know where your money is currently going (e.g., run an expense tracker) and then start telling it where you want it to go before the month begins. If you’re reluctant to get started, call yourself out and build up some momentum in the right direction of change.
Don’t let minor setbacks get you frustrated or lead you back to avoiding being proactive. Your spending plan doesn’t have to be perfect and will not work out perfectly as planned. The key is to “roll with the punches” and be flexible.
Make your life easier through automation. Online budgeting tools are great because they can help you track your progress and help you understand where you stand at all times. There are other ways to automate your finances and gain peace of mind knowing that even when you aren’t obsessing over your finances, the wheels of change are constantly in motion. Some other examples of automation in motion include setting up automatic transfers to savings accounts once you get paid, regular 401(k) and IRA contributions, automatic rate escalation features in your 401(k), never missing payments with automatic bill pay, and automatic re-balancing features for your investment allocations.
Educate yourself. As a financial wellness educator, you’d probably expect me to be an advocate of financial education. But a desire to learn should be a given across all areas of our lives. If you aren’t learning, you aren’t growing so spend some time to understand the root cause of financial anxiety. Try to understand your money history. What were some early experiences you remember about money growing up? What recent events in your financial life have shaped your views toward managing money? Most importantly, ask yourself if your beliefs about money are helping or hurting your progress toward life goals. Once you’ve identified what has been holding you back, you can move forward by learning some important financial planning concepts. Just remember that you don’t have to be a financial genius to make smart financial moves going forward. But you do want to obtain a strong grasp of the basics and never stop learning from this point on.
Here are some helpful sites to build up your financial knowledge base:
360 Degrees of Financial Literacy
Financial Literacy and Education Commission
Khan Academy (for a little more advanced look at personal finance concepts)
Reach out to others for guidance and support. The idea of having regular money talks may not sound exciting to someone who has a history of money arguments. These conflicts related to managing finances may even contribute to a desire to avoid financial matters altogether. But sometimes the best way out of a cycle of money avoidance is to just fight through the urge to begin a system shutdown when you are at a financial crossroads. Consider reaching out to a friend or family member that’s got their financial life in order for support. Contact your employee assistance program (EAP) to see if they offer financial counseling or coaching services. Hire a CERTIFIED FINANCIAL PLANNER™ professional or just start small by scheduling regular talks with your spouse or partner about money. There is even a Financial Therapy Association available as a resource to help you overcome money avoidance. No matter which route you decide to take, commit to talking more about money and reach out to others for guidance.
Avoiding money matters may provide temporary relief but eventually they must be addressed with a proactive financial plan. Unfortunately, financial stress and related problems may be lurking around the corner of avoidance with more permanent reminders of the dangers associated with mentally checking out from money matters. The best way to deal with the fear factor associated with managing personal finances is to take a few steps in the right direction. Just a few behavior changes and a little open and honest assessment of the situation can result in positive results. Whatever needs to be done to enhance your financial life plan (or just get one rolling)…the best time to start is right now!