Category Archives: Psychology of money

What’s Your Money Story?

May 23, 2013 10:27 amLeave a Comment

Do you ever watch movies and then halfway through them think to yourself, “Man, this movie sucks”? Then you get mad because you’ve invested an hour of your time into something that you don’t even care to watch the ending of?

This happened to me the other day. I downloaded a movie to watch at home, and 40 minutes in, I was like, “This movie is lame.” I didn’t like the story and wasn’t excited about how it was projected to end, so I stopped watching it.

It got me thinking about how our own money stories are playing out in our financial lives. Many of us get so caught up in the day-to-day stresses of our money that we forget to look at the big picture and see how that story is shaping our current and future financial situations.

So let me ask you a question.

  • If you were watching your money story on screen, would you want to watch the ending?

  • In other words, are you happy with how your financial movie is projected to end?

Watch this video, where I talk about how to begin the discovery process in order to identify your money story, as well as what you can do to change your money story if you don’t like where it’s headed.

As always, I encourage you to share this email and video with your closest girlfriend so she too can learn how to become a Financially Wise Woman and use her money to create a life she loves.

Let’s all come together to join this movement and create a world of Financially Wise Women!

Brittney Castro

Brittney Castro (CFP®, CRPC®, AAMS® ) is Los Angeles based Certified Financial Planner specializing in helping women achieve their financial goals. She is author of “Financially Wise Women” and is a featured contributor here at the CIF blog.

Posted in Brittney Castro, Featured Contributors, Psychology of Money

Client-Focused Financial Planning Addresses Money and Emotions

May 21, 2013 7:22 amLeave a Comment

Anyone who sent a check to the IRS this month certainly doesn’t need to be convinced that there is a relationship between money and feelings.  I can personally attest that paying a hefty tax brings up a great deal of painful emotion.

The case for the union of money and psychology is overwhelming.  Almost everyone experiences fear, sadness, grief, anger, or happiness around money events.  Large life events like divorce, death, bankruptcy, losing a job, and selling a home clearly involve money and evoke emotions.

We may be less likely to notice the psychological aspects of smaller money events.  Yet even acts like paying monthly bills, buying birthday gifts, or shopping for groceries have an emotional component.

Researchers like psychologist Daniel Kahneman (who won the Nobel prize in economics) find that 90% of all financial decisions are made emotionally, not logically.  Even the seemingly cold and calculating world of investing is driven by emotions.  Economic theory is being set on its head as economists are slowly coming to realize that, regarding money, consumers often don’t make rational decisions that are in their best interests.

Yet 18 years after a small group of pioneering financial planners and therapists first met to explore the relationship of emotions and money, the field of financial psychology is still in its infancy.  It’s really no wonder.

On the money side of the equation, we have institutions like large brokerage houses, insurance companies, and banks. Like all businesses, they need to be profitable.  Any concern these institutions may have about the union of finance and psychology is likely to focus on ways to manipulate customers’ emotions in order to sell more of their goods and services.

On the emotional side, psychologists and therapists rarely mention money issues.  When they do talk about money, it’s often in the context of their own fees.  Their training doesn’t address the idea that both they and their clients may have emotional issues or beliefs around money that could be destructive.

This leaves a big gap.  In the middle of it are consumers who don’t know how to develop healthier patterns of behavior around money.  They may overspend to relieve stress, feel overwhelmed by credit card debt, be unreasonably fearful about financial security, be overly trusting or overly suspicious, or give or lend too much to family members.

Some of these consumers have at least some idea that their destructive financial patterns are psychological.  They may realize they need more than financial facts to change those patterns.  Yet they may have no idea where to find the help they need.

The one group of professionals that is moving to fill that need is client-focused financial planners.  Unlike advisors who sell financial products, client-focused financial planners receive no commissions but charge fees for their advice.  By law, they must act as fiduciaries and advocates for their clients.

Historically, financial planners have not embraced the notion of money psychology.  Obtaining the Certified Financial Planner® designation still requires no formal training even in client communications or conflict resolution.  Yet a small but growing group of client-centered financial planners is seeking out training in psychology and communication.  A few even partner with financial therapists.

The challenge for consumers is how to find these professionals.  One source is the Financial Therapy Association, which has a list on its website.

Gradually, more consumers as well as professionals are realizing that it’s possible to combine financial knowledge and psychology to create more balanced relationships with money.  This awareness is sure to increase the demand for financial psychology services.  It will be exciting to watch this infant profession as it grows.

Rick Kahler

 

Rick Kahler is a Certified Financial Planner, President of Kahler Financial Group, author of the “Financial Awakening” blog, and a featured contributor on the CIF Blog.

Posted in Featured Contributors, Financial Planning, Financial Therapy, Psychology of Money, Rick Kahler

Integrating Your Money and Emotions

April 19, 2013 7:17 pmLeave a Comment

Are you seeking to understand and deepen your relationship with money?  If you aren’t, or don’t think money is that important, consider this:  money touches everything in your life.  Understanding money and your relationship with it is a 21st century survival skill.

Deepening your journey is what the Integrating Your Money and Emotions Workshop is about.  In this program, you will be given the opportunity to look at new ways of relating to money by participating in an exclusive Financial Integration Process.

The Wall Street Journal  (September 25, 2003) referred to the Financial Integration Process as “an innovative effort that combines experiential therapy with nuts and bolts of financial planning”.

The workshop uses specific experiential therapy techniques such as psychodrama, guided imagery, meditation, written exercises, and small group process to uncover, explore, and resolve money issues.  We examine family of origin, unresolved trauma, loss, shame, emotions, dreams, and hopes as they relate to money.

This program can help you identify the beliefs and feelings about money that keep you stuck in any issue that money touches like overspending, underspending, risk taking,  workaholism, an unfulfilling job, and poor investments.  We help you  recover from dysfunctional or painful money behaviors, and develop a new model that will move you toward fulfillment of what you most want out of life and get

Dave Jetson and Rick Kahler, two pioneers in blending financial planning with experiential therapy, have partnered together to offer a most unique experience for individuals and couples to deal with how money shapes their lives. The”Financial Integration Workshop” is a 5-day workshop that helps couples better understand and transform their relationship as individuals and as a couple around money.

This workshop starts at 6:00 pm on Thursday, April 11th and ends at 5pm on Monday, April 15th. The cost is $2,750 per individual and $4,950 per couple that includes meals and lodging! The workshop will be held in the beautiful Black Hills of South Dakota at the new Terra Sancta Retreat Center in Rapid City.

Make an investment in yourself or your coupleship that will pay big dividends  for years to come. Join us for an experience that may change for the better how your coupleship works around money. Reserve your space early as seating is limited and we typically sell out this event.

Rick Kahler

 

Rick Kahler is a Certified Financial Planner, President of Kahler Financial Group, author of the “Financial Awakening” blog, and a featured contributor on the CIF Blog.

Posted in Behavioral Finance, Featured Contributors, Psychology of Money, Rick Kahler

5 Tips for Reducing Financial Stress

April 18, 2013 1:20 pmLeave a Comment

Every now and then, we run into periods of financial stress.

Right now, I’m preparing to close on a home refinance.

We need to bring some money to the table (the lower rate and savings on the monthly payment mean that it will be made up in about six months), and I am feeling a little stress about the situation.

Do we have the assets? Yes. Am I worried that something will come up to interrupt our cash flow? Yes.

Financial stress can come in a number of forms, from unexpected car repairs, to high levels of debt, to wondering how you will pay for your kids’ extracurricular activities.

If you are experiencing financial stress, here are 5 tips that can help you overcome it:

1. Know the Situation

You can’t tackle the situation unless you know the particulars. One of the ways fear can harm your finances is when you don’t want to face the situation. However, not having a handle on the situation — and the vague concerns that result — can be even more stressful.

Instead, take a direct look at the situation. Brutal honesty is required in these situations. Just knowing exactly what you face can help reduce the stress level a little bit. Once you know the situation, you can begin moving forward.

2. Make a Plan

One of the best ways to reduce financial stress is to make a plan. A financial plan can help you chart a course. With my refinance, I know how I’m going to pay the closing costs. And I have a Plan B, just in case Plan A doesn’t work out. Creating this Plan B has helped me feel a little less nervous about everything.

Make a plan to pay down your debt. Have an emergency fund that can handle car repairs. Create an alternative source of income.

Think about how you want to handle a situation, and then make a plan.

You’ll feel less stress once you know what to do.

3. Communicate

Next, you need to communicate with financial companies. This applies mostly to those to whom you have obligations. If you lose your job, and you know that it will be difficult to make credit card payments for a while, you need to communicate that as quickly as possible. From income based repayment for your student loans, to deferment and forbearance for most other types of loans, there are options.

Communicate with your creditors, and you might be surprised to find out that you can work out a payment plan. These communications can help you reduce your stress, since you know you have alternatives.

4. Turn to Your Support System

Chances are that you have people in your life that you can turn to for support. Use your support system. If your church congregation offers help to struggling members, talk to your leader. If a friend offers to babysit your kids while you look for a job, agree. If your parents invite you over for dinner, and send you home with the leftovers, enjoy the free meals.

From lending a listening ear, to lending you money with a low interest rate, your support system can be a great help in times of financial difficulty. The help of your support system can reduce your stress and improve your chances of getting through the difficulties.

But don’t forget: Even as you receive support, you need to be there when your own loved ones need your aid.

5. Prepare Ahead of Time

If you are in the midst of financial stress right now, it’s a bit late to prepare ahead of time. But if you want to avoid this level of stress next time there’s a financial setback, you need to prepare ahead of time.

Make it a point to get ready for problems before they arise. Create an emergency fund. Cultivate income diversity. Know which items you will cut from your budget if you need to reduce your expenses. When you prepare yourself ahead of time, you can reduce your level of financial stress when setbacks threaten your peace of mind.

Jeff Rose

 

Miranda Marquit writing for Jeff Rose. Jeff Rose is a financial Planner, co-founder of Alliance Wealth Management author of the “Good Financial Cents” blog and a featured contributor here on the “CIF Blog”.

Posted in Featured Contributors, Jeff Rose, Lifestyle, Psychology of MoneyTagged

Love and Money: Financial Tips for Newlyweds

February 25, 2013 8:12 amLeave a Comment

Let’s face it—marriage is a huge step.

There is a lot that goes into making a relationship work, and finances can often bog a couple down.

That’s why it is important to be up-front about money matter.

financial advice for newlyweds

To many, managing finances separately seems to be the most logical choice in skirting stress, but in fact, it can irritate the issue.

Making any and all financial decisions together is the key to avoiding any mishaps, personal or financial.

1| Have the Money Talk

The first conversation newlyweds should have (financially—the rest is not really my business) should be regarding personal accounts and any debt you have. When you apply for a mortgage, the bank runs a credit report on both of you, so if one spouse has bad credit, it will negatively affect the loan.

This information is particularly important, because it will serve as the foundation upon which you will set your financial goals. And while it may not be the most fun or pleasant, you should list assets like checking and savings accounts, 401(k)s, stock or bond investments, real estate, jewelry and other valuables in their portfolios.

If you can, get a financial professional to manage this portfolio, because it is important that you lay out where you stand financially as a couple, and what your expectations for each other are, and what your mutual goals are for the next ten years.

For example, start discussing how your finances will factor into your personal goals. Do you want to retire by a certain age, or go back to school? Do you want to take care of your debt immediately? Make a plan about these goals and prioritize. Making a budget or hiring a financial planner is a good way to help you reach these financial goals.

2|Factor in expenses.

What do you need, and what can you do without for now?

Vehicles, houses, and entertainment expenses tend to drain savings the most.

financial tips for newlywedsCars are essentially a money pit—they constantly decrease in value, require money for maintenance, and let’s not forget funds for fuel.

If you and your spouse can do without a vehicle (or two if you both have one), maybe it’s time to sell and look into options such as public transportation or carpooling.

If this is not a realistic option, perhaps the two of you can share a vehicle.

Either way, this will help cut down on your costs, and allow you to save some money.

Below is a sample calculator that newlyweds can use to better determine their household expenses.

Expenses Calculator

Use this expense calculator to total your living expenses and show them as a percentage of your household income. It shows you:

  • How much you spend for each category (food, clothing, etc.).
  • What percent of your income goes to each category.
  • Your total expenses relative to income.
  • What percent of income is left for savings.
  • How to apply the envelope strategy.
  • Works for any time period (monthly, annual).

Just enter the income for the period you will be entering expenses for (monthly, annual) along with the name and amount for each expense category. The calculator does the rest.

This works great in tandem with the budget calculator to compare how you are doing with national averages and recommended percentages.

In addition, couples often lose money by going out too often. If you find yourselves trying to “keep up with the Joneses,” so to speak, really assess how much of your funds you’re utilizing. If you’re going out to eat twice a week or more, chances are you are wasting a good portion of your potential savings. Instead, little things like preparing more meals at home or having a movie night at home rather than going out can make a big difference.

Finally, there is no harm in starting small when you are looking for a home. Be modest in your search; a little elbow grease is nothing compared to a staggering mortgage payment.

3| Managing it Together

Now it’s time to start talking about how to manage all of your new savings. For example, will you have a joint checking account? Two savings accounts and a joint checking? Questions like this need to be asked and openly discussed, without procrastinating. On one hand, a joint bank account keeps managing all of your money convenient. There is no question where your money is, and can each pay bills as they come, without necessarily assigning specific bills to one another.

On the other hand, this can lead to miscommunication, and a bill can go unpaid. A joint bank account requires complete trust and cooperation, with both parties willing to check in occasionally with common expenses. Make sure you are ready for this, but remember, there are other options.

Finding a combination that works best for you and your partner is all part of the newlywed game, so be patient, and know that getting financially efficient and settled takes time.

Just remember, the key to success is cooperation, and both parties need to come to a comfortable understanding of budgets, responsibilities, and future goals. Whether this requires a weekly meeting, or simply a mutual promise to contribute and help out, it is important that both people are on board. Money is often a sensitive subject for married couples, but it doesn’t have to be, and creating the kind of environment where each partner can converse is step one.

 

Jeff Rose

 

Jeff Rose is a financial Planner, co-founder of Alliance Investment Planning Group, author of the “Good Financial Cents” blog and a featured contributor here on the “CIF Blog”.

Posted in Featured Contributors, Jeff Rose, Psychology of Money