4 min read.Updated: 29 Dec 2021, 05:25 PM ISTJ.J. McCorvey, The Wall Street Journal
Research suggests that seeking more insight on complex money issues could positively affect a person’s overall happiness
Improving your financial life can sometimes feel like a Catch-22: The same money issue you need to unsnarl creates so much anxiety that you end up turning away from it altogether.
Seeking more insight on money issues such as debt management, building emergency savings and risk diversification could increase overall happiness. A study published earlier this year by Finra and the Global Financial Literacy Excellence Center found that even before the pandemic, a low level of financial literacy was a top contributor to financial stress and anxiety. The report analyzed the survey responses of 19,000 Americans.
“Fear is quite literally paralyzing," said Sonya Lutter, a financial therapist and director of institutional research and education at Herbers & Co., a management consulting firm. Mismanagement or bad decisions could happen if money issues that feel overwhelming—such as the need to figure out your total debt and how you’ll pay it off—are ignored.
Another study, published earlier this month, which Dr. Lutter oversaw, found that top-earning Americans who had sought out a financial adviser were nearly three times happier than those who managed their own finances—and those who went solo became statistically unhappier as they made more money, which could highlight how difficult it can be to manage large sums of money on your own.
Here are some steps toward facing your financial fears:
Learn what you’re afraid of
The most daunting part of facing your financial fears might be figuring out exactly what you’re afraid of and why.
When working with first-time clients, financial planners often ask them to recall their very first experiences with money, which can provide clues to their approaches to money in adulthood.
How someone handles finances might vary widely depending on the person’s first money-related memory. For example, someone who earned an allowance might have a very different experience with money compared with someone whose earliest memory is of a single parent struggling to make ends meet, said Mark Reyes, a certified financial planner and financial advice manager at Albert, a money-management app.
Dr. Lutter points beginners toward a tool she helped develop, the Klontz Money Script Inventory, which aims to surface a user’s beliefs about money.
“Is the fear running out of money? Is it a fear of embarrassment?" she asked. “It really gets back to some of those observations we made as children, whether our parents taught us or not."
Experts advise journaling or talking to friends and family about memories to get a better understanding of the fear, which can offer more direction on how to move forward.
Find targeted information
As with health information, details of just about any money topic are just a Google search away.
“Decide that you are going to read the books, watch the videos, take an online course," said Brittney Castro, certified financial planner at Mint, another money-management app. “Money is around for the rest of your life, so the sooner you learn to invest time, energy and sometimes money in learning, the easier it’s going to be."
Chelsea Ransom-Cooper, managing partner and financial planner at Zenith Wealth Partners, recommends a pair of recent books to help allay financial fears: “Get Good with Money: 10 Simple Steps to Becoming Financially Whole," by Tiffany Aliche, a basics-focused approach by the personal-finance educator known as “The Budgetnista," and “The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness," by Morgan Housel. It presents financial takeaways through short stories.
People should also peruse the blogs and frequently asked questions on the pages of official agencies such as the big three credit bureaus and the Consumer Financial Protection Bureau, said Angela Holliday, president of Frost Brokerage Services and Frost Investment Services. For people who might be intimidated by the journey of cleaning up their credit, she suggested, those are good starting points for basic guidance.
Ms. Castro said that consumers can access free financial deep-dives by following prominent YouTube influencers. While social-media platforms abound with money influencers dispensing advice and basic tips, Ms. Ransom-Cooper warns that influencers’ backgrounds might be hazy. Some might be sponsored by financial firms pushing certain products or services.
“It’s just hard to filter through what’s real, what’s not and who actually has the education to put this out," she said.
Consider a financial planner—or affordable alternative
Hiring a financial planner or adviser can provide an objective view of your spending, help untangle why you’re avoiding some things, such as paying off credit cards or student debt, and provide a degree of accountability.
Many people tap family, friends and peer networks for referrals or free financial-planning association databases, such as the National Association of Personal Financial Advisors (or Napfa) or the XY Planning Network.
Planners are often out of reach for those who most need them, said Dr. Lutter. Many larger cities have centers for free financial counseling, she said, and certified planners—who tend to work with higher-income clients—often participate in pro-bono days, when planners provide free one-on-one advice to consumers. If you’re interested in attending sessions, such as those hosted by the Foundation for Financial Planning, you can check the event calendars of the sponsor organizations.
If you have a therapist, consider broaching your financial anxieties in your next session, Ms. Ransom-Cooper said. If you have friends in similar situations, bring up your concerns and compare notes.
“Hiring a financial planner is a little expensive and a lot uncertain," Dr. Lutter said. “So I don’t want to get people discouraged. There are tons of options out there."
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