What IS Financial Therapy?

Financial Therapy is an emerging field of practice that blends the skills of mental health practitioners and the expertise of financial planners to treat people with emotional issues that are blocking their ability to reach their financial goals.  Some financial therapists have education and credentials in both fields; other therapists are teaming up with financial advisors to guide their clients down the therapeutic journey to financial success.

Financial Therapy pioneers, researchers, educators (Kansas State University), and practitioners Bradley T. Klontz, PsyD, CFP^®, Sonya L. Britt, PhD, CFP^®, and Kristy L. Archuleta, PhD, LMFT¹ have identified four Money Scripts that influence people’s financial decisions:  Money Avoidance, Money Worship, Money Status, and Money Vigilance.  They have also identified a number of Money Disorders, defined as “persistent, predictable, often rigid, patterns of self-destructive financial behaviors that cause significant stress, anxiety, emotional distress, and impairment in major areas of one’s life².”  These money disorders include compulsive buying disorder, gambling disorder, workaholism, hoarding disorder, financial denial, financial enabling, financial dependence, financial enmeshment, and financial infidelity.

¹Klontz, B., Britt, S., and Archuleta, K. Financial Therapy:  Theory, Research, and Practice

²Klontz, B. and Klontz, T., Mind over Money: Overcoming the Money Disorders that Threaten our Financial Health  

Making “The Talk” with Your Children (about Finances) Easier

You’re getting close to retirement age, you’ve met with your financial advisor, and you have a strategy in place for funding the next thirty years of your life.  All you have to do is wait for the magic date!  Actually, there is one more thing you need to do before you start spending down your investment accounts – talk to your children about your finances. 

While the thought of this version of “the talk” may seem as awkward as the one you had with your teenagers, it’s even more important to initiate it, because it’s for your own benefit, as well as your children’s.  You can make it clear to them who you want to handle your finances when you can no longer do it yourself.  (This may be especially important if your choice is not your oldest child or an otherwise obvious one.)  Making your plans and expectations clear now will prevent worries (yours and theirs) during future health crises and other stressful times; also, your children will know what you want them to do and where to find the information they need to do it.  Explaining what your retirement income and resources will be will allay concerns your children may have.  Also, detailing how much you expect to leave behind and how you plan to divide it among your heirs will quell speculation and minimize or eliminate fighting over your estate.

Here are some tips that will help you conduct a stress-free family meeting:

1.      Plan the discussion when everyone you want involved can be present; set up a conference call with anyone who can’t attend. 

2.      Decide what you want to share; write an agenda, if it will help you organize your thoughts. 

3.      Show your children your respect by listening to their concerns and answering their questions.  (Entertaining their suggestions is optional.)

4.      If you have concerns about leaving anything to a particular family member, address it so there are no surprises for anyone down the road.

5.      Be clear about your current plans – and that they can change.  Assure them that you’ll notify them of any major modifications to the plan.

6.      If you are concerned that this meeting will not go well with one or more of your family members, ask a financial therapist, financial advisor, or other professional to help facilitate the discussion.

Sharing the details of your financial life with your children is not relinquishing control over it.  You’ll merely be acknowledging that a time may come when you will need their help, and you want to make it as easy on them as you can.  If you don’t give them this information, you may be forcing them to someday make decisions based on what they think you would want.  That scenario will be more stressful for them, and their decisions will be less likely to concur with your wishes.  Overcome the potential awkwardness and show your children that you trust them, not only with this most personal of information, but with your future.

Financial Therapy - Like a Walk in the Park

When my son, Kyle, jogs with his dog in the park, he sets a steady pace along the trail, but Sam runs ahead, stops to sniff a clump of grass, and then darts after a squirrel.  When I shop with my daughter, I always head straight for the department we need.  Crystal  starts out with me, but something always catches her attention, and she frequently veers off into the racks, then scurry to catch up with me.  Inevitably, she darts away again to look at something new.  We shop the way Kyle and Sam exercise!

            Park outings are more successful for both Kyle and Sam if they each do it the way it comes naturally.  If Kyle keeps Sam on a leash, the dog would constantly be tugging, slowing him down, and tripping him up; also, Kyle enjoys seeing the squirrels, rabbits, and other wildlife Sam flushes out.  Without my focus, Crystal and I may wear out before we find what we’re looking for; but I also enjoy watching her delight in her discoveries.  And sometimes she spots a treasure that I would never have seen.

Couples with different money management styles often find themselves at an impasse as they each insist on budgeting/saving/spending their own way.  Money management, like walking the dog and shopping with a friend, is often more successful when both spouses can contribute in their own way.  Taking advantage of unexpected bargains and opportunities can be an effective way to save money on things you need or were already planning to buy; making it possible to methodically saving toward a goal.  Learning new ways to achieve your objectives can be very satisfying, and attaining a goal you might never have achieved by yourself can be exhilarating.  Acknowledging the value of your partner’s point of view and trusting his/her instincts and abilities will build a stronger relationship at the same time it helps you achieve your goals.