I recently read in the Wall Street Journal about a new legion of “therapists” practicing “financial therapy.” These mental health practitioners aim to help individuals and couples with emotional and behavioral problems related to money management. Rational Emotive Behavior Therapy is well qualified to help people with these types of issues because many of these problems are due to the unhealthy emotions of anxiety, unhealthy envy, and lack of financial self-discipline. REBT is an exceptional approach for helping people convert their unhealthy anxiety into healthy concern, which will enable them to address the challenge of the rational management of money and the cultivation of financial self-discipline. REBT also helps people relinquish their unhealthy envy to make better decisions about spending their money rather than striving to have what others have, even when doing so would mean engaging in self-defeating spending.
Money and Our Emotional Health
Bankrate.com found in a recent study that 52% of Americans said money negatively impacted their emotional health. Given worldwide inflation, geopolitical uncertainty, and the interconnectedness of global markets, worrying about money is not a burden limited to Americans.
Uncertainty Surrounding Government-Supported Social Security
The Wall Street Journal article reported that people anxious about their finances are less likely to plan for retirement, which is exceptionally unwise given high inflation and the decreasing number of people with jobs offering a retirement pension. In the United States, demographic shifts contribute to uncertainty surrounding how and when modifications will occur with social security payouts. In the not-too-distant future, such payouts may be reduced, or eligibility to receive them changed to a later age due to the future insolvency of the social security system. The fund reserves that help pay for Americans’ Social Security benefits will run out in 2035. Without congressional intervention, retirees would then only be able to receive 83% of their full benefits. Americans have good reason to live below their means, save money, and invest wisely to grow their future retirement assets without overreliance on the United States government to ensure their retirement.
Financial Therapy
Financial therapy aims to help people identify their self-defeating attitudes toward earning and spending money, saving and investing it, and then spending their accumulated wealth rationally as the years go by. However, one needs to go beyond merely identifying self-defeating attitudes and modify those attitudes to ensure healthy behavior, safeguarding their financial and emotional well-being. Insight into your emotional problems with money is insufficient. REBT can help you go beyond insight to what is self-protective, namely emotional and behavioral change.
Take Personal Responsibility for Your Money Management Fears, Self-Defeating Behavior and their Solutions
Some so-called financial therapists will reinforce the idea that the money-avoidant individual can attribute their behavior to being excluded from money discussions as a child. This attribution may or may not be valid. Regardless of the past, the anxious, money-avoidant adult must overcome their emotional and behavioral problems with money now and take responsibility for prudently managing their money rather than looking back in time and holding their parents responsible for their emotional issues related to their now possessing inadequate money management skills. Blaming your parents for your deficits is a recipe for financial disaster.
Financial Infidelity
The Journal article also discussed financial infidelity, which occurs when one spouse hides or misrepresents financial information from the other. Examples of financial infidelity could mean hidden credit card debt, keeping your spouse in the dark about how much you make or set aside for saving or investing, or hiding accounts and financial resources so that your spouse is unaware of how much money is truthfully available to the household. This behavior can lead to mistrust, undermining the bond between couples. Worse still, financial infidelity, when discovered late in an advanced stage, can lead to bankruptcy and great emotional suffering.
Money Management Difficulties of the Unmarried, Newly Divorced, or Widowed
Unmarried, divorced, and widowed women (and men) who have not taken part in the management of household financial assets are vulnerable when they can no longer rely on their spouses to make financial decisions and manage their wealth. These people can be overwhelmed by anxiety.
The Worried Well who Have Ample Financial Resources
Some people believe they need more financial resources and worry about money even though the actual numbers in their investment accounts tell a different story. They have ample funds for comfortable living based on conservative assumptions about how long they will live and what inflation will be. Nevertheless, these people suffer anxiety, not feeling the emotional security that follows from reasonable assumptions of future financial needs. With ample financial resources, the worried well lacks uncertainty tolerance around money and future financial needs.
Problems Due to Unrestrained Spending
Other people have a different problem. Some people need more financial discipline. These people stick their heads in the sand. They live beyond their means. With too little concern, they fail to restrain short-term spending and fail to build ample funds to sustain them as the years go by. These individuals have ‘money-avoidant thinking,’ a mindset that avoids dealing with financial issues and responsibilities, often leading to significant financial constraints in the long run and even financial disaster.
Problems Due to Different Risk Tolerance in Couples
Financial management in couples is a delicate balance. It’s not just about how much to spend, save, and invest but also about open communication and shared responsibility. Money is a resource and a tool, and the family member who is the principal breadwinner or the person in charge of investments yields considerable power. Couples can share the power and awareness of the state of the family finances. Still, in doing so, couples may have different risk tolerances, which can lead to interpersonal conflict even if they jointly share decision-making and awareness around family finances and investments. REBT can help these people accommodate their different risk tolerances and achieve a resolution that improves their emotional well-being.
Wall Street’s Language and Personel Can Be Intimidating
Some people fear the language of investing. There is a vocabulary to learn, and people may be disinclined to expose themselves to it. They are uncomfortable when studying the language and complex principles involved in investing, and their discomfort and anxiety lead them to avoid learning basic financial terms and the primary investment instruments available to them. Even people who inherit a sizable sum of money may be intimidated by having to manage it and find a way to grow it to yield the most significant financial security as the years go by. Some people may be ashamed of admitting their unfamiliarity when interacting with others who either manage money or are involved in placing trades and investments. The embarrassment of their naivete leads them to refrain from investing, and therefore, they keep it in low-interest-bearing accounts.
Two Categories of Anxiety
Rational Emotive Behavior Therapy identifies two broad categories of anxiety, namely, nonego (discomfort) anxiety and ego-based anxiety. Nonego (discomfort) anxiety drives indulgent buying decisions and living beyond one’s means. Discomfort anxiety can also be the source of avoiding learning the vocabulary of investing, making a plan about how much to save and invest, delaying starting to invest, and how to invest in building wealth and financial security. Discomfort anxiety may also underpin saving too much and never spending down the accumulated funds achieved over years of hard work. Avoiding enjoying the fruits of previous savings and investing is self-defeating because attempting to pad our coffins with money is generally not a sensible use of this valuable resource.
Ego anxiety is where individuals link their personal worth to their possessions, the size of their income, or the value of their investment portfolio. Ego anxiety or unhealthy envy can lead people to live beyond their means in a self-defeating attempt to keep their lifestyle on par with those they compare themselves to. The antidote for ego anxiety and unhealthy envy is to cultivate unconditional self-acceptance. Unconditional self-acceptance will help people make prudent decisions about how much to spend and save regardless of whether or not they can afford what their friends, siblings, and cousins can afford.
Exemplary Self-Defeating and Self-Helping Attitudes Towards Money, Saving, Investing, and Spending One’s Wealth
Let us now examine some of the typical rigid and extreme attitudes REBT theory hypothesizes lie at the core of emotional and behavioral problems that undermine prudent money management and contrast them with their healthy alternative attitudes:
Unhealthy attitude: Because I paid into Social Security over my working years, Congress must not change Social Security in any way. I need my full benefits. Getting less or working a few more years to receive them would be unbearable.
Healthy alternative attitude: Although I paid into Social Security over my working years, it does not follow that Congress must not modify Social Security to keep it solvent. Life is unfair. Change will have to occur to avoid insolvency because of demographic changes in the population working to pay into Social Security. It is simple economics. You can only remove the amount you added to an account and keep it going without creating a debt burden. I had better accept that law of economics. I want my full benefits on the schedule that has been in place for years, but I may not get them. Too bad. In the absolute sense, the fair scenario of nothing changing for my social security payout does not have to occur. It will undoubtedly be uncomfortable to get less than my full benefits or delay the initiation of my full benefits, but that would not be unbearable. Too bad life is unfair. I had better not just rely on Social Security to pay my bills in retirement. Take action now!
Unhealthy attitude: It is too hard for an adult to learn about saving and investing. My parents (absolutely) should have done a better job as a child by teaching me about managing my money, saving, and investing. These are essential life skills, and they failed to introduce them to me.
Healthy alternative attitude: It is hard for an adult to learn about saving and investing, but not too hard. It is worth doing because I am the best person to ensure my financial well-being! I wish my parents had done a better job when I was a child of teaching me about managing my money, saving, and investing, but unfortunately, they did not. I can complain and blame them for their failure, but that won’t help me. Alternatively, I can bear the discomfort of learning about saving and investing and find a trustworthy person to assist me. These are essential life skills, and although my parents failed to introduce them to me, it does not mean I cannot get through life and learn them some other way. I will work at learning what they did not teach me so that I can have peace of mind.
Unhealthy attitude: I am a bad person for having hidden credit card debt from my spouse. I cannot tell them how much of a hole I have dug for us to climb out of to pay it off.
Healthy alternative attitude: I am not a bad person for hiding credit card debt from my spouse. However, this house of cards will come crashing down on me, and my spouse will eventually find out. I had better choose to unconditionally accept myself with my poor judgment and past behavior and get the help I need to fix this mess. I also had better think about the best way to break the news, as keeping them in the dark is neither feasible nor ethical. It will be uncomfortable to tell them how much of a hole of debt I have dug for us, but it will not be unbearable. It is worth doing because the emotional energy needed to keep this a secret is an added emotional stress. I can also bear to start digging out of this debt hole one way or another. I have work to do, and I will start doing it sooner rather than later. I do not want to be imprisoned by debt.
Unhealthy attitude: My husband always managed the money and invested in it. Now that he is gone, I cannot bear to do it alone.
Healthy alternative attitude: My husband always managed and invested our money. It will be challenging for me now that he is gone, but it is not unbearable to do it alone. It is worth doing. If I do not learn to do it, there will be grave consequences for my money-avoidant behavior. However, rather than address this critical matter alone, I could work with a fee-only financial planner to help me learn how to be more actively involved in managing my wealth. Even if I get assistance free of conflicts of interest, I will still have to be more actively engaged in money management than when my husband took care of this. It is worth it for me to do this, and I commit to facing this challenge rather than running from it. I can no longer allow myself to be disengaged from money management.
For more information on Fee-only Financial planning, go here: https://www.napfa.org/
Note: I have no financial relationship with this organization, and the link is only to assist you in learning more about this type of financial planning.
Unhealthy attitude: Although I have saved and invested my money over the years, there is no such thing as having too much money. I need a guarantee I will have enough money saved when I retire so my retirement is comfortable and secure.
Healthy alternative attitude: Although I have saved and invested my money over the years, there is no such thing as having too much money. I want a guarantee that I will have enough money saved when I retire so that my retirement is comfortable and secure, but sadly, I cannot have a guarantee. There is only probability in this world. I have likely saved enough money to live reasonably comfortably and securely in retirement because I have started early and profited from time in the market and compounding interest. I have done the math, discussed it with my fee-only planner, know my projected expenses in retirement, and have made conservative estimates regarding how much my money will continue to grow as I spend down my nest egg. This planning is all I can do. A reasonable probability of financial security over time is only what is possible, not certainty. I can tolerate a lack of a guarantee.
Unhealthy attitude: I want fancy vacations, designer clothes, luxury cars, and big houses. I have to have these things.
Healthy alternative attitude: I want fancy vacations, designer clothes, luxury cars, and a big house, but I do not have to have these things. Something has to give in life. No one can have it all, and I do not have to have everything I desire. I will work towards some of the things I want, and in the end, those unfulfilled material desires will not kill me. I do not have to be miserable over not having everything I want in life, and I can choose to be grateful for what I do have. Learning to work towards a goal and then savoring what you have achieved is one way of defining wealth.
Unhealthy attitude: If I do not have the lifestyle my family and friends have, it shows I am inadequate (as a person).
Healthy alternative attitude: If I do not have the lifestyle my family and friends have, it does not mean I am inadequate (as a person). It means they have things I do not have. It is too bad that life is unfair, and we do not all have equally abundant lifestyles. How can I work towards some of what is most important to me? It is also important to remind myself I do not (absolutely) need to have what others have and can still have some degree of happiness in life. I will philosophically accept inequity to the extent it exists in my life.
Unhealthy attitude: My personal worth is proportional to my financial worth.
Healthy alternative attitude: I cannot validly appraise my human worth but can appraise my financial worth. When I link my financial worth to human worth, I set forth an arbitrary definition. Objectively, I cannot empirically determine my human worth or the human worth of other people. People are too complex and constantly in flux to appraise their human worth objectively. What I can appraise objectively is the value of my actions or deeds toward my goal. I will stick with the facts. When I do well, I will rate that as having worth; when I do poorly, I will rate that as having less or no worth. If my goal is to accumulate wealth, and I do so, then that is good. I have done well and achieved my goal. However, I will distinguish my goal of attaining financial wealth from my worth as a human. These things are independent, and I can tie them together only by arbitrary definitions, which is emotionally self-harming. Thinking clearly about human worth and wealth will enable me to avoid conditional self-devaluation and cultivate unconditional self-acceptance.
Unhealthy attitude: I cannot bear to share power with my spouse. I must make the investment decisions because my spouse is risk-averse and will hold me back from growing my wealth as much as I theoretically can.
Healthy alternative attitude: It is hard for me to share power with my spouse, but it is not unbearable. It is worth doing because coercing her to accept all my decisions will likely strain our relationship. It is challenging for me to tolerate her risk aversion, but I can tolerate her concern, and perhaps we can find a happy medium between my more aggressive investment style and her more conservative investment style. It is our money; therefore, I would be well-advised to negotiate for an asset allocation mix that we both can tolerate. Perhaps we could make more money if we took a more aggressive stance, but is it worth the interpersonal conflict this will lead to between us? There is more to my happiness than building wealth.
Unhealthy attitude: My spouse must not constrain my desire to spend our money. I cannot bear to yield to my desire to spend.
Healthy alternative attitude: I wish my spouse would not caution me as I spend money, but that does not mean they must not. Even if I define this as a constraint, it does not mean they must not call into question my desire to spend our money. Given that we are married, our fortunes are linked; therefore, they have a right to express concern about the level of spending we engage in. I, too, may express concern about their spending as well. Angering myself and arguing will not help us work together to reach a happy middle ground where we feel reasonably secure about our joint assets.
Unhealthy attitude: It is too hard to learn the language of investing.
Healthy alternative attitude: Learning the language of investing is challenging but not too hard. I can bear the discomfort of exposing myself to this new language, which is worth doing. I wish to have a comfortable and secure state of wealth, which requires some tolerance for learning about new concepts and words. I can also seek someone to help me who will not have a conflict of interest in learning about the world of investing. I can seek out a fee-only financial planner who will not have a conflict of interest and work with them to learn how to invest wisely.
For more information on Fee-only Financial planning, go here: https://www.napfa.org/
Note: I have no financial relationship with this organization, and the link is only to assist you in learning more about this type of financial planning.
Unhealthy attitude: I must not lose money when investing. I could not bear that.
Healthy alternative attitude: I certainly do not want to lose money when investing, but it does not follow that I (absolutely) must not lose money. Through asset allocation, I can minimize risk by distributing my assets across different kinds of assets, thereby balancing risk and reward potential. Holding any asset that loses value is uncomfortable but not unbearable. I can stand to lose and gain value in various investments. It is worth doing because I need to remember there is always inflation risk to contend with. I had better knowledge that there is a risk to not growing my money through calculated risk-taking achieved through asset allocation and other forms of risk management when investing.
Unhealthy attitude: I started too late to save and invest for retirement. I (absolutely) should have started earlier in my career.
Healthy alternative attitude: It would have been far better if I had started saving and investing for retirement years ago, but sadly, I did not. I did not have to, but I will lose out on the impact of time on cultivating wealth. However, it is very self-defeating not to start immediately. It’s better to start later than never and at least build a small nest egg. Sticking my head in the sand, kicking the can down the road further, rationalizing, and denying my future financial challenges are not the answers to my dilemma.
Unhealthy attitude: I must make a killing in the market. I cannot bear the slow but steady approach to wealth.
Healthy alternative attitude: I wish to make a killing in the market, but this attitude is very self-defeating. I do not have to attain wealth quickly. Striving for quick results is very risky and unrealistic. Taking a slow but steady approach to building wealth is uncomfortable but not unbearable. I can stand the slow but steady approach. It is worth taking this more realistic approach. I commit to it, and my family and I are worth cultivating this discipline.
Unhealthy attitude: Now that it is time to retire, I cannot bear to spend down my assets and watch my balances slowly diminish.
Healthy alternative attitude: Now that it is time to retire, it is uncomfortable but not unbearable to spend down my assets and slowly watch my balances diminish. It is worth doing because I cannot pad my coffin with the money I have grown over the years. Money is a tool, and now it is time to use it. What good is a tool if you never use it? My family and I are worth spending down our wealth in a controlled and scientific way so that I use my investment assets wisely to maximize the pleasure I experience while not sacrificing the security I have. I will rely on conservative assumptions and math to determine how much of our wealth we can slowly spend over the coming years of retirement without jeopardizing my ability to meet my changing expense profile as we age. Again, my fee-only financial planner can help me with these calculations. Two heads are better than one!
For more information on Fee-only Financial planning, go here: https://www.napfa.org/
Note: I have no financial relationship with this organization, and the link is only to assist you in learning more about this type of financial planning.
Unhealthy attitude: I need a guarantee that my fee-only financial planner will give me excellent financial guidance, which is worth the money I pay him.
Healthy alternative attitude: I wish I could have a guarantee that my fee-only financial planner will give me excellent financial guidance, which is worth the money I pay him, but unfortunately, consultations with all professionals are never guaranteed, whether they be with doctors, lawyers, or fee-only financial planners. There are ways to minimize risk. Suppose you cannot get a direct referral from someone who is happily using a fee-only planner. In that case, you can go to the National Association of Fee-Only Financial Planners, identify three planners in their membership directory, and interview them over the phone. At the end of the phone interview, ask each fee-only planner for the names and phone numbers of two or three current clients willing to talk to you about the service the fee-only planner has provided them. Call those clients and ask about the integrity and service they have received from the fee-only planner. Then, make a decision and make an appointment with one fee-only planner. Sit down with them and discuss your financial situation and desire for competent guidance to help you build wealth. There are no guarantees, but you could trust no one, procrastinate on investing on your own, and lose money that way. Procrastination leads to opportunity cost, so there is a risk in going it alone. You might gain peace of mind by working with a professional you vetted with this sound selection process. You can not eliminate risk in the markets or with people, but you can minimize risk and bear the uncertainty using REBT strategic thinking.
Unhealthy attitude: I have to guarantee that my wife and I will not outlive our money. It would be awful for one of us not to have enough at the end of our lives.
Healthy alternative attitude: I wish it were possible to have a guarantee that my wife and I will not outlive our money, but unfortunately, that is impossible. I do not need a guarantee that we will not outlive our money at the end of our lives. I can have reasonable probability based upon realistic assumptions of spending and growth of our assets throughout our lifespan, living below our means early in life to build a good foundation of wealth, knowledgeable and unbiased investment planning and tax guidance, and a willingness to attend to the asset value of our portfolio regularly. The most important way to ensure having sufficient funds is a willingness to adjust to changing conditions. Give up how things “must be” and adjust your lifestyle, savings, and spending rates to keep yourself financially secure as conditions change.
Unhealthy attitude: I must leave my children a large sum of money.
Healthy alternative attitude: I would like to leave my children a large sum of money, but I do not have to. Teaching children about money, saving, investing, and spending is better than leaving them wealthy. It is better to help your children cultivate the self-discipline to build their wealth than provide them with it. It is better to encourage them to obtain an education, job skills, the ability to keep learning and adapting throughout their working years, and emotional management skills like those taught by REBT than to leave them wealthy. Teaching a child to fish rather than give them a fish dinner is consistent with the REBT philosophy.
Unhealthy attitude: My parents (absolutely) should have left me a large inheritance to make my financial future more comfortable and secure.
Healthy alternative attitude: I wish my parents had left me a large inheritance to make my financial future more comfortable and secure, but they did not have to. I can strive to be responsible for my own life and well-being or blame them for failing to make my life easy and raising me differently. Blaming them for failing to give me more money, education, support, or kindness will only make me angry or depressed. I wish they had done more for me, but I would be well-advised not to fixate on this as it will hold me back from taking care of myself. Ultimately, no one cares more about my well-being and is a better person to provide for it and then protect it than me.
Disclaimer
I receive no compensation from the fee-only planning association mentioned in this article and have no relationship with them. Twenty-nine ago, I used it to identify the contact information of a fee-only planner after seeing him on television discussing the advantages of fee-only financial planning. That decision to consult with this fee-only planner 29 years ago has served me exceptionally well. I have peace of mind due to the guidance I received and continue to receive from this fee-only investment and tax professional.